Domestic equities surged more than one percent Tuesday, wiping off losses suffered Monday, as investors took a cue from Europe’s peripheral markets after Spanish bonds came off Euro-era record highs on speculation the Federal Reserve and other central banks will restart asset purchase programs. Sure, we’ve heard that one before resulting in very short-term effects.
Treasuries retreated as Wall Street traders remained upbeat on another round of monetary stimulus to boost a faltering economy. The Dow Jones Industrial Average (DJIA) zoomed 162.57 points, wiping out Monday’s 142.97 points loss. All but one of the 30-component blue-chip-index finished lower for the day.
The S&P 500 Index (SPX) added 15.25 points with materials and financial gaining the most among the 10 business groups. The NASDAQ Composite Index (COMP) gained 33.34 points to settle at 2843.07.
Following ratings agency Fitch’s downgrade of 18 Spanish banks, US debts pared early losses as demand for US safe-have assets spiked. Markets, however, chose to shrug off rising Italian borrowing costs and uncertainties over looming Greek elections, as risk appetite improved, pushing the benchmark 10-year yield higher seven basis points to 1.66 percent.
The 30-year bond yield climbed 6 basis points to 2.77 percent. Yield on five-year notes rose five basis points to settle at 0.74 percent.
ETFs in the news:
Solar power ETFs surged today after photovoltaic panel manufacturer First Solar (FSLR) announced a new project in Australia to design, construct and maintain two utility-scale PV power projects for AGL Energy Limited amounting 159 megawatts. The photovoltaic (PV) solar systems provider said it would not close a German plant till the end of the year due to sudden spike in demand. First Solar vaulted 21.25 percent on NASDAQ to close at $14.95.
The Guggenheim Solar ETF (TAN) remained one of the biggest gainers for the day, surging 6.67 percent for the day. First Solar is TAN’s third largest holding at 7.83 percent. The fund however, is trading closer to its 52-week low and has lost 31.42 percent since January.
Other solar power linked funds like the Van Eck Market Vectors Solar Energy ETF (KWT) also jumped, adding 5.88 percent for the day. The ongoing European crisis has hit the solar power business hard as struggling countries have refused to continue the heavy subsidy that the industry depends on.
The Invesco PowerShares WilderHill Clean Energy Portfolio (PBW), which focuses on renewable energy, including hydro and wind power stocks, also rose, adding 2.88 percent for the day.
The Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX) remained among the top losers, shedding 1.75 percent for the day as risk sentiments improved on monetary stimulus hopes.
The CBOE Volatility Index (VIX) tumbled 6.24 percent, indicating an overall improvement in risk appetite. However, despite today’s drop, the fear-tracking index remains over the 20 mark, indicating heightened uncertainty among investors.
Our Trend Tracking Indexes (TTIs) improved slightly but remained in their establisxhed patterns; that is the Domestic TTI hovers above its long-term trend line by +1.81%, while the International TTI is stuck below the line at -3.99%.
If you follow our ETF model portfolios, the latest update will be posted tomorrow morning at 6 am.
Disclosure: No holdingsContact Ulli