SPY Down 2.5% as Brent Fell below $30 for First Time in a Decade


Jan. 14 2016, Updated 3:58 p.m. ET

US stocks retreated

The SPDR S&P 500 ETF (SPY) and the Direxion Daily S&P 500 Bull 3X ETF (SPXL) retreated on Wednesday, January 13, 2016, after a short lift that lasted for two days. The SPY and the SPXL went down 2.5% and 7.4%, respectively, on the day. The new lows in the oil prices ruled the sentiments of investors who were already cautious about the growth of the global economy. The following graph shows a snapshot of the US market on January 13, 2016.

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Market scenario

Here, the US dollar is represented by the PowerShares DB US Dollar Bullish ETF (UUP), oil is represented by the United States Oil Fund (USO), and gold is represented by the SPDR Gold 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 (VIX).

Markets had picked up for the last two days as the Chinese yuan rebounded. However, the lift in the US stocks did not persist more than that, as investors still fear that the slowed global growth can turn into something more severe. As a result, US equities tumbled on Wednesday, January 13, and volatility rose sharply, as seen in the graph above. Bond prices got a lift amid the volatile environment, and thus, bond yields dropped on the day. The US dollar weakened 0.16% and gold once again rebounded owing to the fall in the dollar and the rising volatility.

Oil kept its downward trend on Wednesday and Brent touched $29.96 in the early session of the day. Brent crude traded below $30 for the first time since 2004. Therefore, oil and gas stocks Williams (WMB), Tesoro (TSO), and Chesapeake Energy (CHK) slipped -17.7%, -12.2%, and -10.1%, respectively, on January 13.

In the next part of the series, we’ll look at the performances SPY’s component sectors.


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