American equity markets finished the day mixed as the Dow managed to continue its winning streak but the other major benchmarks slid marginally in the session. The Dow finished ahead by seven points while the broader Nasdaq and S&P 500 both declined by 0.3% in Wednesday trading as comments from Fed Chair Ben Bernanke on long-term unemployment and a general feeling of an overbought market kept shares subdued throughout the session. Major commodity markets also finished the day flat as gold and oil both oscillated between gains and losses before the both finished lower by a couple cents each. Much bigger moves came in the Treasury and currency markets where the dollar index fell by 0.5% and suffered the biggest losses against the euro, and the Swiss franc. Despite this, investors continued to pile into U.S. Treasury bonds as yields declined across all maturity levels with the biggest notional moves coming in the seven and ten year issues.
One of the biggest gainers on the day was the PowerShares DB Agricultural Fund (DBA) which rose by 1.0% in Wednesday trading. These gains came as investors again bid up prices in a variety of agricultural commodities thanks to continued supply concerns from around the world. Among the biggest movers was corn which saw its spot price surge by close to 3.6% and hitting the $7/bushel mark. This came after the USDA cut their domestic corn inventory forecast by 70 million bushels to 675 million in total, surprising analysts who had expected the Department to announce a 16 million bushel cut instead. This dramatic turn of events was the result of two key factors according to the report; increased demand for ethanol and corn syrup’s popularity in a variety of emerging markets thanks to high sugar prices. As a result, corn led the charge for agricultural commodities all of which were broadly higher on the USDA report [see more on DBA's fact sheet].
One of the biggest losers in the ETFdb 60 was the iShares MSCI Brazil Index Fund (EWZ) which declined by 2.8% on the day. This sharp decline followed the broad sell off in emerging markets and came after the Brazilian statistic bureau reported that January’s inflation reading came in at an annualized rate of just under 6.00%, well above the government’s target of 4.5%. As a result, many investors sold off Brazilian stocks in anticipation of a rate hike or further cuts in government spending in order to cool off the rapid price increases throughout the economy. “They say they are going to make the cuts, but it all depends on the execution,” said one analyst according to the WSJ. “More interest rate hikes will be necessary, in any case.” Given the ongoing turmoil across the world and the heavy flight to quality, investors decided to dump EWZ rather than risk further losses to their Latin American component of their portfolios [see technicals of EWZ here].
Disclosure: Long EWZ.