SPY rose 2.1%
The SPDR S&P 500 ETF (SPY) and the Direxion Daily S&P500 Bull 3X ETF (SPXL) rose by 2.1% and 6.2%, respectively, on January 22, 2016. US equities rose due to the increase in oil prices and the dovish stance taken by the central banks in Europe, Japan, and China. Let’s look at how the markets responded on the day.
The above graph shows a market snapshot through various aspects as of January 22, 2016.
In the graph, the US dollar is represented by the PowerShares DB US Dollar Bullish ETF (UUP). Oil is represented by the United States Oil Fund (USO). Gold is represented by the SPDR Gold Trust (GLD). The Treasury bond market is represented by the iShares 20+ Year Treasury Bond (TLT). Volatility is represented by the Volatility S&P 500 (^VIX).
The day might not be the end of the volatile market conditions. It showed that oil reached its lowest level. Now, the only direction it can move is upwards. The anticipation of stimulus measures—that could be initiated by the central banks soon to help accelerate the economic activity—lifted the US stocks on January 22. Also, investors’ anticipation that the economic acceleration would soak up some of the oil supply glut lifted USO by 8.3% on January 22. Read to learn more, read Stimulus Prospects Give Much-Needed Boost to the Material Sector.
The US dollar kept rising compared to other major currencies. Treasury bonds and gold are considered to be “safe havens.” Their demand fell with the decrease in the market volatility. The stocks at the top of SPY are energy-related stocks from the pipeline industry—Williams Companies (WMB), ONEOK (OKE), and Kinder Morgan (KMI). They rose by 23.1%, 11.0%, and 10.5%, respectively, on the day.
In the next part of this series, we’ll look at SPY’s sector-wise performances on January 22.