Boosted by banks and a lower price for oil, American equity markets surged higher in Tuesday trading across the board. The Dow led the way on the upside with a gain of 1% while the S&P 500 and the Nasdaq performed admirably as well, gaining 0.9% and 0.7%, respectively. Meanwhile, commodity markets were down across the board as gold fell by $5/oz. and oil sunk by about 65 cents a barrel to finish the day below the $105 mark. Prices were also soft in most of the soft and grain markets as well, where wheat (down 2.7%) and cotton (down 3.3%) were among the biggest losers on the day. This commodity dip was a result of the dollar’s strength against some of the world’s major currencies, especially the euro. The greenback gained almost half a percent against the common currency as fears over upcoming debt auctions helped to weigh on the market during Tuesday’s session.
Equity markets today were largely boosted by a report from financial giant Bank of America (BAC) which said that it would be hiking its dividend and would be implementing a share buyback program. CEO Brian Moynihan also said that he believes that the company has the ability to earn in excess of $35 billion once the business normalizes and that dividends would be the top priority of the company going forward. BAC was one of the hardest hit by the financial crisis so many took it as an extremely good sign that the company was healthy enough to increase its dividend and buyback shares. The news pushed up a number of other large financial institutions as well with JP Morgan, Wells Fargo, and Citigroup all gaining more than 2.5%, however, these gains paled in comparison to BAC’s robust 4.7% surge in the session.
One of the biggest gainers on the day was the Homebuilders SPDR (XHB), which jumped by 3.5% in Tuesday’s session. Although there was not any major reports out of the housing sector in terms of number of houses sold, an upbeat report from homebuilder Pulte helped to carry the day for the sector. The company reported that it signed more sales contracts in the first two months of 2011 than it did in 2010 and that it also posted more sales in February than in January, leading many to believe that the spring home buying season may be surprisingly good this year. This optimism helped to boost a number of other homebuilders which find their way into XHB, including Lennar Corp and Toll Brothers–both surged higher on the day as well [see holdings of XHB here].
One of the biggest ETF losers was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which tumbled by 2.1% on the day. This popular ETN declined thanks to growing optimism over the beaten down financial sector as well as declining oil prices and tensions in the Middle East, a situation which many feared was poised to derail the economy going forward. The fund traded on exceptional volume once again with today’s total exceeding double the daily average. Despite today’s drop, VXX is still up close to 12% over the past two weeks and 5.4% in the past week alone, suggesting that even with the decline seen in Tuesday’s session anxiety remains high in the marketplace [see charts of VXX here].
Disclosure: No positions at time of writing.