Investors Turned to Safe Havens after Russian Warplane Incident
Rising Oil Prices Boost SPY and EWU
Rise in volatility
The SPDR S&P 500 ETF (SPY) and the Direxion Daily S&P 500 Bull 3X ETF (SPXL) ended slightly higher on November 24, 2015, shrugging off losses in the financial and the consumer discretionary sectors.
SPY and SPXL gained 0.13% and 0.45%, respectively, on the day. The Russian warplane incident resulted in a hike in oil prices that pushed the energy sector to lead SPY by 2.1%.
The above graph illustrates the market’s response to the geopolitical issue that arose on Tuesday, November 24.
Here, 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 total bond market is represented by the Vanguard Total Bond Market ETF (BND), and volatility is represented by the Volatility S&P 500 Index (VIX).
Concerns over the continuous and uninterrupted supply of oil from the Middle East led to the rise in oil prices following the mounting terrorism and geopolitical tensions on November 24. US investors turned to safe havens such as gold and bonds, whose prices rose.
Volatility also rose on the day amid terrorism panic after the Paris attack and the incidents that took place thereafter. The US dollar fell on the day.
Tourism industry
The U.S. Department of State issued a worldwide travel alert late Monday, November 23, 2015, due to rising terrorism threats. Thus, the tourism and travel industry has not only been hit by rising fuel costs, but also travel alerts wherein few passengers will opt for long travels ahead of the holiday season.
Along with airline stocks, stocks of hotel, resort, and cruise line companies also dropped on the day. These included Royal Caribbean Cruises (RCL), Marriott International (MAR), Carnival (CCL), Wyndham Worldwide (WYN), and Starwood Hotels & Resorts (HOT). These stocks yielded -3.1%, -2.0%, -2.0%, -1.1%, and -0.8%, respectively, on November 24.
Now let’s look at the economic data releases of the day and the key stocks in the US market.
Browse this series on Market Realist:
