American equity markets powered to solid gains in Thursday’s session as good news in the financial, industrial, and consumer staples sectors helped to offset some weakness in the tech and energy sectors. The Dow gained 73 points on the day while the S&P 500 added 0.4% and the Nasdaq lagged behind, adding just 0.1% on the day. Meanwhile, precious metals continued their unprecedented surge as gold added close to 1.3% on the session and silver rocketed higher by more than 5.3%, finishing just over the $48.40/oz. mark. However, grains and other soft commodities were not quite as fortunate as fears over oversupply in these markets dragged down wheat and corn by more than 4% while soybeans fell by about 2% as well. Treasury bill yields did drop across the board, suggesting that traders had not given up on these securities just yet, pushing the 10 year note’s yield to levels unseen since late March.
One of the biggest gainers on the day was the United States Natural Gas Fund (UNG) which jumped by 3.6% in Thursday trading. Today’s surge was largely the result of the EIA inventory report which showed a smaller drawdown than what many people were anticipating. For the week ending April 22nd, the EIA said that supplies increased by just 31bcf, well below the analyst range of 37bcf-41bcf. This was largely due to hot weather in much of the South, and surprisingly cool weather across much of the Northeast and Midwest. Both of these scenarios raised demand for the fuel at a time when supplies are generally increasing at a quick pace in anticipation of the summer cooling period. “This is a market that is just starving for a fundamental headline,” said Jim Ritterbusch, head of oil-trading advisor Ritterbusch & Associates. “It got a smaller-than-expected storage build…and that was enough to send the funds screaming for cover out of their short positions.” [see fundamentals of UNG]
One of the biggest losers in the ETFdb 60 was the iShares MSCI Brazil Index Fund (EWZ) which tumbled by 1.3% on the day. These losses came as a result of continued worries over inflation in the country and the release of the minutes of the central bank’s most recent meeting. In the minutes, all seven bank directors agreed that inflation was high enough to require a ‘prolonged’ series of rate hikes, suggesting that the country could be in for a much higher benchmark rate in the near future. However, the bank is perceived by many as being slow to act so some investors are beginning to pull their cash from the market or are avoiding putting any new money into the South American nation. In fact, the country’s real slid by more than 1.1% on the day and net dollar inflows slowed to just $133 million through the first half of April. “There is a bit of disconnect between what the government is saying and what they are doing,” said Pedro Tuesta, interest-rate and foreign exchange analyst with 4Cast Inc. in Washington, DC. “The longer you delay choking off of inflation the more inflationary inertia creeps in.” [see charts of EWZ here]
Disclosure: long EWZ.