American equity markets came storming back in Wednesday’s trading session as all of the major indexes posted solid gains. The Dow jumped higher by 2.5% while the broader indexes posted even more impressive gains of 2.9% for the S&P 500 and 3.0% for the tech-heavy Nasdaq. Performances were especially good in the basic materials and financials sectors while laggards were seen in the consumer goods and health care corners of the market. In commodity trading, gold lost some of its safe haven appeal as the precious metal fell almost $50/oz. while the oil markets saw a gain of close to 3.9% in WTI trading on the hopes of more robust demand. Most other commodities also rose on the day, especially in the energy markets although some softs, notably wheat and cocoa, did finish the day about 1% lower.
In forex trading, the U.S. dollar sank against a basket of foreign currencies, falling by just over one cent against the euro and a third of a cent against the pound. The dollar also did manage to fall against the yen and especially so against the Aussie dollar. In fact, the greenback is now trading at the 1.06 level against the Aussie, a nearly 1.6% move for the day. Thanks to these moves out of dollars and the return of demand for risky assets, many also fled the bond markets sending yields higher for most levels of American debt including a seven basis point increase for the 10 year note in today’s trading session.
One of the biggest ETF winners on the day was the SPDR Financial Select Sector Fund (XLF) which gained just under 4.8% in Wednesday trading. Today’s gains came thanks to a shakeup near the top of embattled giant Bank of America (BAC) as the company announced the departure of several high ranking officials including the head of consumer banking and the head of global wealth and investment management. Markets cheered this news, pushing shares of BAC higher by close to 7% on the day, while other major banks also rallied by more than 4% as well. Additionally, investors also likely bought up some smaller regional banks thanks to a buy rating from Deutsche Bank. The German bank’s upgrade helped to push firms such as KeyCorp and Regions Financial up more than 10% on the day, resulting in an all around good day for the beaten down financial sector [see charts of XLF here].
One of the biggest losers in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX) which lost just under 3.6% for the day. Today’s losses were largely the result of a German court ruling which stated that the country could participate in regional bailout funds. This decision supported German involvement in the Greek package as well as the creation of the EFSF, two huge issues that could have led to a crisis for some if not sanctioned by the German court. Investors also cheered the approval of an austerity plan in Italy which looks to help save that country’s bond market for the time being. This is especially important because of the incredible size of the Italian economy; the country is currently the 8th biggest in terms of GDP. As a result of these two factors, demand for this ETN representation of the ‘fear index’ declined sharply and finished the day markedly lower on light volume [see more on VXX's fact sheet].
Disclosure: No positions at time of writing.