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US Stocks Follow Oil’s Rebound, SPY Rises 0.51%

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SPY Rises 0.51%

The SPDR S&P 500 ETF (SPY) and the Direxion Daily S&P 500 Bull and Bear 3X Shares ETF (SPXL) rose 0.51% and 1.7%, respectively, in yesterday’s trade. With no major economic data released yesterday, US equities followed the direction of oil prices on the day. The following graph presents a market snapshot of the day.

In the chart above, the US dollar is represented by the PowerShares DB US Dollar Index Bullish Fund (UUP), oil is represented by the United States Oil Fund (USO), and gold is represented by the SPDR Gold Shares Trust (GLD). The Treasury bond market is represented by the iShares 20+ Year Treasury Bond (TLT), while volatility is represented by the Volatility S&P 500 Index (^VIX).

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Market overview

In the afternoon session, the downward trend in oil prices was reversed, and oil rose 1.9%. US crude settled at $36.31 per barrel, while Brent crude oil fell to $37.92 per barrel in London. With the rise of crude oil prices, the stocks of Diamond Offshore Drilling (DO), Chevron Corporation (CVX), ConocoPhillips (COP), EOG Resources (EOG), and ExxonMobil (XOM) rose 3.6%, 3.3%, 2.9%, 2.6%, and 2.3%, respectively, on December 14.

The US dollar rose on investors’ confidence that the Fed will raise interest rates based on strong US economic data. Treasury bond yields also rose on the day. Bond prices and yields move in opposite directions. Gold lacked its luster amid rising probability of a rate hike and a decline in market volatility.

The market was less volatile due to the strong possibility of a rate hike at the Federal Reserve’s December meeting. Given that future rate hikes will likely be small and gradual, equities were not strongly impacted on the day. Generally, ultra-low interest rates favor equities.

In the next part of this series, we’ll look at the performances of the component sectors of the SPDR S&P 500 ETF (SPY) in yesterday’s trade.

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