U.S. indexes reversed Tuesday’s gains after Fed Chairman Ben Bernanke hinted at stopping further liquidity expansion measures today. In other words, he took the punch bowl away for the time being by showing no monetary exuberance.
In a testimony before the Congress that started at 10 a.m. Wednesday, Bernanke said though continuing with liquidity enhancing measures is desirable, a faster-than-anticipated reduction in the jobless rate and higher energy costs may fuel inflation temporarily. All the three indexes ended Feb. with a whimper while 10-year Treasury yields surged and prices of gold and silver sank.
The Dow Jones Industrial Average shed 0.4 percent, to close at 12,952.07. Despite today’s losses, the DJIA is up 2.5 percent in Feb. and 6 percent for the year. The S&P 500 declined 0.2 percent, to 1,368.83 with natural resource companies losing the most.
The S&P 500 added 4.1 percent in February and 8.6 percent since Dec. The tech-heavy NASDAQ Composite ended lower at 2,973.87, a loss of 0.4 percent for the day. The NASDAQ is up 5.7 percent this month and 14 percent year-to-date.
U.S. debts slumped to its first monthly decline since October. Longer-term 30-year bonds had risen earlier after the Fed purchased $1.8 billion of dated securities as part of Operation Twist. Yield on 10-year notes 3 basis points, to 1.97 percent. Bonds with 30-year maturity rose one basis point to end at 3.09. The iShares Barclays 20 Year Treasury Bond ETF (TLT) shed 0.61 percent for the day while the Vanguard Total Bond Market ETF (BND) lost 0.1 percent.
Asian ETFs continue to top the charts with iShares MSCI Philippines Investable Market Index Fund (EPHE) emerging the day’s winner with 3.1 percent gain. The iShares MSCI Indonesia Investable Market Index Fund (EIDO) and the iShares MSCI Malaysia Index Fund (EWM) also ended in green.
The Market Vectors Vietnam ETF (VNM) however continued to disappoint for the second day, dipping 1.5 percent. Another top gainer for the day was iShares Dow Jones U.S. Home Construction Index Fund (ITB), adding 3.4 percent on the day.
However, solid economic growth data for the fourth quarter took its toll on precious metals. As the GDP expanded 3 percent against an expected 2.7 percent, and Bernanke made no mention of another round of QE, precious metals got hammered as all economic developments proved to be a negative.
The State Street SPDR Gold Trust (GLD) sank today, losing a whopping 5.3% on the day while iShares Silver Trust (SLV) performed worse, shedding 5.4 percent over Tuesday.
Our Trend Tracking Indexes pulled back as well, but remain solidly on the bullish side of the trend line.
Disclosure: Holdings in GLD, BND, TLT, UUP
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