Rising Oil Prices Boost SPY and EWU
SPY managed slight gains
The SPDR S&P 500 ETF (SPY) rose 0.13% on Tuesday, November 24, 2015, as its losses in the real estate sector, the financial sector, the industrial sector, and the consumer discretionary sector were overshadowed by the rally of the energy stocks. The rally in the energy sector was prompted by the Turkey-Russia incident as explained in the next section.
The above graph presents the performances of the component sectors of SPY as of November 24, 2015.
Russia-Turkey geopolitical tensions
Early on Tuesday, November 24, 2015, a Russian jet was shot down by Turkish security officials. According to the Turkish government, the warplane had entered Turkish airspace. Russia denied any such violations by its aircraft, and the Russian president warned that Turkey would face serious consequences following the incident. As a result, tensions in the Middle East rose, and the concerns over probable interruptions in oil supply boosted oil prices.
US crude oil jumped 2.7% to $42.87 per barrel on the day, leading the Energy Select Sector SPDR ETF (XLE) to rise 2.1%. Energy stocks such as Chesapeake Energy (CHK), Marathon Oil (MRO), and Helmerich & Payne (HP) rose 6.8%, 5.5%, and 5.2%, respectively, on the day.
Stocks related to air transport dropped following the rise in oil prices on the day. These stocks include Delta Air Lines (DAL) and Southwest Airlines (LUV), which fell 3.1% and 2.6%, respectively, on the day.
Stocks of transportation companies involved in air freight and logistics also suffered on the day due to the rise in oil prices. United Parcel Service (UPS), FedEx (FDX), and C.H. Robinson Worldwide (CHRW) fell 0.2%, 0.2%, and 0.04%, respectively, on November 24.
Geopolitical risks after the Russia-Turkey incident led the Direxion Daily Russia Bull 3X ETF (RUSL) to fall -5.0% on November 24.
Let’s have a look at the US market response on the day of the above-mentioned incident.
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