American stocks faced weakness in Thursday trading as all of the major benchmarks slumped into the red on the day. The Dow fell by roughly 1% while the S&P 500 and the Nasdaq sank by more, falling by 1.2% and 1.3%, respectively. Weakness permeated all sectors of the market, but consumer goods managed to do better than most while financials and tech led on the downside. Commodities mostly trended lower as well, as the headline commodities of gold and oil both fell slightly with gold falling by 0.2% and crude oil dropping by just a penny. Losses were also seen in the softs corner of the market, as losses of at least 3.7% were seen in the wheat and corn markets to open up the month.
The U.S. dollar index, on the other hand, gained on the day as the benchmark rose by $0.35 against the world’s major currencies. The dollar gained close to one cent against the euro, and traded just shy of 77 against the yen, while the greenback ended flat against the pound for the day. In Treasury markets, weakness in the commodity and equity sectors prompted many to buy up U.S. government debt, pushing yields below 2.15% for Ten Years and under 0.2% for the shorter term Two Year notes.
One of the biggest winners in the ETFdb 60 was the iPath S&P 500 Short-Term Futures ETN (VXX) which gained 1.4% in the session. This solid performance came as many traders fretted over the outcome of tomorrow’s key jobs report with many betting that it would show further weakness in the economy. Given that the ISM manufacturing Index was barely above contraction levels and consumer confidence was so poor, this isn’t that unreasonable of a bet by those with a more active tilt. As a result, many piled into this ETN representation of the ‘fear index’ as an easy way to play further volatility in the marketplace, giving VXX a nice 16% return over the past two weeks alone [see charts of VXX here].
One of the biggest losers in the ETF world was the PowerShares WilderHill Clean Energy Portfolio (PBW) which declined by 2.6% on the day. These losses were largely the result of news that Solyndra, a California-based manufacturer of solar panels, would be filing for bankrupcy. The company received a roughly half a billion dollar loan from the government a little over a year ago but seemed unable to compete with its competitors in China which, according to another bankrupt solar power company CEO, receive ‘considerable government and financial support”. In light of this trend of high profile bankruptcies in the solar sector, many traders have decided to sell their holdings in PBW, focusing in on other corners of the market instead. Thanks to this, PBW is down close to 21.5% in the past quarter and nearly 30% in the year-to-date period [see holdings of PBW here].
Disclosure: Long PBW.