Daily ETF Roundup: UNG Tumbles On Mild Weather, GDX Continues Surge On Demand

by on June 22, 2011 | ETFs Mentioned:

Although stocks were up significantly to start the session, markets tumbled after Ben Bernanke’s comments that followed today’s Fed meeting, leaving equities sharply lower in Wednesday trading. All of the three major benchmarks, the Dow, Nadsaq, and S&P 500 fell by roughly 0.7% on the day, with virtually all of the losses coming in the final hour of trading. This came as Bernanke got ready to end QE2 at the end of the month but also appeared to be ready to keep rates at an ultra-low level for an ‘extended period’. This signaled to many, and Bernanke said it himself, that the economy remains weak and although it doesn’t need more quantitative easing, still needs low rates in order to get back on its feet. This helped to push investors back into greenbacks as many were worried that a third QE program would be in the works, something that would have been a dollar negative. As a result, T-Bills were mostly flat and the U.S. dollar index reversed its losses from earlier in the session to finish the day up by 0.4%. Unfortunately for commodity investors, this strength in the U.S. dollar led to losses across much of the softs while gold and oil retreated off of their highs for the day. Trading was especially bad in the wheat and corn markets as a good weather forecast combined with a stronger dollar to limit demand for these products in today’s session.

One of the biggest ETF winners on the day was the Market Vectors Gold Miners ETF (GDX) which gained 1.2% in today’s session. These gains came despite a relatively lackluster day in the gold market as the yellow metal gained just four dollars an ounce to finish Wednesday trading at the $1,550/oz. mark. Nonetheless, investors bought up gold miners thanks to continued uncertainty in Greece and worries over the American economy. These concerns came as Bernanke suggested that the current level of economic growth remains below expectations and could continue to do so for some time. “We don’t have a precise read on why this slower pace of growth is persisting,” Bernanke told a press conference after the Federal Open Market Committee meeting. As a result, risk aversion was high in some sectors of the market prompting many investors to pile into gold equities as a hedge against further uncertainty, boosting the appeal of GDX [see more on GDX's fact sheet].

One of the biggest losers in the ETFdb 60 was the United States Natural Gas Fund (UNG) which sank by 2.1% in Wednesday trading. Today’s losses came as traders sold off the fuel ahead of tomorrow’s key IEA storage report. Thanks to more moderate weather last week, many traders are now looking for a larger increase in the nation’s stockpiles of the fuel, which would be a UNG negative. Additionally, traders also looked to moderate weather in the coming days as another reason to get out of any long positions in UNG. This drop came on a day of exceptionally light volume in the fund as just under 9.7 million shares changed hands, or roughly three million less than average, suggesting that the fund trended down throughout the session after starting off the day on a strong note. Nonetheless, UNG is now down close to 7% over the past week and 8.5% over the past two week period, meaning that a significant deviation from the predictions will be necessary to change the sentiment in UNG in Thursday trading [see fundamentals of UNG here].

Disclosure: No positions at time of writing.