Equity indexes on Wall Street oscillated between minor gains and losses early in the day, however, cautious words from the Fed tipped stocks south right before lunch time. Selling pressures accelerated across the board as investors grew worried that without another round of quantitative easing the economic recovery could loose steam and falter [see also Five ETFs For Doomsday Capitalism]. On the home front, the Dow Jones Industrial Average led the way lower, shedding 0.76% on the day, while the S&P 500 proved most resilient, losing only 0.54%. Gold prices drifted lower amidst wobbly equities; futures prices for the precious yellow metal settled near $1,730 an ounce as the trading session drew to a close.
Economic data releases at home were overwhelmingly positive; industrial production figures came in flat, however, the Empire state index and home builders’ index both came in better-than-expected, helping to shed some optimism on the ongoing recovery [see Fund Managers Turn Bullish As "Risk Appetite" Increases]. In international news, German GDP surpassed expectations; economic growth for the Euro zone powerhouse came in at -0.2% for the fourth quarter, a minimal improvement over the expected -0.3%. Investors’ sentiment in the U.K took a bit of a hit after the latest jobless claims report painted a gloomy picture; 6.9K people filed for unemployment benefits last month, a noticeable deterioration from the previous reading of only 1.9K.
The Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX) was one of the strongest performers, gaining 5.66% on the day, bolstered by resurfacing worries about the health of the domestic economic recovery. According to the latest Fed minutes, only a few members of the FOMC voiced their support for another round of quantitative easing. Investors expressed their concerns that another round of stimulus would be critical in sustaining the recovery by taking profits across all corners of the market [see Low Volatility ETFs].
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The United States Natural Gas Fund (UNG) was one of the weakest performers, shedding 3.53% on the day. Prices for natural gas have been drifting lower and lower since last summer thanks to a production boom coupled with relatively weak demand given the fairly mild winter season. UNG resumed its longer-term downtrend today, further pressured by a strong U.S. dollar.
Disclosure: No positions at time of writing.
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