U.S. equity markets continued their recent run higher in Wednesday trading as investors cheered the results of the Greek austerity vote in Athens earlier today. The Dow rose by 0.6% on the session while the Nasdaq gained 0.4% and the S&P jumped by 0.8% in comparison. Thanks to less gloom over Europe, investors bought up commodities across the board as well, as gold saw prices rise by about $11/oz. and oil continued to rebound, jumping higher by about 2.2% to finish just below the $95/bbl. level. Softs were more mixed, however, as most of these products finished the day rangebound, only cocoa experienced large gains, surging by 3.1% on the day. Copper, on the other hand, continued its recent run, now trades for just over $4.23/lb. thanks to today’s 3% gain. As more traders embraced these risky assets, money continued to flow out of T-Bills; although the Two Year’s yields were flat, the Ten Year saw yields rise above the 3.10% mark, finishing the day up nine basis points in total.
One of the biggest ETF winners on the day was the Financial Select Sector SPDR (XLF) which gained 2.1% in Wednesday trading. Today’s gains for the financial sector came in part from Greece but mostly from a settlement between Bank of America and customers who were financially harmed during the mortgage crisis. The banking giant agreed to pay close to $8.5 billion in a settlement stemming from a suit from a group of investors who held more than $56 billion in MBS. Thanks to the declining risk levels, as well as the prospect of putting a large chunk of this situation behind them, BAC saw its shares rise by close to 3% in Wednesday trading, helping to spur similar gains in other large banking institutions as well. In fact, Bank of New York Mellon and Citi were both up by more than 3% in the session while JP Morgan and Wells Fargo added more than 2% each as well [see more fundamentals of XLF here].
One of the biggest ETF losers in Wednesday trading was the iPath S&P 500 VIX Short-Term Futures ETN (VXX) which declined by 5% following the Greek austerity vote today. These losses came thanks to a broad decline in demand for safe haven assets as the Greek vote looks to pave the way for more funds from the EU and the IMF, staving default for a little longer for the highly indebted country. The vote in Greece was close but passed nonetheless by a five vote margin, easing fears that a contagion that could have easily spread to Portugal and Ireland was right around the corner. As a result, investors continued to flee U.S. Treasury bonds and this ETN representation of the ‘fear index’, especially in the last several trading sessions. In fact, VXX is now down 5.5% over the past week and nearly 26.5% over the past quarter alone, suggesting that further turmoil is needed to boost VXX back into positive territory [see more charts of VXX here].
Disclosure: No positions at time of writing.