In what was yet another rocky session for Wall Street, equity markets plunged to start the day thanks to weak data only to finish in the green on bargain buying and hopes for solid earnings reports. The Dow finished the day higher by 30 points while the Nasdaq and S&P 500 rose by much greater levels, gaining 0.9% and 0.5%, respectively. Strength was seen in the tech and financials sectors of the market while some weakness in the basic materials and health care named tempered the overall performance of the broad indexes. In commodity markets, broad weakness was seen in most products as all of the energy futures finished the day lower while the softs followed energy products lead as well. Precious metals, however, did continue their surge in Wednesday trading as gold finished above $1,660/oz. and silver added close to $1.5/oz., or just under 4%. Treasury markets had a rocky day as well, although yields did manage to rise across the board for most maturity levels as the two year finished higher by two basis points at a rate of 0.34%, despite continued dollar weakness against the world’s other major currencies.
One of the biggest winners on the day was the Market Vectors TR Gold Miners Fund (GDX) which gained 1.3% in Wednesday trading. Today’s gains, which continue the solid run for the fund yet again, were largely the result of continued dollar weakness and the flight to assets denominated in other currencies. Since much of GDX’s holdings are foreign companies, a further increase in gold prices coupled with weakness in the greenback gave this fund a nice boost on the day. Demand for gold also increased on more worries regarding an economic double dip as more data came in below expectations in the U.S. and more issues are clouding the outlooks for sovereign bonds in European nations such as Italy and Spain. “It’s a scary environment right now,” said Rob Kurzatkowski, senior commodity analyst with optionsXpress. “As long as it stays that way, you’re going to continue to see gold move higher.” Thanks to this, GDX continued to rise today, putting the one month gain for the fund at 5.5%, far outpacing broad market indexes over the same time period [see holdings of GDX here].
One of the biggest losers in the ETFdb 60 was the iShares MSCI Brazil Index Fund (EWZ) which sank by 1.7% to close out the day. Today’s losses were largely the result of weakness in the commodity markets, especially in some of Brazil’s most important products such as oil (down 2%), sugar (down 1.7%), and cattle (down 1.2%). Thanks to this move downward in natural resources, EWZ, which has close to one-third of its assets in basic materials and energy firms, led the way on the downside today. Additionally, many analysts are growing worried that Brazil’s economy is on the verge of overheating and could be poised for a quick drop in the near future. As a result, the IMF is now looking for GDP growth in the country to be just 4.1% down from 7.5% last year. When factoring in the average inflation rate of 6.6%, this 4.1% growth rate is extremely low and helped lead to a rash of selling in this emerging market during today’s trading session [see charts of EWZ here].
Disclosure: Long EWZ.