It was yet another rocky start to the week for American equity markets as a rough couple of hours to begin trading gave way to roubst performances in the final hours, sending equities sharply higher on the day. The Dow led the way with a 2.5% gain while the S&P 500 and the Nasdaq both rose as well, gaining 2.3% and 1.4%, respectively. Arguably the biggest gains were had in the financial, industrial goods, and basic materials sectors while utilities, services, and tech lagged on the day. Commodities were more mixed on the session as gold continued its losing streak to open up the week lower, while oil gained about $1.10/bbl., sending prices above the $81.25 mark. Other commodities mostly gained on the day as most grains finished higher and softs were in the green as well except for a few stragglers such as cotton, rice, and orange juice.
In currency trading, the U.S. dollar fell against most of its major counterparts, sinking by $0.3 when measured on the U.S. dollar index. Losses were had against the big three of the euro, yen, and pound, although moves lower were also seen against the resource currencies as well. Thanks to this broad move back to risky assets, Treasury bonds didn’t exactly have a great performance on the day as yields rose across the board with the biggest moves coming in the benchmark 10 year debt as yields rose by six basis points up to the 1.9% mark to close the day.
One of the biggest winners on the day was the Financial Select Sector SPDR (XLF) which surged by 4.5% in Monday trading. Today’s gains, were largely the result of hopes for a new way forward on the European debt crisis, with speculation circuling that the ECB may move to cut rates in October or that euro zone governments may be looking to increase their bailout package by several fold. Investors also scooped up shares after Berkshire Hathaway announced plans to repurchase stock for the first time since Buffett took over more than 40 years ago. The move launched BRK.B shares up by nearly 9% on the day and signaled to many that other companies may also be undervalued as well, helping to push financial companies up across the board to start the week [see more fundamentals of XLF here].
One of the biggest losers in the ETFdb 60 was the SPDR Gold Trust (GLD) which sank by 1.4% to start the week. These losses pushed the yellow metal to below $1,600 oz. at one point in the day and came as many investors resumed their purchases of risky assets in droves. Thanks to this sharp move, gold has now fallen in four consecutive sessions and is at its lowest level in nearly two months, signaling just how quickly sentiment has changed on this metal. In fact, GLD is now down 10% over the past month including a nearly 11.6% loss in the past two weeks alone, suggesting that a much-needed correction may be underway in the precious metals market [see more on GLD's Fact Sheet].
Disclosure: No positions at time of writing.