US Equities Viagra Higher In Late Trading On EU Hope; XHS Rises, SLV Tumbles

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

US stocks closed with only small losses after speculations of a breakthrough in the ongoing EU summit in Brussels fueled a late-session recovery.

The rumor over a possible progress in negotiations grew stronger after Bloomberg reported German Chancellor Angela Merkel has cancelled her scheduled press conference on Thursday night, raising hopes that European leaders will announce meaningful resolutions to tide over the present sovereign debt crisis.

Sure, let’s wait and see until tomorrow to ascertain if Germany caved in EU negotiations as much as they did in their soccer game vs. Italy.

Europe’s turmoil ensured demand for US safe-haven assets remained robust even as the government auctioned $29 billion in seven-year notes that traded at a record low yield for the third straight month.

Despite sinking 177 points, the Dow Jones Industrial Average (DJIA) closed down only 0.2 percent with 16 of the 30 components within the blue-chip index finishing lower for the day.

The S&P 500 Index (SPX) shed 0.2 percent with technologies hitting the ground hardest. All the 10 business groups closed in red for the day.

The yield on the benchmark 10-year notes fell to its lowest level in more than a week after the Supreme Court upheld President Obama’s health care reform law, triggering fear that it will further cripple the economy with additional burdens. The Affordable Care Act of 2010 requires all Americans to buy health insurance and might hinder consumer spending, while businesses will be forced to spend more on health care, in turn cutting expenses on other items.

10-year note yield fell three basis points to 1.59 percent while the yield on 30-year bond shed two basis points to finish at 2.67 percent in late afternoon trading, New York time.

ETFs in the news:

The State Street SPDR S&P Healthcare Services ETF (XHS) emerged on top, adding 1.89 percent on the day after the Supreme Court upheld the constitutional validity of the Affordable Care Act. Today’s verdict bodes well for the hospital and health care services providers as it would add a ton of people to the rolls of HMOs. Other health-care provider linked funds like IHF also ended in green, adding 1.47 percent for the day.

As bullions continue to weaken over Europe concerns, the iShares Silver Trust (SLV) tanked 1.91 percent. SLV holds 9876 metric tons of silver valued at $8.5 billion. As the price of the white metal dropped below $30 and hovers around $27 now, chances of a rally are slim unless central banks across the world announce further quantitative easing.

So far, the markets have bounced all over the place since last Friday but are essentially unchanged. You can see the effects on our Trend Tracking Indexes (TTIs) in the latest StatSheet, which will be posted within the hour.

Disclosure: No holdings.

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