American stocks slipped in Wednesday trading as disappointing earnings and more concerns over Europe plagued the markets once again. The Dow fell by about 0.6% on the day while the broader indexes saw more significant losses as the S&P 500 fell by 1.3% and the Nasdaq sank by 2% in the session. Banks were again a big loser on the day while tech was extremely mixed as INTC rose more than 3.5% but Apple sank back by nearly 5.6% on a rare earnings miss. Commodity markets continued to see signs of weakness as well, as gold slipped by about $10/oz. to $1,643 while oil, thanks to a late session slump, fell by about 2.5% on the day. Beyond these headliners, the rest of the precious metals segment also saw outflows while the softs experienced weakness as well. In addition to losses in these crucial spaces, it was a difficult day for copper as well, as the base metal lost about 4.1% in the session.
Currency trading was also volatile in today’s trading session as the dollar slumped against many of the world’s major currencies to start the day, only to rise back to breakeven after the Fed released its Beige Book report. This data release noted economic growth across many of the Fed regions, suggesting to many that additional outflows of U.S. dollar based assets could be unwarranted for the time being, especially given the uncertainty in Europe. As a result, government bond trading was also mixed leaving both short term and mid term rates little changed on the day.
One of the biggest ETF winners on the day was the iPath S&P 500 VIX Short-Term Futures ETN (VXX) which surged by 6.7% in Wednesday trading. Today’s gains came as French President Nicolas Sarkozy flew to Germany in order to participate in key talks over the plan to expand the EFSF and recapitalize the banks. This meeting in Frankfurt looked to help minimize the differences between the two giants of France and Germany before this weekend’s summit, but put a great deal of stress on markets as it suggested that the two countries weren’t seeing eye-to-eye on some issues. Many are now growing worried that a plan will not be reached and that a contagion will spread, although, as we have seen in recent sessions, sentiment is very fickle and could shift at any moment [see more on the VXX Fact Sheet].
One of the biggest losers in the ETFdb 60 was the PowerShares DB Base Metals Fund (DBB) which slumped by 3.4% on the day. Today’s heavy losses in the base metal market came as copper fell more than 14 cents a pound down to about $3.22/lb. In addition to more European woes, including concerns over a Spanish downgrade and disagreements between France and Germany, Chinese demand also appears to be slipping thanks to slower economic growth. “Copper is under pressure because of a theme of slowing economies throughout the world,” Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview. “Prices will need to go lower to attract Chinese buyers as there’s ample supply” in the country, he said. Thanks to these concerns, it was another rough day for DBB, helping to push the fund to a nearly 12.4% loss over the past month alone [see charts of DBB here].
Disclosure: No positions at time of writing.