American equity markets slumped across the board as a terrible jobs report sank investor confidence. The Dow finished the day lower by 2.2% while the S&P 500 and the Nasdaq fell by 2.5% and 2.6%, respectively. Losses were especially bad in the financial and basic materials sectors, while the health care and utilities managed to finish in the red, but did far better than other corners of the market. Meanwhile, in commodity markets, gold surged by close to 3.1% on the session thanks to the extra market turmoil while oil fell by nearly 2.5% on fears of lower levels of economic demand. Other natural resources, and especially those in the softs corner of the market, did manage to rise on the day, led by a 2.9% gain in corn and a 1.9% jump in the wheat market.
In currency trading, the U.S. dollar appreciated modestly against a basket of developed market currencies, as the U.S. dollar index finished at the $74.75 mark. Gains were had against the euro, but the dollar did manage to struggle against both the pound and the yen to close out the week. Unsurprisingly, given the market turmoil and stronger dollar, investors piled into longer-term U.S. Treasury debt pushing yields on the benchmark 10 year note down to just 2.01% heading into the long weekend.
One of the biggest ETF winners on the day was the iPath S&P 500 VIX Short-Term Futures ETN (VXX) which jumped by 5.0% to close out the week. Today’s gains were largely the result of the terrible jobs report as zero jobs were created overall during the month of August. This is especially bad considering that the consensus estimate called for growth of 60,000 jobs in the period and that the prior month had growth of 117,000 jobs. Furthermore, average hourly earnings declined by 0.1% while the average workweek also fell by one-tenth of an hour, suggesting weakness all around for the job market. Thanks to this extremely bearish report, investors ran for the exits in stocks and sought protection in safer corners of the market. In addition to gold and Treasurys, many piled into VXX, the ETN representation of the ‘fear index’ as a way to weather the storm heading into the long weekend [see charts of VXX here].
One of the biggest ETF losers in Friday trading was the Financial Select Sector SPDR (XLF) which declined by 4.1% on the day. Today’s significant losses were due to worries over job growth and heavy pressure on the legal front, especially from the Federal Housing Finance Agency. The government organization which oversees Fannie Mae and Freddie Mac, announced lawsuits targeting more than a dozen banks including Bank of America, Deutsche Bank, Morgan Stanley, and J.P. Morgan Chase. This news, along with speculation over the terrible economy, led a variety of banks sharply lower on the day. BAC led the way on the downside falling by 8.3% while Citigroup (down 5.3%) and Goldman Sachs (down 4.6%) plunged as well. Thanks to this, XLF is now down 14.6% over the past quarter and 18% year-to-date, suggesting that a significant downturn is underway in the financial sector [see holdings of XLF here].
Disclosure: No positions at time of writing.