American equity markets rose broadly in Tuesday trading, as optimism over a resolution to the Greek crisis boosted sentiment across the board. The Dow finished up by 1.2% but lagged the other, broader indexes in the session; the S&P 500 rose by 1.3% while the Nasdaq gained 1.5% on the day. Commodity markets also gained on the session as gold added about five dollars an ounce and oil roared ahead by close to 2.5%, finishing the day just below the $93/bbl. level. Other commodity markets, namely the softs, also had strong sessions as grains rebounded from their recent stretch of weakness, and products such as coffee and sugar rose by more than 3% on the day as well. These strong gains in natural resources came as the U.S. dollar weakened against most of its major rivals– the U.S. dollar index was off by o.3%– and as many traders continued to embrace risky in light of declining geopolitical fears. This also helped to push investors out of U.S. Treasury bonds as well; the 10 Year saw yields rise by 0.11% and the Two Year saw a 10 basis point increase, moving yields up to the 0.5% mark in Tuesday trading.
One of the biggest winners in the ETFdb 60 was the Energy Select Sector SPDR (XLE) which gained 2.9% in Tuesday trading. Today’s gains came as oil prices continued to bounce off of their IEA-induced lows from last week, as WTI crude briefly hit the $93 level before falling back about a quarter to close out the session. Additionally, investors bought up oil producing companies on hopes that Greece would pass austerity measures and spare the wider European region from a contagion. Back in the U.S., the Case Shiller home price index saw gains of 0.7% for its most recent reading, pushing the yearly loss to just 4%. These reports helped to boost sentiment regarding the American economy and were especially helpful to refiners and equipment companies which led the way on the upside, outgaining their larger, integrated oil brethren [see more on XLE's fact sheet].
One of the biggest losers in the ETF world was the iPath S&P 500 VIX Short-Term Futures ETN (VXX) which continued its recent slide, falling by close to 4.1% on the day. Investor demand for VXX, and indeed most other safe havens, plummeted in Tuesday trading as investors speculated that Greece would pass the austerity measures and stave off default for the time being. This optimism came despite protests across Athens and a general strike throughout the country, unnerving some but signaling a positive outcome for the vote from others. “The negative reaction that you’re getting from the public is a sign that the parliament is likely to vote in favor of the austerity plan,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco. Thanks to these expectations, investors in this ETN that represents the ‘fear index’ have seen weakness as of late. Although the fund is up 4% over the past two weeks, it has declined by 3.9% in the past week alone, suggesting that many investors are beginning to believe that Greece will pass the latest round of austerity measures and avoid creating a larger situation throughout the euro zone [see more VXX fundamentals].
Disclosure: No positions at time of writing.