American equity markets struggled in Thursday’s session as broad weakness permeated all corners of the stock world throughout the day. This slump came as unemployment claims beat expectations but the ISM Non-manufacturing survey finished below the bottom of the consensus range at 53.5.
This slump represents a 2.5 point slide in the key figure and continues the trend lower that investors have been seeing for several months now. As a result, this report overshadowed the relatively good news from the unemployment report leaving expectations mixed heading into the key employment situation release due out at market open tomorrow.
Selling pressure was especially strong in the banking and energy segments, although services tilted towards the consumer also sold off on the day as well. Among the only winners in the session came in the consumer staples, and health care names as these sectors offered a respite from the broad market turmoil (read Is The Italy ETF Next?).
Thanks to this weakness, the dollar did see some inflows although they were pretty modest against most of the world’s major currencies. Bonds were also stable in the session although some of the short to medium term debt did see modest inflows, pushing yields slightly lower in fixed income throughout the two to 10 year segment.
Yet again, commodities did see weakness with selling especially bad in the energy, precious metals, and grains markets. However, a few products in the grains segment—led by wheat and rice—added a bit on the day while natural gas surged 3.8% thanks to a rare bullish storage report from the volatile fuel (see PIMCO Launches Global TIPS ETF).
In ETF trading, investors saw volume that was roughly in line with historic levels in most of the top products in the industry. However, trading levels were elevated in the commodity markets while international products broadly took a breather—except for a few exceptions—leaving U.S. sector ETFs as the big leaders in volume for the day.
In particular, trading was elevated in the Guggenheim Airline ETF which saw a spike in interest in Thursday trading. The ETF usually trades a paltry 8,500 shares in a normal session although volume reached the 22,000 level today.
The ETF is heavily focused on three airlines; Delta, United Continental, and Southwest, although 23 other firms find their way into the fund. While the three listed above weren’t that volatile, a top six component, Spirit Airlines (SAVE - Snapshot Report), was a big mover, losing 5% on the day.
This move came as the company announced plans to charge $100 for carry-on bags, more than double the cost of some of the airline’s tickets, possibly signaling some weakness in the company. Nevertheless, this move lower wasn’t enough to drag down the whole sector as Delta and Southwest finished in the green and helped keep FAA up 0.4% for the session.
Another ETF which saw an outsized level of interest was the PowerShares DB G10 Currency Harvest Fund (DBV - ETF report). This currency fund usually sees volume of about 178,000 shares in a session but experienced a massive spike to 1.04 million shares in Thursday trading.
Possibly, investors looked to position themselves in this fund ahead of Friday’s crucial jobs report, which could set the tone for the market heading into the weekend. The ETF is long in a number of resource currencies and has a short position in the dollar, the yen, and the Swiss franc, so this composition may have also played a role in the trading level increase (see Bet Against The Dollar With These Three ETFs).
Given this exposure profile and the weakness of some key commodities, the product declined about 0.6% heading into Friday. Since currency markets look to be in focus again after the jobs report, we could see another outsized trading day for the product to close out the week as well.
(see more on ETFs at the Zacks ETF Center)