American equity markets plunged in Monday trading as higher oil prices and a series of downgrades in the technology sector pushed all of the major indexes sharply lower. The Dow, which at one point was up almost 70 points on the day, finished the session down by 80 points, while the broader indexes posted more significant losses of 0.8% for the S&P 500 and 1.4% for the tech-heavy Nasdaq. Commodity markets again rose across the board as oil prices gained more than one dollar a barrel and precious metals also gained; gold was up more than $5/oz. while silver approached the $36/oz. level in Monday trading. Meanwhile,/ Treasury and currency markets were more mixed as the dollar held firm against the world’s major currencies while yields rose by a few basis points on most maturity levels of U.S. debt.
One of the biggest losers in the ETFdb 60 was the PowerShares DB Base Metals Fund (DBB), which sank by 2.5% in Monday trading. Today’s losses were largely thanks to a large sell-off in the price of copper as the red metal declined by 3.5%, or more than 15 cents a pound on the day. Copper futures make up slightly more than one-third of the fund’s total holdings and since the metal is often seen as a barometer for other base metal demand, copper’s slide helped to drag down zinc and aluminum as well. The main reason for copper’s slide today was oil’s continued ascent higher which could hurt the industrial sector of the world economy, potentially limiting demand for copper. “There’s a lot of worries about high oil and gas prices spilling over to the economic recovery,” Lind-Waldock senior market strategist Phillip Streible said. “And if that slows down, then, of course, that’s going to slow down copper and copper demand.” [see DBB's fact sheet here]
One of the biggest winners on the day was the United States Natural Gas Fund (UNG), which soared higher by 3.3%. Today’s gains came as a welcome turnaround for the beaten-down fuel, which until recently was at a three month low thanks to a serious supply glut and warm weather. However, forecasts of colder weather in some of the nation’s key gas consuming markets has given traders hope that some of the supply overhang will be cut into later this month. A surprisingly bullish report from Credit Suisse also helped to boost the prospects of UNG in the short-term. The company predicted that stockpiles would decline by the end of the heating season to more normal levels. “We’re seeing a little bit of selling fatigue. We’re still at the point where we’ll end the season at a storage deficit,” analysts said in the report [see charts of UNG here].
Disclosure: No positions at time of writing.
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