Domestic equity markets got off to an explosive start as Fed Chairman Ben Bernanke expressed his concerns regarding the ongoing recovery and reaffirmed his support of accommodative policies as deemed necessary. Stocks rallied higher as investors were relieved to see that the central bank is committed to promoting the recovery even if it entails another round of quantitative easing [see also How To Play A Treasury Bubble With ETFs].
On the home front, the Nasdaq led the way higher, gaining 1.78% on the day, while the Dow Jones Industrial Average lagged behind, inching higher by 1.23%. Gold soared on the day as inflation worries resurfaced after the Fed dropped subtle hints of potentially more stimulus to come; futures prices for the precious metal gained over 1.5% on the day, settling near $1,690 an ounce. Worse-than-expected housing market data was brushed off to the side; pending home sales for February came in at negative 0.5% versus the previous reading of 2% [see ETF Insider: Do Fundamentals Justify The Wall Street Rally?].
The iShares Russell 2000 Growth ETF (IWO) was one of the best performers, gaining 2.18% on the day, bolstered by broad-based optimism on Wall Street. Investors increased their risk appetite, and small caps as represented by IWO led the way, after Ben Bernanke made it clear that the Fed was committed to sticking with a loose monetary policy given the fragile recovery. After today’s rally, IWO has gained nearly 16% from a year-to-date perspective [see How To Hedge For A Market Correction With ETFs].
The Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX) was one of the worst performers, shedding a dismal 9.42% on the day. Uncertainty seemingly evaporated from the markets as Chairman Bernanke bolstered investors’ confidence by reassuring Wall Street that more stimulus would be provided if deemed necessary. VXX dropped as growth expectations improved and the Volatility Index closed below the 15 mark [see also ETF Laggards Struggling In 2012].
Disclosure: No positions at time of writing.