Another rough start to trading on Thursday gave way to solid gains in the afternoon session as some key earnings reports helped to boost investor sentiment. The Dow managed to finish the day ahead by just four points while the S&P 500 posted gains of 0.2% and the Nasdaq led the way on the upside with gains approaching 0.6%. Meanwhile, commodity markets continued their slide as gold tumbled close to the $1,310/oz. mark and oil lost 2% in Thursday trading. Other commodities were mixed in the session as sugar and cotton rose but wheat and corn both fell by roughly 1% on the day. This commodity weakness came despite a slightly weaker dollar which suggested that investors were continuing to flee commodity markets as a safe haven and taking their chances with riskier stocks instead.
Undoubtedly the biggest news on the day came from a number of key consumer companies which disappointed investors before the bell. World-renowned firms such as Procter & Gamble and Colgate-Palmolive both slumped by more than 2.7% as investors sold off shares in the consumer product titans thanks to weakness in sales and lower profit margins. However, Caterpillar, Netflix, and a host of drug makers posted strong results in their most recent quarters, helping to balance out the consumer pessimism and lead the markets to a net gain on the day. These gains likely would have been even more robust had economic data from the government not hit the wires. Investors proceeded to sell many securities as jobless claims soared and durable good orders fell, once again calling into question the health of any economic recovery.
One of the biggest ETF winners on the day was the Vanguard REIT Index Fund (VNQ), which rose 1.6% in Thursday’s session. Today’s gains in the real estate market came as investors bought up a number of the fund’s top components on speculation of a wave of M&A activity in the industry. The main catalyst came from two industrial real estate companies in a move that would create a $14 billion company by combining ProLogis and AMB Property. The move, combined with several other smaller deals late last year, has many analysts thinking that a number of deals could be just around the corner in the space. “2011 could see a resurgence of dealmaking in the real estate sector, as investors return to the asset class and portfolios are reshuffled following a long hiatus,” wrote Helen Thomas in the Financial Times, suggesting that the beaten down real estate market may be finally turning around, at least for some of the major REITs in the country [see fundamentals of VNQ here].
One of the biggest losers in the ETFdb 60 was the United States Natural Gas Fund (UNG), which tumbled by 3.5% on the day. Today’s drop came after the EIA released its weekly update on the natural gas inventory picture which showed that supplies of the key heating fuel tumbled by 174bcf to 2.542 trillion cubic feet in total. Although this beat analyst estimates– which had forecast a drawdown of roughly 174bcf– this was not enough to convince market participants that the glut of natural gas would be going away any time soon. “The supply-and-demand fundamentals remain really uninspiring for the gas market,” said Cameron Horwitz, an analyst with Canaccord Genuity. “When the market stepped back and assessed the storage number, people saw it was just above expectations and nothing to get overly excited about.” [see more charts of UNG here]
Disclosure: No positions at time of writing.