American stocks plunged in Thursday trading as fears over Europe and uncertainty over Bernanke’s speech plagued equities throughout the session. The Dow sank by 1.5% while the S&P 500 slumped by 1.6%, however, losses in the tech-heavy Nasdaq were even worse as that index fell by just under 2% on the day. The biggest losses seemed to be in the basic materials and consumer sectors, while financials definitely led on the upside, largely thanks to another solid day from Bank of America and Citigroup. In commodities, oil had somewhat of a volatile session thanks to some choppy trading in midday activity, but finished roughly 20 cents a barrel lower on the day. Meanwhile, gold prices rebounded somewhat after the big drop in previous sessions as the yellow metal managed to gain about $15/oz. in Thursday trading. Soft commodities were more or less flat while multi-percentage points gains were had in both the copper and silver futures markets, giving resources a tilt to the green heading into Friday trading.
One of the biggest ETF winners on the day was the PowerShares DB Base Metals Fund (DBB) which gained just under 1.4% in the session. Today’s gains were largely thanks to a solid performance in the copper markets as the red metal gained just under 2.4% in the session, closing at a three-week high. These gains might be surprising to some given the weakness in the American and European markets, but Asian indexes performed rather well, helping to signal that these key copper consuming markets may be holding up better than their counterparts in the West. Investors in copper were especially bullish on hopes for more Chinese buying of the metal, speculating that the nation would step in and buy up excess supplies of the product in order to fuel growth. Thanks to this relative bullish sentiment for copper, this popular product from PowerShares was able to outpace the market during today’s trading session and post a modest gain when most other products were sinking [see charts of DBB here].
One of the biggest losers in the ETFdb 60 was the Vanguard European ETF (VGK) which sank by 3.0% on the day. These sharp losses were the result of broad fears over the health of euro zone banks, the impending end of the short-selling ban, and worries over a German sovereign bond downgrade as well. Regulators in Europe quickly extended the short-selling ban on financial stocks as selling quickly ensued in markets across the Continent. Some believe that the moratorium could last well into November and it calls into question the health of the banks that are subject to this ban, suggesting that they cannot be held up without the measure’s help. Additionally, investors also grew worried that market juggernaut Germany could be in line for a downgrade thanks to its nearly endless support of euro zone government bonds. Moody’s just downgraded Japan to Aa3 so many are speculating over which developed nation will be next. With an increasingly poor fiscal picture and more demands being put on the nation by the broader euro zone every day, some are beginning to think that Germany may be it, causing VGK to drop sharply in Thursday trading [see holdings of VGK here].
Disclosure: Long VGK.