Tuesday trading continued the solid week for equity markets as all of the major indexes managed to finish in the green after the Fed released minutes from its most recent meeting. The Dow and S&P 500 both finished up by about 0.2% while the Nasdaq continued its outperformance of the other two benchmarks, gaining close to 0.6% in comparison. Tech and oil companies led the day higher while some level of weakness was seen in the financial and consumer sectors after the horrendous consumer confidence report shook those sectors. Commodity markets also finished the day higher as strength in gold and oil led most commodities to the green for the day. Gold added just under $50/oz. while oil managed to add about $1.5/bbl. to finish the session just below the $88.75 mark while broad strength was also seen in the rest of the metals and energy categories as well. Only the agriculture space was mixed as corn, coffee, and soybeans rose while wheat, sugar, and cocoa all finished the day in the red.
In currency markets, the dollar strengthened marginally against most of the world’s major currencies as the dollar index finished the session just below the $74 mark. The biggest gains came against the pound which lost a full cent against the greenback, while the euro also slipped against the American currency. The yen, however, did manage to increase further against the dollar, falling to an exchange rate of just under 76.7 yen per dollar to close Tuesday trading. Thanks to the choppiness of the markets and more uncertainty regarding further easing measures, investors continued to buy up U.S. Treasury debt in Tuesday trading, pushing the Two Year Note down one basis point to 0.21% and the Ten Year down to a yield of just 2.19%.
One of the biggest ETF winners on the day was the SPDR Gold Trust (GLD) which jumped by 3% in Tuesday trading. Today’s gains were largely the result of fears over more easing by the Federal Reserve later in the month, leading some traders to buy up gold as protection against further currency debasement. This was the case after the release of the Fed’s minutes from the most recent meeting which suggested to many that the FOMC believed that the economy was very weak and might need another boost in the near term. Analysts also noted that although Chicago’s Fed President, Charles Evans, in a recent interview said that the economy was moving sideways but “didn’t say the QE3 words, (he) more or less implied the economy needs more fiscal stimulus,” said Sterling Smith, market analyst with Country Hedging. “More fiscal stimulus directly benefits gold.” Thanks to this, investors piled into gold bullion and gold ETF assets as a way to hedge against more measures by the central bank. (Note that GLD deviates from open market returns because the gold market closes one hour before the ETF does.) [see more info on GLD's fact sheet]
One of the biggest losers in the ETFdb 60 was the Financial Select Sector SPDR (XLF) which fell by 0.7% on the day. Today’s losses were largely a result of more trouble at Bank of America (BAC), one of the nation’s largest banks and a top five component in XLF. Stock in the banking giant slumped by close to 3.2% on the day as US Bancorp sued BAC in order to get the firm to repurchase close to 4,000 poorly-written mortgages sold to the company by Countrywide, a subsidiary of Bank of America. According to an article from the AP, Countrywide had agreed to buy the loans within 90 days if any of the statements made in the contract ended up being untrue. Since many of the loans quickly become delinquent, US Bancorp is now getting into an increasingly long line of companies seeking to recoup some of its losses from Bank of America, helping to put pressure on the company’s stock, and indeed the entire financial sector, in Tuesday’s trading session [see more charts of XLF here].
Disclosure: No positions at time of writing.