The bulls and the bears clashed on Wall Street today as investors digested encouraging economic data while profit taking temptations intensified. Back-and-forth trading paved the way for an all around volatile day in the markets as indexes oscillated between multi-year highs and intraday-lows. Although fundamental news were positive, equity benchmarks at home ended the trading session in red territory as the dust settled. The Dow Jones Industrial Average proved most resilient, shedding 0.41% on the day, while the Nasdaq led the way lower, inching lower by 0.67%.
Following yesterday’s disappointing durable goods orders data, investors were more than pleasantly surprised today as fourth quarter GDP results came in well above expectations. Economic growth came in at 3%, which was well above analyst estimates of 2.7%, while also surpassing the previous reading of 2.8%. The real action came as Ben Bernanke testified before Congress; the Fed Chairman was reluctant to say that conditions in the labor market have returned to normal, however, his conservatively-optimistic commentary made no mention of an additional round of quantitative easing to come [see also Big Gains And Limited Risk: BTAH Offers A Way].
The PowerShares DB USD Index Bullish (UUP) was one of the strongest performers, gaining 0.83% on the day, bolstered by better-than-expected GDP results coupled with cautious, although optimistic, commentary from the Fed. The U.S. dollar staged an impressive run-up in the currency markets as economic data restored confidence in the greenback. Inflation worries also eased up significantly as Ben Bernanke did not make an announcement for QE3 like many had anticipated [see Black Swan Hyperinflation ETFdb Portfolio].
The State Street SPDR Gold Trust (GLD) was one of the worst performers, shedding a whopping 5.3% on the day. Virtually every economic scenario that could hurt gold prices unraveled today. First and foremost, solid GDP data decreased demand for safe haven assets as investors instead opted for more lucrative returns in the equity market. Second, a rally in the U.S. dollar put the lid on gold prices; inflation expectations seemingly evaporated for the day as Bernanke surprised many after he made no hints of another round of stimulus [see GLD-Free Gold Bug ETFdb Portfolio]. Futures prices for the yellow metal settled near the $1,700 an ounce level as the trading session drew to a close.
Disclosure: No positions at time of writing.