Tuesday sent U.S. equity markets lower across the board as weak data weighed on a variety of market sectors in the session. The Dow and S&P 500 both fell by 0.3% while the tech-heavy Nasdaq sank by 0.5% in comparison as markets failed to recover from a rough start to the day. Commodity markets were more mixed as oil continued its recent slide, falling by 0.5% while gold managed to continue its recent surge, gaining $9/oz. in the session. Meanwhile, base metals were not as fortunate as their more valuable precious metal cousins; copper retreated from its recent high and fell by 2.3% or roughly 10.5 cents a pound on the day. Tuesday trading saw markets focus in on an important M&A deal between the NYSE and the Deutsche Boerse in which the Frankfurt-based exchange would buy a controlling stake of the American icon. Both companies were off marginally in Tuesday trading, but if approved, the deal would create the largest global exchange in the world, with major hubs stretching from New York to European markets. However, this deal activity was not enough to cancel out the bad data that was reported in a variety of market sectors. Of particular concern was undoubtedly data regarding prices; U.S. import prices rose by 1.5% in January while China reported that consumer prices surged by 4.9% from a year ago, suggesting that inflation may be beginning to appear in markets around the world. “Today there’s a bit of a pullback, but we’re coming off a multimonth high,” said Stuart Freeman, chief equity analyst at A.G. Edwards.
One of the biggest ETF winners on the day was the Market Vectors Gold Miners ETF (GDX) which soared higher by 1.9% in Tuesday’s session. Gold miners outperformed the broad market thanks to rising fears over inflation and its impact on the world economy. Since gold is often seen as a hedge against rising prices, the producers of gold stood to benefit greatly from this sentiment. Additionally, continued protests in a variety of Middle Eastern markets once again raised concerns over the likelihood of the Egyptian situation spreading across the region. This also pushed investors into safe haven investments as a way to wait out the storm in these troubled countries [see holdings of GDX here].
One of the biggest losers in the ETFdb 60 was the PowerShares DB Base Metals Fund (DBB) which fell by 1.7% on the day. Today’s losses were largely the result of traders locking in profits after copper’s recent run-up over the past few trading sessions. Many are also growing concerned that large stockpiles could reenter the market thanks to the high prices, a situation which could put a top on the red metal in the near term. “You’ve reached a new plateau, so the market pulls back,” said Ira Epstein, director of the Ira Epstein division of the Linn Group. “It’s ripe for profit-taking.” [see fundamentals of DBB here]
Disclosure: No positions at time of writing.