Equities Rally As Auto Sales, Factory Orders Robust In June; GDXJ Shines, VIXY Tumbles

[Chart courtesy of MarketWatch.com]

Strong factory orders and an increase in auto sales for May pushed US stocks higher Tuesday after closing mixed Monday as investors breathed easy on concerns that the economy is faltering.

Of course, as has been the case lately, bad economic news is simply ignored while decent reports provide the fuel for a rally. Go figure. Stocks of commodities and energy firms rallied as prices of materials and commodities surged for the day.

US Treasuries sank risk sentiment improved following a government report that showed US factory orders rose for the first time in three months in May. The number came in at 0.7 percent against a consensus estimate of 0.1 percent.

The Dow Jones Industrial Average (DJIA) climbed 0.6 percent, after closing slightly lower yesterday on the back of weaker than estimated ISM data. Within the Dow, breadth remained positive with 23 of the blue-chip’s 30 components finishing in green.

The S&P 500 Index (SPX) rose or 0.6 percent with basic materials, energy and utility fronting its 10 major business groups.

Treasuries pared some of Monday’s gains after US automakers’ June sales numbers showed strong rebound in the sector. Toyota (TM) Motors sales for June leapt 60 percent while sales of General Motors (GM) jumped 16 percent over the same period last year. The benchmark 10-year Treasury yield rose 4 basis points to 1.63 percent while the 30-year bond yield jumped six basis points to 2.74 percent in mid-afternoon trading, New York time.

ETFs in the news

As US equities jumped today, gold futures rose nearly 1.5 percent on hopes of further monetary stimulus from the Federal Reserve. Also the market is pricing in a rate cut by the European Central Bank of Thursday and an additional £50 billion in quantitative easing by the Bank of England.

Gold and silver-miner related ETFs performed strongly today with the Van Eck Market Vectors Junior Gold Miners ETF (GDXJ) emerging among the winners, leaping 5.07 percent for the day. GDXJ tracks medium and small cap silver and gold mining companies while the only gold-miner tracking Van Eck Market Vectors TR Gold Miners (GDX) also ended higher, adding 3.78 percent for the day.

As markets march forward, risk sentiments continue to improve driving the so-called fear-tracking volatility index lower. The CBOE Volatility Index (VIX) dropped about one percent on the day, pulling the ProShares VIX Short-Term Futures ETF (VIXY) down 2.22 percent.

There’s optimism around a rate cut by the ECB on Thursday and announcement of further stimulus measures by the US Fed. And these are the only things driving the market.  For a little entertainment on the state of Europe, here’s the latest rant from Nigel Farage:

Happy 4th of July!

Disclosure: No holdings

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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