US Stocks Retreat Ahead of Federal Open Market Committee Meeting



SPY falls by 0.3%

The SPDR S&P 500 ETF (SPY) and the Direxion Daily S&P 500 Bull 3X ETF (SPXL) slid by 0.3%, and 0.8%, respectively, on Monday, October 26. The two-day rally of the SPY was capped by the slump in oil prices. Also, for clues on the timing of the Federal Reserve’s rate change, investors are looking forward to the FOMC (Federal Open Market Committee) meeting to be conducted this week. Currently, many countries’ central banks are easing their monetary policies. Although it’s possible that the Federal Reserve will raise rates, the likelihood is small. The strength of economic indicators and the global financial environment will determine the Fed’s decision on the timing of rate hikes. Therefore, investors were cautious with respect to stock markets this week.

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Slump in oil prices weighed SPY down

Oil represented by the United States Oil ETF (USO) fell by 1.8% on October 26. This led to almost all energy stocks plummeting that day.

The graph above shows the performance of the worst-hit energy stocks on October 26. The energy sector represented by the Energy Select Sector SPDR ETF (XLE) dropped by 2.5% that day, leading SPY’s decliners. Stocks of Chesapeake Energy (CHK), QEP Resources (QEP), and Range Resources (RRC), companies into oil and gas exploration and production, were hurt the most, landing at the bottom of the SPDR S&P 500 ETF (SPY) on Monday, October 26.

That day, the US dollar, represented by the PowerShares DB US Dollar Bullish ETF (UUP), fell by 0.3%, and gold, represented by the SPDR Gold Shares ETF (GLD), fell by 0.06%. Yield on bonds went down as bond prices rose on October 26. Let’s take a look at Monday’s performance of SPY’s component sectors.


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