Thanks to high oil prices and fears over a government shutdown, investors sold off U.S. equities across the board to close out the week. The Dow finished down by 0.2% while the broader indexes posted more significant losses of 0.6% for the Nasdaq and 0.4% for the S&P 500. Commodity markets, on the other hand, continued their recent surge thanks to a weak dollar which was likely caused by investor worries over a prolonged government shutdown. Gold finished at yet another record, gaining $17/oz., while silver finished the day above the $40 level–a multi-decade record for the commodity. This surge in commodities came after traders fled the U.S. dollar in droves ahead of the possible federal government shutdown at midnight tonight. T-Bills fell across the board while the greenback lost more than one cent against the euro in Friday trading as traders continued to jump to precious metals in order to obtain safe haven exposure.
One of the biggest winners in the ETFdb 60 was the PowerShares DB Commodity Index Fund (DBC), which surged by 2.4% to close out the week. These sharp gains in commodity markets came after the U.S. dollar sold off broadly against most major currencies as the US Dollar Index finished the day down 0.9%, below the $75 level. This represents the weakest that the dollar has been since late 2009 when the index trended around the $75 mark before shooting higher in January of 2010. The surge was especially large in the silver, wheat, oil, and soybean markets, which all gained more than 2% in the session. However, since DBC is heavily influenced by oil and its derivative products– more than 50% of the fund’s holdings go to RBOB gasoline, light crude, heating oil, and Brent crude– oil’s gains on the day helped to power this popular commodity fund to the top spot in Friday’s session [see more on DBC's fact sheet].
One of the biggest ETF losers on the day was the iShares Dow Jones Transportation Average Index Fund (IYT), which sank by 1.7% to close out the week. Today’s tumble was largely thanks to oil’s surge as the important commodity hit $113/bbl. in WTI trading and $126.7/bbl. in Brent trading. With increased costs, the margins for many of the top components in this fund are likely to shrink, leading to a huge sell-off in some of the more oil-sensitive names in IYT. FedEx was down 2.9% in the session while UPS and Expeditors International both declined by 1% on the day. Even less oil-sensitive names such as those in the railroad sector declined on the day as CSX fell by 1.3% and UNP sank by 0.9%, suggesting that it was a rough day all around in the sector [see more holdings of IYT].
Disclosure: No positions at time of writing.