Earnings season is officially underway and U.S. stocks have started off the ceremonies on a fairly strong note. Equity indexes broadly climbed higher as investors rejoiced over better-than-expected earnings results from Alcoa; the Nasdaq led the way higher on the home front, clinching gains of 0.97%, while the Dow Jones Industrial Average lagged behind, gaining 0.56% on the day. Investors’ appetite for risk grew stronger on Tuesday in anticipation of more positive economic developments and solid earnings results at home; the financials sector lead the pack higher, while the “risk on” trade put utilities at the bottom of the barrel in terms of performance [see ETF Insider: Beware Of Lingering Euro Fears].
Euphoria on Wall Street was bolstered by expectations that China may engage in monetary stimulus in the foreseeable future. Chinese trade data showed a slightly worrisome slump in imports, which effectively raised expectations that the Asian giant would succumb to stimulus in an effort to spur economic growth. Weakness in the U.S. dollar pushed gold prices higher; the precious yellow metal settled near $1,630 an ounce as the trading session drew to a close. Oil went along for the ride as well, gaining close to 1% on the day and finishing just above $102 a barrel.
The PowerShares DB Base Metals Fund (DBB) was one of the best performers, gaining 2.69% on the day, bolstered by positive earnings results and a generally upbeat outlook from aluminum giant Alcoa. The company’s sales rose by 6% to $5.99 billion, which sailed past analyst estimates and painted an optimistic outlook for industrial metals as a whole in 2012. Expectations for monetary stimulus in China boosted demand expectations for raw materials, which further paved the way higher for DBB [see Commodity Guru ETFdb Portfolio].
The Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX) was one of the worst performers, shedding 2.11% on the day. Expectations for volatility cooled off as investors rejoiced over a solid start to earnings season as home, along with hopes for stronger growth in China [see How About A High Volatility ETF?]. VXX faced additional headwinds as the NFIB Small-Business Index came in better-than-expected at 93.8, signaling that optimism rose in December.
Disclosure: No positions at time of writing.