U.S. equity markets drifted higher in Wednesday’s trading session as a surprisingly solid private-sector employment report from ADP boosted market sentiment. Thanks to this report, the Dow rose by a modest 32 points while the S&P 500 and the Nasdaq both posted more robust gains of 0.5% and 0.8%, respectively. Commodity markets were once again volatile as gold tumbled more than $20/oz. before regaining much of its lost ground in late session trading while oil managed to push higher, finishing the day up 1.1%. All of this came as the U.S. dollar gained against many of its major rivals, helping to push the dollar index up to $80.2 or a 1% gain on the day.
While this surge in the U.S. dollar was followed by rising bond yields across most maturity levels, this was only a result of the day’s biggest news story; the robust ADP report. According to the payroll processing organization, private-sector payrolls jumped by just under 300,000 on the month in a figure that was more than double analyst predictions. The vast majority of the gains came from the service sector although manufacturing companies and other goods producing firms managed to post payroll increases of 27,000 for the month as well. In fact, the numbers were so good that some began to question just how accurate the figure was citing seasonality as a possible explanation for the large uptick in hiring. “We accept that the [ADP report] is very likely overstating growth of private payrolls due to the seasonal” issues, according to Macroeconomic Advisers. “However, we would not be surprised to see a portion of the unexpected weakness in [the government’s employment data] in November reversed and manifested as outsized strength in December.”
One of the biggest gainers in the ETFdb 60 was the Market Vectors Agribusiness ETF (MOO) which gained 1.6% on the day. Today’s gains for the agribusiness sector came after one of MOO’s key components, the Mosaic Company (MOS), posted solid results that beat expectations. Earnings from continuing operations came in at $1.01, handily beating the 92-cent estimate average by analysts thanks to surging demand for phosphates and rising prices for potash. “Demand for fertilizers is booming,” said Mosaic Chief Executive Officer Jim Prokopanko. “We’re doing all we can to keep up with demand.” This bullish outlook boosted the rest of the sector and put traders on notice for Monsanto’s report tomorrow morning before the bell [see holdings of MOO here].
One of the biggest losers on the day was the United States Natural Gas Fund (UNG) which sank by 2.6% in Wednesday’s session. Today’s tumble was a result of profit taking as traders cashed in on recent gains in the popular heating fuel ahead of tomorrow’s storage report and forecasts of moderating weather across the nation. “People remember what happened when they stayed long at these prices just a few weeks ago,” said Walter Zimmermann, chief technical analyst with United-ICAP. Who added that Wednesday’s selloff was likely a brief pullback rather than the start of a new downward direction for the market, according to the Wall Street Journal. Despite these losses, UNG is still up 12% over the past two weeks as extreme weather has helped to heighten demand for the fuel across much of the country and cancel out the significant supply overhang [see more charts of UNG here].
Disclosure: No positions at time of writing.