The SPDR S&P 500 ETF (SPY) and the Direxion Daily S&P 500 Bull 3X ETF (SPXL) managed to end slightly higher on Monday, January 11, with returns of 0.1% and 0.06%, respectively. Gains in the consumer sectors and other defensive sectors offset the plunge in the major sectors of the SPY like the energy sector, the material sector, the healthcare sector, and the financial services sectors.
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).
The rise in the US dollar weakened the demand for the dollar-denominated commodities like gold and oil. As the volatility in the US equities subsided by 10.0%, bond prices too fell on the day, thereby increasing their respective yields for the Treasury bonds. Bond prices and yields maintain an inverse relationship.
Oil down as global growth fear continues
The slowdown in global economic growth, particularly in China, coupled with the oil supply glut continue to upset oil prices, which went below $32 a barrel. China, being the second largest economy, impacted oil prices with its data, which suggested sluggish growth in its economy. On Monday, US crude fell 5.3% and closed at $31.41 per barrel while Brent crude came down 6.0% to settle at $31.55 per barrel. Due to the slump in oil prices and worries about China, energy stocks were adversely impacted on Monday. Williams (WMB), Ensco (ESV), CONSOL Energy (CNX), and Denbury Resources (DNR) dropped 8.0%, 8.0%, 9.0%, and 8.6%, respectively, on January 11.
In the next article, we’ll look at the performances of the component sectors of SPY.