Despite an increasingly tense situation in Egypt and the broader Middle East in general, American equity markets rose across the board in Tuesday trading. The Dow jumped by close to 150 points while the S&P 500 and the Nasdaq posted even better days, rising by 1.7% and 1.9%, respectively. In commodity markets, WTI crude retreated by more than $1.5 a barrel while other types of energy were more mixed on the day. Other commodity types such as precious and industrial metals finished the day higher while grains generally outperformed as well. These gains in commodities came as the dollar sold off significantly against most of its major rivals as the U.S. dollar Index fell by 1.0% on the day. Traders also sold off some of their Treasury bond holdings as investors moved back into riskier assets throughout the trading session.
Equity markets largely put the Egyptian turmoil in the rear view mirror as traders focused in on quality earnings reports in order to propel the markets higher. Among the biggest gainers was Pfizer which reported higher-than-expected profits and said that it would be buying back $5 billion in stock, news that sent shares of the company higher by more than 5% on the day. Tensions also appear to be easing to a degree in Egypt as embattled President Hosni Mubarak announced that he will not be seeking reelection in the fall, possibly placating the crowds in Cairo for the time being. “There’s a sense that [Egyptian President Hosni Mubarak] is gone and whoever replaces him will be secular and the country will be freer as a result,” says Peter Boockvar, equity strategist at Miller Tabak & Co. in Manhattan. “There’s no concern that it spills over to other countries; if there were, the markets wouldn’t be reacting this way.”
One of the biggest winners on the day was the PowerShares Water Resource Portfolio (PHO) which surged higher by 3.0% in Tuesday trading. Today’s gains came as many of the funds top components jumped higher with two of the top three holdings, Tetra Tech and Lindsay Corp, rising by more than 6% in the session. This run caps off a solid 52 week period for the fund in which it has gained almost 25%, including 20% over the past 26 weeks [see holdings of PHO here].
One of the biggest losers in the ETFdb 60 was the United States Natural Gas Fund (UNG) which sank by 1.5% on the day. These losses came despite the possibility of a blizzard across much of the Midwest as traders sold off natural gas contracts in light of data suggesting that there will be milder weather in the later part of February. “If we are looking at normal weather in 11 to 15 days, it would be a major change from what we’ve been seeing,” said Peter Beutel, president of trading advisory company Cameron Hanover Inc. in New Canaan, Connecticut. “It would definitely bring some selling into this market.” UNG is now down 5.5% over the past week as moderating fears over the weather have weighed on this beaten down product. However, should the Midwest storm live up to expectations, it could cause a reversal later on in the week at the crucial EIA weekly gas storage report on Thursday [see charts of UNG here].
Disclosure: No positions at time of writing.