U.S. equity markets slumped in Thursday trading as weakness in retail and telecommunication stocks weighed on the markets. Both the Dow and the S&P 500 fell by 0.2% while the Nasdaq managed to post a gain of 0.3% thanks to solid performances out of big names such as Microsoft. Meanwhile, commodity markets continued their recent slide as gold fell marginally and oil corrected by another $2/bbl in today’s session. This came after the U.S. dollar posted strength against most of its major rivals including a 1% gain against the euro, helping to push Treasury yields down across the board.
The markets today focused in on holiday retail sales which helped to stall the rally that had taken place earlier in the week. Although December same-store sales rose by 3.1% on the month, this was lower than the Wall Street analyst consensus forecast of 3.4% which helped to sink the retail sector of the market for the day’s session. “The challenge is how aggressive do they have to be to clear the excess inventory” this month, said Tom Clarke, a director at consultancy AlixPartners, in an interview. “Overall, it’s a good holiday, but it’s still questionable whether consumers will come back. It remains to be seen whether the holiday momentum is a blip or can be sustainable.” Meanwhile, telecom, banking, and oil exploration firms were also down across the board as well, as an iPhone price cut, concerns over the health of consumer balance sheets, and the price of oil, weighed on each of these sectors, respectively.
One of the biggest gainers on the day was the PowerShares DB US Dollar Index Fund (UUP) which rose by 0.7% on the day. Today’s gains were the result of growing optimism over tomorrow’s U.S. jobs report which could be a net positive for the greenback given the recent bullish jobs data. News in Europe regarding costs of future bank bailouts also weighed on currency markets as investors fretted over a plan to make bond holders pay in any future bailout and to give the ECB broader regulatory powers going forward. “The ECB is pushing hard to get a recognition that investors share the pain and it doesn’t all go to the sovereigns,” said Kit Juckes, head of foreign-exchange research at Societe Generale SA in London. “In Europe, we could have a spark that makes us afraid and makes us one step closer to the abyss again.” [see technicals of UUP here]
One of the biggest losers in the ETFdb 60 was the Market Vectors Gold Miners ETF (GDX) which tumbled by 2.5% in Thursday’s session. These losses came as investors once again exited the safe haven thanks to improving demand for the U.S. dollar and growing optimism over the health of the American economy. This attitude was largely the result of a solid jobs report from ADP on Wednesday and a moderating situation on the unemployment front; new claims rose by 18,000, within analyst expectations. Additionally, the previous week’s figures were revised slightly upward but still managed to stay below 400,000 for the first time in 18 months. “We’re moving down towards the 400,000 level, which typically means sustained, decent jobs growth,” said Bart Melek, metals strategist with BMO Capital Markets. This assertion helped to limit the speculation of an all out collapse of the U.S. economy and thus limit the demand for gold as well [see holdings of GDX here].
Disclosure: No positions at time of writing.