U.S. equities started the holiday-shortened week on a high note as markets began the day sharply higher before trending lower only to finish the session near the highs for Tuesday trading. The Dow gained 128 points on the day while the S&P 500 posted a slightly better performance, percentage wise, gaining 1.1% while the tech-heavy Nasdaq led all three with a 1.4% surge on the day. This broad strength was largely due to optimism over a Greek bailout package and the flows out of the dollar and into the euro. This helped to send demand for dollars lower and boost stock market prospects as an alternative. Commodity markets were more mixed on the session as gold failed to hold onto its gains and finished the day down marginally to $1,537/oz. but oil did manage to post a very strong day in comparison, gaining more than 2% to finish above the $102.6/bbl. level. Meanwhile, other commodities also experienced very rocky trading as most livestock and industrial metal commodities rose but significant weakness was seen in the grains market as corn fell by close to 1.5% and wheat took the biggest hit sinking by 3.7% in Kansas City and close to 4.6% in Chicago trading.
One of the biggest ETF winners on the day was the United States Natural Gas Fund (UNG) which gained 2.7% to start the week. Today’s surge continues UNG’s momentum from last week’s trading as more prospects of warm weather across much of the country boosted hopes of additional drawdowns of the fuel. According to a report from private forecaster MDA EarthSat, temperatures are expected to moderate in the Northeast but will remain warmer-than-normal across much of the Midwest while hot conditions will continue across the Southern states. However, the data remains weak for the fuel as close to 105bcf were added in last week’s update from the EIA, suggesting that extreme weather and an active hurricane season will be needed in order to keep prices of UNG surging higher over the long term.
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One of the biggest losers in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which slumped by 3.0% in Tuesday trading. Today’s losses came thanks to the prospect of a Greek bailout package, an event that could potentially reduce the risks in the market and limit demand for this ETN representation of the "fear index" as well. Many now believe that a restructuring of Greek debt will not be needed - at least not yet - should the new package be approved, potentially allowing the highly indebted nation to receive close to 12 billion euros from the European Central Bank and the IMF. Thanks to this, investors regained their appetite for risk during today’s trading, sending VXX plunging on the day. With this move, VXX is now down close to 6.5% over the past week and nearly 7.2% over the past two weeks, suggesting that investors are slowly regaining their faith in the market despite some pretty significant data headwinds.
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Disclosure: No positions at time of writing.
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