SPY Down 1.3%, Futures Markets Fell as Global Concerns Worsened



SPY down 1.3%

The SPDR S&P 500 ETF (SPY) and the Direxion Daily S&P500 Bull 3X ETF (SPXL) fell 1.3% and 4.0%, respectively, on Wednesday, January 6, 2016. All the component sectors of the SPY bled on the day as various global concerns intensified this week. We will examine these factors in detail throughout this series.

Let’s take a look at various aspects of the market, as seen in the graph below.

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Futures market in red

Commodity futures bled due to concerns over global growth and the weakened global demand. Crude oil and the Brent crude futures declined 2.6% and 2.1%, respectively, on January 6. Gold futures rose 0.4%, citing volatility in the financial markets while silver dropped due to falling demand for precious and industrial metals.

Index futures tumbled as weakness in the yuan triggered a sell-off of the equities in global financial markets. Therefore, the E-Mini S&P 500 slid 2.7% on the day.

Market overview

Referring to the above graph, the US dollar is represented by the PowerShares DB US Dollar Bullish ETF (UUP), oil is represented by the United States Oil ETF (USO), and gold is represented by the SPDR Gold Trust ETF (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 (or VIX).

Oil fell the most, owing to weak economic growth and its forecast about future demand. As a result, oil prices fell below $35 per barrel. US WTI crude fell 5.6% to close at $33.97 per barrel and Brent crude slid 6% to settle at $34.23 per barrel.

Goldman Sachs (GS) had forecasted oil to descend further to the level of $20 per barrel. Please read Will Oil Glut Continue in 2016 with OPEC’s Production Policy? for a detailed look at this issue. Stocks of companies engaged in oil drilling, production and storage include Denbury Resources (DNR), Williams (WMB), Apache (APA), Southwestern Energy (SWN), and Marathon Oil (MRO). These companies fell by 14.9%, 13.0%, 11.5%, 12.6%, and 11.6%, respectively, on January 6.


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