Daily ETF Roundup: GDX Sinks, JJC Regains Lost Ground

by on January 21, 2011 | ETFs Mentioned:

Markets failed to respond to solid earnings reports from key market bellwethers as any hope for a strong day was soon squashed by midday trading. Still, both the Dow and the S&P 500 managed to finished the day in the green as the Dow jumped by 0.4% while the S&P 500 rose by 0.2%, however, the Nasdaq was not as fortunate, tumbling by 0.6% on the day, a figure that pushed the tech-heavy index down more than 2% for the week. Commodity markets also continued their weakness as both gold and oil resumed their recent tumble with both falling modestly in the session. While most commodities failed to move higher on the day some did manage to surge on continued supply concerns; coffee was up 3.7%, sugar and lumber both rose by 3.3% as well. In addition to concerns over supplies, a weaker dollar probably helped these soft commodities as the greenback experienced more weakness against the world’s major currencies and especially against its chief rival, the euro.

The biggest stories for the market in Friday’s session came as GE reported robust earnings which helped to buoy a number of companies in the industrial sector. The Connecticut-based conglomerate said that its fourth-quarter earnings rose 31% to $3.9 billion, beating estimates by four cents a share. Investors were especially bullish on the company’s order book; overall orders jumped 12% year-over-year while the company’s total deal backlog increased by $3.1 billion to $175 billion.   “It’s a pretty strong earnings season,” said Philip Orlando, the equity market strategist at Federated Investors Inc., “U.S. bellwethers reported profits that beat estimates. On top of that, the tone of the economy has changed significantly for the better. That’s a great backdrop for investors who want to take money out of bonds and put it into the stock market. I bet the trend is higher, with the S&P 500 at 1,450 by year-end.” However, technology stocks did not ride in this wave of optimism as investors sold off shares of Google despite its solid quarter on news that founder Larry Page would once again take the reins as CEO of the search giant. Google shares were down almost 2.4% on the news while weakness also was present in other big name technology companies such as Microsoft and Apple, which both retreated by more than 1.2% as well.

One of the biggest losers in the ETFdb 60 was the Market Vectors TR Gold Miners Fund (GDX) which tumbled by 1.3% on the day. Today’s weakness was a result of continued pessimism in the gold market as prices for the yellow metal sank below the $1,345/oz. mark, a near 40 dollar an ounce drop since the beginning of the year. Unsurprisingly, this news has had a devastating impact on gold miners which are often seen as a leveraged play on the price of gold, helping them to outperform when prices are high but struggle more than the precious metal when prices are slipping. As a result, GDX is now down 12.3% so far year-to-date, a far cry from its 52 week performance in which the fund rose by 23.3% thanks to surging gold prices which reached record highs before trending downwards to their current position [see fundamentals of GDX here].


One of the biggest gainers on the day was the iPath DJ-UBS Copper Total Return Sub-Index ETN (JJC) which rose by 1.7% to close out the week. These gains for the important base metal came as traders bought up copper on improving economic sentiment in the U.S. economy, assuming that a more robust outlook would lead to greater demand for the red metal. This surge came after copper dropped significantly in Thursday trading once traders reassessed the likelihood of a Chinese rate hike which would help to cool copper demand in the country. However, with positive economic reports in both Germany and the U.S. earlier today some are growing increasingly worried over a copper shortage which may be developing if the economic situation continues to improve. This return to the green for JJC continues the short-term trend for the metal which has now gained 14.1% over the past 13 weeks and 35.2% over the previous half year period [see charts of JJC here].

Disclosure: No positions at time of writing.