U.S. equity markets tumbled in Friday trading as worries over the euro zone increased risk aversion across global markets. The Dow and Nasdaq both fell by 0.7% and the S&P 500 sank by 0.8% in comparison. However, commodities did have a nice day as gold gained appeal thanks to its role as a safe haven; the yellow metal surged by 1.4% up to the $1,513o/oz. level. Oil also ascended on the session as the commodity rose by 0.9%, pushing the product just below the $100 mark. While these headline commodities did do pretty well, soft commodities were more mixed as cocoa and coffee sank by more than 1.7% while sugar, corn, and rice all rose on the day led by the sweet commodity which gained 2.7% in the session. Meanwhile, in the currency and bond markets, the U.S. dollar gained more than one cent against the euro as worries over the Greek debt situation continued to plague the common currency zone. This also helped to push more investors into Treasury Bonds as well; yields fell by a few basis points on the day continuing the recent trend in the American sovereign debt market.
One of the biggest winners on the day was the United States Natural Gas Fund (UNG) which gained 3.7% to close out the week. This often volatile fund was again a big mover on the day as traders reentered the market seeking to scoop up bargains after yesterday’s slide. Next week’s weather forecast also didn’t hurt sentiment as temperatures look to hit the mid 80s— and feel like the 90s– across parts of the east coast, potentially fueling demand for the fuel to help power plants meet AC demand. “Now we are seeing some position-taking and some buying interest coming into the market before the weekend, at a price level at what has been a favorable entry point in recent months,” said Matt Smith, an analyst with Summit Energy in Louisville, Ky. Thanks to this, UNG managed to finish the week up 1.4%, potentially setting the stage up for more solid performances to close out May [see fundamentals of UNG here].
One of the biggest losers on the day was the Vanguard European ETF (VGK) which tumbled by 1.7% in Friday trading. Today’s losses were largely the result of continued worries over the Greek debt situation which some fear is getting out of control. Yields on Greek debt rose to incredible heights calling into question the ability of the nation to pay off its bonds without some sort of restructuring; yields on bonds maturing in May 2013 are currently yielding 24.6%. Additionally, traders are also eying the regional and local elections that are to take place in Spain this weekend. If events go according to some predictions, the ruling Socialists could lose a great deal of power to the Conservatives, potentially crippling Prime Minister Rodriguez Zapatero’s ability to reign in the country’s deficit. “European officials have been successful in establishing a firewall around Spain and insulating it from the crisis in the peripheral. That firewall may be tested shortly,” said Marc Chandler, global head of currency strategy Brown Brothers Harriman in New York. These fears weghed on European securities causing VGK to decline significantly heading into next week, a period that looks to be another volatile one for European stocks [see more charts of VGK here].
Disclosure: No positions at time of writing.