American equity markets finished Thursday’s trading session mixed as a bearish report from JP Morgan dragged the Dow and S&P 500 lower. In fact, the Dow and S&P 500 both finished the day lower by about 0.3% while the tech-heavy Nasdaq, boosted in part by strength in giants such as Apple, Google, and Intel, rose about 0.6% on the day. Commodity markets were also weaker as the headline commodities of gold and oil finished the day lower with gold sinking 0.8% and oil falling by about 1.2% in the session. Beyond these products, investors saw a choppy session in the natural resource space as industrial metals sank but some softs, namely coffee, orange juice and sugar, rose higher on the session.
In currency trading, the dollar was more or less flat on the day as the U.S. dollar index slipped to just below the $77 mark. The dollar finished mixed against both the euro and the pound but slipped a tad against the yen in the session. The greenback also continued to see weakness against the Aussie dollar as that currency now trades at roughly $1.02, close to the 52 week high. Given the uncertainty plaguing the financial sector and a relatively firm dollar, investors continued to buy up T-bills, pushing yields on the Two Year slightly lower and the Ten Year below the 2.2% level to end Thursday trading.
One of the biggest ETF winners on the day was the PowerShares DB Agriculture Fund (DBA) which gained 1.2% in the session. Today’s gains were largely a result of the three free trade pacts that were signed with key markets in both Latin America and Asia. Both houses of Congress approved the measures by wide margins to allow free trade with South Korea, Colombia, and Panama, a situation that could potentially boost exports of a variety of agricultural crops. The gains could be especially good in the livestock market as live cattle and lean hogs both gained more than 1.5% on the day. This is because the move looks to eliminate several steep tariffs on American meat, helping ranchers to sell their products easier to these markets. In fact, National Pork Producers Council president Doug Wolf of Wisconsin called passage of the FTAs “one of the greatest victories ever for the U.S. pork industry”. As a result, many investors ran to scoop up this diversified product, pushing DBA up far higher than the other commodity sectors on the day [see charts of DBA here].
One of the biggest ETF losers in today’s trading was the Financial Select Sector SPDR (XLF) which lost close to 2.4% on the day. Today’s losses were largely a result of JP Morgan’s earnings report which hit the street before the bell today. In the report, the financial giant beat estimates on both revenues and earnings but still didn’t live up to the hype thanks to weakness in the quality of the earnings. In fact, the bank reported an accounting gain of $1.9 billion helping to push pre-provision profit to an 11% year-over-year decline. Meanwhile, investment banking fees fell by close to 50% when compared to the previous quarter while trading saw a double digit decline in revenues from the year ago period. This gloom in what many consider to be one of the strongest big banks helped to push shares of both JPM and other sector giants lower on the day. JPM fell by nearly 4.8% while Citi and Bank of America finished the day lower by at least 5.3% as well, digging a huge hole for the popular financial ETF on the day [see holdings of XLF here].
Disclosure: No positions at time of writing.