American equity markets rose again in Thursday trading as traders cheered better-than-expected economic data on the jobs front. As a result, the Dow finished ahead by 0.7% on the day while the S&P 500 rose by 1.1% and the tech-heavy Nasdaq gained 1.4% on the day. In commodity markets, gold managed to sneak by with a two dollar an ounce gain while oil continued to surge, rising by close to two dollars in Thursday’s trade, finishing above the $98.5/bbl. mark. Other commodities also rose on the day thanks to a small decline in the U.S. dollar index as the value of the greenback fell against many of the world’s major currencies on the day, falling below the $75 mark. Among the leaders were energy commodities as heating oil and RBOB both rose by at least 4% while grains and metals also performed well, as copper gained more than 2% on the day thanks to a better short-term economic outlook. In Treasury markets, investors saw outflows on the day as the debt ceiling issue continues to hang over the markets; this helped to push yields up across the board putting the benchmark 10 Year Note up to the 3.15% level.
One of the biggest ETF winners on the day was the PowerShares DB Commodity Index Fund (DBC) which gained 2.1% in Thursday trading. Today’s gains came thanks to broad strength in the energy commodity sector, which, with the exception of natural gas, saw futures rise across the board in Thursday trading. These gains in the oil and oil derivatives market came thanks to falling inventories in the U.S. as crude stockpiles fell by 3.2 million barrels and gasoline supplies saw a drawdown of two million barrels as well. “Whereas the decline in crude stocks can be explained by lower imports, the decline in oil products suggests a rise in demand,” says Carsten Fritsch, Commerzbank commodity research analyst. This greatly helped DBC as half of the fund’s assets are in four commodities; light crude, Brent crude, Heating oil, and RBOB gasoline. These four products averaged a gain of nearly 3.6% on the day, helping to carry DBC higher on a session that saw strength pretty much across the board in the natural resource space [see more on DBC's fact sheet].
One of the biggest losers in the ETFdb 60 was the United States Natural Gas (UNG) which lost 1.6% in the session. Today’s losses, which far outpaced those of the rest of the commodity sector, came as traders sold-off the important fuel after today’s release of the EIA storage report. Traders had expected an increase in supplies of 82 bcf but inventories increased by 95 bcf, suggesting that less gas was used than expected, further increasing the abundant supplies of the fuel. The level of increases also compares unfavorably with last month’s increase which came in at 78 bcf, meaning that not only are the supply additions significant, but they are accelerating over the last few weeks despite warm weather across much of the nation. Unsurprisingly, this report led to a broad sell-off in natural gas futures as well as UNG, pushing the popular ETF down just over 3.5% in the past week, and 14.9% in the past quarter alone [see fundamentals of UNG here].
Disclosure: No positions at time of writing.