Two underperforming ETF sectors – emerging markets and gold miners – were leading the market higher Thursday as comments from Federal Reserve Chairman Ben Bernanke caused investors to rethink their stance on the future of the Fed’s bond buying program and low interest rates.
Market Vectors Gold Miners (NYSEArca: GDX) was up 5% in morning trade while Direxion Daily Gold Miners Bull 3x Shares (NYSEArca: NUGT), a 300% leveraged ETFs, jumped more than 15%. [ETF Chart of the Day: Gold Miners]
Gold miner stocks were getting a reprieve after a deep slump this year along with bullion prices. GDX was down 50% so far this year heading into Thursday’s rally.
Gold prices also vaulted higher Thursday after Bernanke said the Fed would likely keep short-term interest rates near zero even if the unemployment rate falls to the central bank’s target of 6.5%. [Gold, Silver ETFs Ripping on Bernanke Dovish Comments]
Another beaten-down sector, emerging market ETFs, were also on the mend Thursday with iShares MSCI Emerging Markets (NYSEArca: EEM) and $2.1 billion from Vanguard FTSE Emerging Markets (NYSEArca: VWO) both up more than 3%. [Mean Reversion Time for Emerging Market ETFs?]
Bernanke’s remarks trumped an International Monetary Fund report earlier this week warning that emerging market economies could weaken further.
Emerging market ETFs and other riskier asset classes have been particularly sensitive to expectations the Fed and other central banks could ease back on monetary stimulus.
“The world’s markets woke up today because Bernanke made a declaration that the world wasn’t expecting,” said Ariovaldo Santos, a broker with H.Commcor in Brazil, in a Reuters article. “The market had been nervous recently because people were unsure about when the tapering was going to happen.”
Full disclosure: Tom Lydon’s clients own EEM.