American markets finished the last full week of May on a high note as the major benchmarks ended solidly in positive territory thanks to a slumping U.S. dollar, which boosted demand for equities and commodities alike. The Dow finished Friday trading up 39 points while the broader benchmarks posted larger gains; the S&P 500 finished up 0.4% while the tech-heavy Nasdaq rose by 0.5% on the day. Meanwhile commodities continue to rise, clawing back much of their losses from earlier in the month; gold gained close to $13/oz. while oil finished above the $100.60 mark to end the week up 0.4%. Meanwhile, soft commodities also benefited from the drop in the dollar as prices rose for corn, cotton, and sugar, although some weakness was seen in the cocoa and soybean markets. However, these gains in the broad markets were not enough to stop the benchmarks from posting their fourth weekly drop. The Dow lost 0.6% for the week while the Nasdaq finished the week lower by 0.5% and the S&P 500 sank by just 0.2%, edging out the other benchmarks but still finishing the week in the red despite today’s solid performance.
One of the biggest winners on the day was the United States Natural Gas Fund (UNG), which rose by 3.4% to close out the week. Today’s gains in the volatile fuel were largely the result of a bullish weather forecast which could lead to higher demand for natural gas. Traders bought up the fuel on reports that warmer-than-normal temperatures may strike the central and eastern U.S. through June 10th. Additionally, some forecasts are calling for temperatures to be as much as 14 degrees above normal in parts of the southern U.S. “The return to hot weather is giving us a little bit of a psychological boost,” said Phil Flynn, vice president of research at PFGBest in Chicago. “Yesterday we had a very bearish storage injection, and the warm weather was the only thing that kept the market from cracking altogether.” Thanks to this boost, UNG rose sharply heading into the long weekend on volume that was close to seven million shares above normal, potentially setting the stage for a small run for the beaten down fund heading into June trading [see more on UNG's fact sheet].
One of the biggest losers in the ETFdb 60 was the PowerShares DB US Dollar Index Bullish Fund (UUP), which lost 0.9% in the session. These losses came as the U.S. dollar index, which measures the greenback against a trade-weighted basket of developed market currencies, fell below the key $75 level for the first time in several weeks on more poor data on the U.S. economy. Among the worst pieces of data was the pending home sales in April which slumped 11.6% as well as the report on personal income and spending which showed that these figures rose by just 0.4% on the month, the smallest increase in three months. Investors took this to mean that the economic recovery was stalling and that the Fed would likely have to postpone raising rates even further into the future. The biggest losses came against the euro which gained more than one cent against the dollar as well as the Swiss franc which finished the week at a record high against the American currency [see charts of UUP here].
Disclosure: No positions at time of writing.