Debt worries crushed American equities once again in Tuesday trading as all three of the major benchmarks started the day in the red and failed to come back into the green to close out the session. The Dow led on the downside falling by 0.7% while the S&P 500 fell by 0.4% and the Nasdaq dipped by 0.1% in comparison. Solid performances out of TLAB and BRCM helped to carry the tech sector ahead of the other corners of the market on what was otherwise another rocky day. In commodity markets, most resources finished the day higher as most energy and soft commodities rose, led by a 1% gain in RBOB futures and a 4.1% jump in sugar prices. Metals also rose on the day, largely thanks to another day of weakness for the greenback as the American currency slumped against most of its major rivals, helping to boost demand for both safe havens such as gold and silver, as well as industrial metals such as copper, which rose by seven cents a pound on the session. Yet, despite the debt ceiling crisis, yields on T-Bills fell back today, as the 10 Year sank to the 2.96% level and the two year fell to a yield of 40 basis points once again.
One of the biggest ETF winners on the day was the PowerShares DB Base Metals Fund (DBB) which gained just over 2%. Today’s gains came thanks to broad weakness in the U.S. dollar as the American currency fell by over a cent against the euro, pound, and the Aussie dollar. Additionally, the yen strengthened against the dollar as well, putting the Japanese currency just below the 78 yen mark to close the session. As a result, many traders piled into metals of all kinds as a way to wait out the storm and to protect against further declines in the dollar’s value. All three of the component metals of the fund were up on the day, with zinc leading the way on the upside [see more on DBB's fact sheet].
One of the biggest losers in the ETF world was the Industrial Select Sector SPDR (XLI) which fell by 1.9% on the day. Today’s losses were largely the result of weakness in the steelmaker corner of the market as a couple of S&P 500 components reported lackluster results in their most recent quarterly updates. AK Steel Holding (AKS) earned just 30 cents in the most recent quarter, missing estimates by 20 cents a share, helping to push the price of the stock down by 16% on the day. Additionally, U.S. Steel saw its stock price decline by close to 8% on the day after reporting disappointing figures after the bell yesterday, causing a gloomy tone to drift over the whole sector. As a result, many other corners of the industrial sector sold off in response as weakness in steel demand suggested to many that industrial demand could be slack in the months ahead [see holdings of XLI here].
Disclosure: No positions at time of writing.