After a weak session in Monday trading, American equity markets managed to march higher today as investors scooped up shares on solid earnings in the industrial sector and hope for a resolution in the European debt crisis. Both the Dow and Nasdaq rose by 0.3% on the day while the S&P 500 managed to edge higher by 0.4%. It was also another solid day for commodities as softs continued to outperform and oil-based commodities surged thanks to the release of a report that suggested increased government involvement in offshore drilling in the near future. Despite this commodity move to the upside, the U.S. dollar remained relatively steady, although a reduction in demand for U.S. Treasury securities was apparent thanks to rising yields across most maturities.
Markets were encouraged today by news out of Asia, where Japan joined in with China to buy up European sovereign debt, thereby taking pressure off of some of the most indebted members in the common currency bloc such as Portugal. “We’re seeing modest improvement on Japan’s willingness to buy European debt. That’s good news, as somebody has got to buy it,” said Jack Ablin, chief investment officer at Harris Private Bank. Equities were also buoyed by a solid earnings report from Dow component Alcoa, which reported estimate-beating earnings along with an upbeat forecast for the new year. The key aluminum maker projected that global demand for the key industrial metal would double by the end of the decade, a prediction that many in the manufacturing and industrial sectors cheered since it suggests robust demand for a variety of industries in the years ahead.
One of the biggest gainers in the ETFdb 60 was the United States Natural Gas Fund (UNG), which surged by 2.4% in today’s session. Today’s gains were the result of a forecast of colder weather across much of the Northeast as well as a severe cold snap in the Midwest where temperatures are forecast to be almost 10 degrees colder than normal. A surge in oil prices thanks to fears over increased regulation in the Gulf offshore drilling region also helped to boost prices, sending the heating fuel higher for the first time in several trading sessions [see technicals of UNG here].
One of the biggest losers on the day was the iShares Dow Jones U.S. Telecom Index Fund (IYZ), which sank by 0.8%. This decline came after Verizon announced the impending release of the iPhone for its network, an event that many consumers cheered but could have just mixed results for the telecom juggernaut. Verizon’s stock fell by 0.3% on the day while traders also sold off their positions in AT&T–which tumbled by 1.5% in the session–as well as Sprint, which declined by 2.1%. Many predict that the iPhone’s appearance on the Verizon network will cause many customers from both Sprint and AT&T to leave their respective providers and join on to Verizon. However, analysts are also worried that the move by Verizon will overload its network and create a drag on bottom line earnings thanks to large subsidy payments to Apple [see holdings of IYZ here].
Disclosure: No positions at time of writing.