U.S. stocks markets continued their rally from yesterday’s final hour of trading as all of the major indexes put up modest gains in Wednesday trading. The Dow finished ahead by 1.2% while the broader indexes posted even better gains with 1.8% for the S&P 500 and 2.3% for the Nasdaq. Commodity markets also performed very well in the session as gold added about 1.8% and oil surged off of its recent lows to finish up 5.5%, or just under the $80/bbl. level. Most of the softs and base metals also gained as well, as wheat and corn led the way on the upside, adding close to 3% each to their totals.
In currency trading, the dollar finished marginally lower against most currencies, although it was flat against the major European ones. The biggest losses came instead against the yen and the resource currencies as strong commodity prices helped to boost the value of the Canadian dollar and the Aussie dollar on the day. Thanks to this demand for riskier assets, investors fled Treasury assets, helping to push the 10 Year note up seven basis points in the session to a yield of about 1.89%.
One of the biggest ETF winners on the day was the SPDR Materials Select Sector Fund (XLB) which soared by 4% on the day. These gains came as investors piled into the sector on hopes of bargain buying and reasonably solid data which suggested to many that slow growth was ahead instead of a recession. The ISM non-manufacturing index came in at 53.0 which was ahead of expectations and far enough above the key 50.0 level for many traders. Furthermore, many were also encouraged by the ADP report which showed that 91,000 jobs were created in the private sector, as well as the EIA Petroleum Status Report which showed that crude inventories plunged in the last week, a bullish sign for the economy. Thanks to these developments, investors were eager to scoop up materials stocks, pushing XLB higher on the day [see holdings of XLB here].
One of the biggest ETF losers in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX) which plunged by 4.9% in today’s trading session. Investors again abandoned this product as markets continued to rise, leaving demand for this ETN representation of the fear index much lower on the day. This was largely a result of solid data and declining worries over Europe as these two trends led many investors to believe that a recession could be avoided. “These economic data points really point toward an environment that is slow growth and not a recession, yet we’ve priced in a recession,” said Burt White, chief investment officer for LPL Financial. “The GDP in the third quarter is going to be stronger than the first two quarters combined.” Thanks to this sentiment, investors didn’t feel the need to have protection against the market by using this product, helping to send VXX lower for the second straight day of trading [see more charts of VXX here].
Disclosure: No positions at time of writing.