Despite UN-led strikes in Libya and lingering concerns over Japanese nuclear issues, U.S. equity markets managed to finish the day broadly higher, boosted in large part by a bid from AT&T to buy rival T-Mobile for $39 billion. The Dow surged by 178 points while the broader indexes posted strong gains as well; the S&P 500 rose by 1.5% while the Nasdaq won the day, jumping by 1.8% in the session. Commodity markets had a solid day as well as most energy products rose Monday thanks to continued violence in Libya, while precious metals and livestock commodities finished the day in positive territory as well. Meanwhile, in the Treasury markets, investors forsook ultra-safe securities for investments in higher yielding classes both at home and abroad. Yields rose pretty much across the board on government debt, with the 10 year note sinking to yield 3.32% in Monday’s session.
One of the biggest gainers on the day was the Energy Select Sector SPDR (XLE), which gained more than 3% during Monday’s session. Today’s gains were largely fueled by the spike in crude oil as the important commodity gained more than $1.10 in Monday trading and passed the $102 mark. Traders bought up the fuel on speculation that the Libyan conflict would be long and drawn out, keeping Gadhafi’s exports of crude to a minimum while the bombing campaign over Libya continues. “Oil prices are likely to remain elevated while the situation in the Middle East and North Africa remains volatile. The key remains Saudi Arabia, where the news has at least not been any worse over the past week,” analysts at the National Australian Bank said in a note Monday. This news helped to boost major oil companies, leading to large gains among most of the components in XLE [see holdings of XLE here].
One of the biggest losers in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which plummeted by 7.6% on the day. Today’s sharp decline was likely the result of broad market gains and limited demand for the main ETN tracking the ‘fear index’. With M&A activity heating up and nuclear reactors in Japan finally cooling down, traders had little to fear to start the week, helping to send equities sharply higher and VXX markedly lower on the day. Nevertheless, VXX still managed to trade on volume approaching 22 million shares, or roughly six million shares better than its daily average. Today’s steel loss also put an end to a strong period for VXX; the popular ETN had posted double digit gains in recent sessions, and is still up more than 12% over the past month [see fundamentals of VXX here].
Disclosure: No positions at time of writing.