American stock markets continued to face resistance this week as equities struggled to fight through a bad report from Hewlett-Packard and anemic U.S. housing data. Although the Nasdaq managed to squeak by with a one point gain and the S&P 500 finished the day flat, the blue chips in the Dow weren’t as fortunate, as the 30 company index fell by 69 points or roughly 0.6% on the day. In commodities, most energy and metal products finished the day weaker, as WTI fell close to the $97/bbl. mark and gold finished below the $1,485/oz. level. Soft commodities fared much better as all of the grains gained at least one percent, led by a 3.3% gain for corn and a 3.7% jump in Chicago wheat. The U.S. dollar, on the other hand, continued its long term trend lower, declining by about $0.25 on the day down to the $75.35 mark in the U.S. dollar index. Nonetheless, Treasurys continued to gain as yields fell yet again; the Ten Year Note is now yielding just 3.11%.
One of the biggest gainers in the ETF world on the day was the iShares MSCI Brazil Index Fund (EWZ) which rose by 1.7%. Today’s gains were the result of declining expectations over inflation in Latin America’s largest economy as the consensus forecast saw expectations drop five basis points to 5.22% for the country’s inflation reading for the next twelve months. Due to this, traders scooped up a variety of big Brazilian names helping to boost the price of EWZ on the day. The fund also traded on a surprisingly high level of volume as more than 20 million shares changed hands or roughly, seven million shares more than normal. Nonetheless, EWZ is still facing some headwinds as the fund has lost over 6% so far in 2011 including a 6.8% tumble over the past two weeks alone, suggesting that it will take more than a modest decline in inflation expectations to right the ship [see fundamentals of EWZ here].
One of the biggest losers in Tuesday trading was the United States Natural Gas Fund (UNG) which fell by 2.7% in the session. Today’s losses were largely attributed to a weak reading from the key Industrial Capacity utilization index which surprisingly fell from the month ago period. Industries used 76.9% of their capacity last month, down 0.1 percentage point from the revised March figure while manufacturing capacity utilization dropped 0.4 percentage point to 74.4%. This compares to the economist forecast of a 0.3 percentage-point increase in output and a predicted capacity utilization rate of 77.6%. Many of these firms use natural gas as their main source of energy so a lower reading from this key statistic suggested to many traders that natural gas demand was likely to slump over the next few weeks, especially if manufacturing remains slack [see charts of UNG here].
Disclosure: long EWZ.