U.S. equity markets started the week on a high note as all three of the major indexes surged higher despite ongoing concerns over a variety of geopolitical events in emerging markets. The Dow roared higher by close to 110 points while the broader Nasdaq gained 1% and the S&P 500 rose by a more modest 0.6%. Commodity markets were more mixed on the day as energy products fell across the board while precious metals were not far behind. Meanwhile, grains and softs had a much better day as cotton and cocoa led the way on the upside, both posting gains in excess of 3.2%. Currencies were also mixed as the dollar remained flat against the pound and the yen but lost against the Australian dollar and the Swiss franc.
The main reason for today’s broad market rally was a number of key earnings reports and deal activity which helped to boost companies in a variety of sectors. Among the biggest gainers on the day were technology firms which received a lift thanks to good news from Intel and NVIDIA, as well as raw material companies which rose on news that RockTenn was seeking to buy Smurfit Stone Container Corp for $3.5 billion, a move that boosted shares of Smurfit Stone up by close to 27% on the day. However, the news wasn’t bullish everywhere as a number of geopolitical events weighed on the markets. Continued strife in the Ivory Coast left many investors uneasy over the country’s supplies of cocoa and coffee and both soft commodities saw their prices rise sharply as a result. Meanwhile, Moscow’s main airport, Domodedovo, experienced an apparent suicide bombing in which at least 35 were killed and more than 130 were injured. Russian markets sold off briefly after the apparent terrorist attack but many believe that the worst will come to the nation’s market over the next few years “Longer term, the fact that it is the second major act of terrorism [in a year] and appears to have been aimed at foreign visitors to Russia will add to investor concerns and will be a factor in how they view investment risk,” said Ian Hague, partner at Firebird Management LLC. “It will make the government’s efforts to attract higher volumes of strategic investor flows into economic sectors outside of natural resources that much harder.”
One of the biggest gainers in the ETFdb 60 was the Technology Select Sector SPDR (XLK) which rose by 1.4% on the day. There were two main catalysts for the outperformance of the tech sector in today’s trading; Intel and NVIDIA. First, Intel boosted market sentiment by increasing its dividend and adding $10 billion to its stock-buyback plan, a move that looks to boost the EPS of the chip giant. Meanwhile the quarterly dividend for the company will go up to 18.12 cents, reflecting the 15% increase in dividend payments that the company announced in Q4 of 2010, boosting shares by 2% on the day. Additional good news came out of the tech sector from GPU manufacturer NVIDIA which saw its shares rise by more than 11% on the day thanks to a positive story in Barron’s magazine. The financial publication called for a massive increase in the price of the stock from its current valuation, causing many investors to buy up shares in the tech giant. “Already one of the fastest rising tech stocks — up from $9 last summer to a recent $22.40 — it could well surge another 80% over the next year,” wrote Barron’s on the rising fortunes of NVIDIA, news that helped to boost the tech sector at large and push XLK into the top spot in the ETFdb 60 during today’s session [see holdings of XLK here].
One of the biggest losers on the day was the ever-volatile United States Natural Gas Fund (UNG) which sank by 2.4% in Tuesday’s session. Today’s losses came after a mini-surge in natural gas prices at the end of last week in which the popular heating fuel saw greater-than-expected drawdowns due to extremely cold weather across much of the country. As a result, today’s decline can largely be blamed on traders locking in profits although it was an extremely light day in terms of volume; just 18.6 million shares changed hands, or roughly seven million less than normal. Nevertheless, UNG is still up almost 11.2% in the past week and 17.1% over the past quarter suggesting that, even including this drop, UNG may have finally bottomed out for the time being [see fundamentals of UNG here].
Disclosure: No positions at time of writing.