U.S. stocks closed out the week, and April, on a high note as a weak dollar and a strong report from Caterpillar helped to boost markets heading into May. The Dow led the three major indexes in Friday trading, gaining 0.4% on the day while the S&P 500 rose 0.2% and the Nasdaq clung to a gain of just one point. Meanwhile, in commodity markets, a weak dollar once again catapulted resources into the spotlight as gold added $32/oz. or 2.1% on the day while silver continued its run, gaining a modest 0.6%. Soft commodities also did well across the board, as the grains rebounded from their poor performances yesterday to finish the month on a high note. Despite this commodity surge, traders continued to pile into T-Bills as well; yields were down for most maturity levels and the Ten Year has now broken below the 3.3% yield mark.
One of the biggest winners on the day was the United States Natural Gas Fund (UNG) which surged by 2.3% in the session. Today’s gains, which came after a reasonably bullish EIA storage report yesterday, were largely the result of the combination of warm weather and concerns over production. These worries came after inventories of the crucial fuel fell below their five year average for the first time since late February and total stockpiles were roughly 11% less than their levels in the year ago period. This was further confirmed by the fact that gas output fell to 65.49bcf a day from a revised 66.78bcf in its revised report. Additionally, a high number of nuclear reactors are currently offline– 29 of the 104 total by some estimates– so demand for natural gas to pick up that slack has been large, further eating into supplies of the fuel. All in all, many investors are feeling at least reasonably bullish on the short term outlook for the fuel, something that most have not been able to say in a long time, further adding to the short-term picture for UNG [see fundamentals of UNG here].
One of the biggest losers in the ETFdb 60 during Friday trading was the PowerShares DB Base Metals Fund (DBB) which declined by 1.4% to close out the week. These losses were largely the result of concerns that China would take the long weekend– Monday is ‘Chinese Labor Day’– in order to announce another rate hike. Higher rates curtail demand for more economic activity and thus limit the demand for base metals and especially copper, which takes its cues from China since the country makes up close to 40% of total demand. “There’s some genuine concern of late that maybe China’s done stocking copper for a while,” said Rob Kurzatkowski, senior commodity analyst at optionsXpress. “A lot of Chinese firms have gotten smarter about their copper purchases and maybe they’ll wait for a bit more of a pullback.” Thanks to these fears, copper declined by nearly 2% on the day leaving those that are invested in DBB in a bearish mood heading into May [see more on DBB's fact sheet].
Disclosure: No positions at time of writing.