After choppy trading last week, American equity markets finished a rocky session slightly higher across the board to open up the new week. The broad S&P 500 barely kept its head above the breakeven mark while the Nasdaq and the Dow managed to post more substantial gains of 0.2% and 0.3%, respectively. Weakness was seen in some corners of the oil and gas market while most of the big banks fell as well in Monday trading. In commodity markets, most resources finished higher, led by a nearly 2.3% move in WTI crude and a 2.5% gain for gold futures. Grains and other softs also finished the day higher while Brent crude, thanks to speculation over the end of major fighting in Libya, fell by roughly half a percent on the day.
Currency markets, however, did not maintain their most recent spat of volatility as the U.S. dollar index rose by less than 0.2% on the day. The greenback gained a little against the yen, but fell by small amounts against both the euro and the pound. Nevertheless, bond yields for American Treasury debt did rise across the board; the two year saw yields rise by one basis point while the 10 Yea was yielding 2.1% at the close, a three basis point increase from the start of Monday trading.
One of the biggest ETF winners on the day was the Market Vectors TR Gold Miners ETF (GDX) which gained just under 4% to start the week. Today’s robust gains came as prices for gold surged to just under $1,900/oz. as the yellow metal added nearly $45/oz in Monday trading. This was largely a result of worries over the health of the global economy and fresh speculation that Bernanke would detail plans for another round of QE this Friday at the important Jackson Hole meeting in Wyoming. Given the broad weakness in the global economy as of late, a shift to more easing is not entirely out of the question for central bankers, especially given the moderate level of inflation. “QE3 is an option if there is a significant downturn in the economy or extraordinary stress in financial markets,” said Mark Gertler, an NYU professor who has worked with Bernanke in the past. Thanks to this, sentiment has begun to shift for gold miners as well, especially given the runup in gold prices over the past few weeks. Many see the miners as a less ‘bubbly’ play on the precious metal, making the fund one of the biggest winners in Monday’s otherwise flat trading session [see holdings of GDX here].
One of the biggest losers in the ETF world was the Financial Select Sector SPDR (XLF) which sank by 1.2% in the session. Worries over further turmoil in Europe plagued this fund at the start of the session while concerns over Goldman Sachs ensured that a solid end to the session was out of the question. This sharp drop in Goldman shares came as CEO Lloyd Blankfein revealed that he had hired defense attorney Reid Weingarten. Reid is famous for having represented former Worldcom CEO and a former Enron executive, creating buzz in the financial world over just why Blankfein needed this particular brand of legal help. Thanks to this speculation, as well as broad European worries, most banking shares plunged on the day including a nearly 4.7% loss for GS. Beyond Goldman, heavy losses were also seen in Bank of America, as the financial giant saw its shares plunge by nearly 7.8% in the session, putting the company below the $6.5/share level [see more charts of XLF here].
Disclosure: No positions at time of writing.