Tuesday started off with a promising start, as major equities saw green figures for the first time in nearly a week. But just as investors were given hope that the four day slide would be erased by a relatively strong one, the last hour of trading sent markets back into the red, making for five straight days of losses. The Dow Jones Industrial Average lost 0.16% as the major index is coming dangerously close to losing its grip on the 12,000 mark. The S&P 500 lost just over a point, as it has been trading at its lowest levels seen in months, much to the dismay of many investors. With investors now fearing a summer slowdown, Fed chair Ben Bernanke issued a statement to try and calm markets, citing high gas prices and the Japan crisis as major anchors to our current economic performance, but that he had high hopes for a promising second half of 2011. No mention was made of QE 2, which is set to expire when the month of June come to a close [see also ETF Insider: Weak Dollar Creates Opportunities].
One of the biggest winners of the day was the Vanguard European ETF (VGK), which gained 1.1% in trading. European equities have been struggling as of late due to renewed fears of a euro crisis, with Greece in danger of default on its debt. But today finally brought some bright news to the battered sector, as President Obama met with German Chancellor Angela Merkel. Obama urged “European countries and bondholders to prevent a ‘disastrous’ default by Greece and pledged U.S. support to help tackle the country’s debt crisis” write Jeff Mason and Steve Holland. A pledge by the U.S. to support the highly indebted Greece is a strong sign for the future of the nation’s debt, as they are receiving support from all around the world to keep them afloat a while longer, hopefully giving them time to get their economic house in order. According to sources, a second aid package worth anywhere from 80 to 100 billion euros is currently in the works, potentially allowing Greece to avoid default [see more charts of VGK here].
One of the biggest losers today came within our own borders, as the PowerShares DB USD Index Bullish (UUP) lost 0.57% in Tuesday trading. This ETF, which tracks the U.S. greenback against a trade-weighted basket of developed market currencies, has been all over the board lately, as the dollar has been constantly fluctuating based on various data points. Today, the dollar saw downward pressure as a “senior Chinese currency regulator warned about the risks of excessive dollar holdings” striking fear into the markets as the statement further confirms that our largest creditors are becoming skittish about the dollar. The greenback may also have seen pressure from Bernanke’s speech as well thanks to some of its comments regarding easy money policies. While he did not mention any further quantitative easing, he did express the need to keep interest rates low, which is bad news for the strength of the dollar over the medium term [see more on UUP's fact sheet].
Disclosure: No positions at time of writing.