American equity markets continued their slide in Wednesday trading as poor economic data on both the business activity and employment fronts led many to sell off their stocks. Both the Dow and the S&P 500 finished the day down by 0.7% while the Nasdaq, thanks to strength from Microsoft and Intel, managed to post more moderate losses of 0.5%. Meanwhile, commodities continued to tumble, seemingly with no end in sight as gold fell by 1.6% and oil sank by 1.9%. Other commodities, especially those in the softs sector such as the grains as well as coffee and cocoa, also had extremely rough days as sugar fell by more than 3%, cotton and coffee sank by 3.8%, and rice lost close to 3.3%. Silver, also had yet another volatile day as the white metal plummeted below the $40/oz. mark as the CME once again increased margins for silver traders. Thanks to these widespread losses in commodity and equity markets, many fled for the relative safety of the Treasury market as rates tumbled across the board for these government securities.
One of the biggest ETF winners on the day was the iPath S&P 500 VIX Short Term Futures ETN (VXX) which rose by 1.2% on the day. These gains came thanks to a shaky market which was reeling from weakness in both the ADP jobs report and the ISM Index reading. First, the ADP jobs report which shows the number of private sector jobs that were created over the last month, came in at just 179,000, or well short of the 200,000 that economists were expecting. Meanwhile, the ISM non-manufacturing Index slipped from its previous reading of 57.3 all the way down to 52.8, far outpacing the projected decline to 57. This gloomy news, along with continued weakness in commodities, led many traders to buy up VXX as protection. In fact, just over 29 million shares changed hands in the popular ETN today, far outpacing the average volume of 16.7 million and further demonstrating how volatile the marketplace has become in the past few days [see fundamentals of VXX].
One of the biggest losers in the ETFdb 60 was the iShares MSCI Brazil Index (EWZ) which declined by 2.5% on the day. These sharp losses came as fears over the country’s inflation rate once again hit markets causing many investors to sell off their Brazilian equity holdings. Additionally, a conference with the country’s central bank President, Alexandre Tombini, also weighed on the markets as he announced his commitment to raising rates to stop inflation in its tracks. “It’s not a 100-meter sprint, it’s a long process” he said. “Obviously, the monetary policy instrument that will get inflation back to its 4.5 percent target in 2012 is the conventional instrument that is being used, and will continue to be used for as long as necessary.” Thanks to fears over continued rate hikes as well as weaker commodity prices, most Brazilian equities sold off in Wednesday trading, including two of the nation’s biggest firms, PetroBras (-2.6%) and Vale (-3.4%) which make up large portions of EWZ as well [see more charts of EWZ].
Disclosure: long EWZ.