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SPY Rallies as Economic Data Turn Out to Be Mixed

Renee Blakely

SPY Rallies as Mixed Economic Data Spark Concerns

SPY rose 0.95%

December’s first day started with a bang as the economic data releases of the day turned out to be not so strong. This left equities more appealing to US investors. The SPDR S&P 500 ETF (SPY) and the Direxion Daily S&P500 Bull 3X ETF (SPXL) climbed 0.95% and 2.9%, respectively, on Tuesday, December 1, 2015.

The above graph depicts the rally in all the component sectors of the SPY as of December 1, 2015.

The economic front

The purchasing managers’ index (or PMI) came in at 52.8 for November 2015. This was just above the consensus expectation of 52.6. The prior month’s reading was 54.1.

Although the index does not indicate a contraction in manufacturing activity, it certainly indicates slower rates of growth in November 2015. According to the report, export orders are in contraction, driven by weak foreign demand and the strengthening US dollar. Hiring is also slowing as per the report, which signifies weakness.

The ISM (Institute of Supply Management) Manufacturing Index for November 2015 came in at 48.6, which was below the consensus estimate of 50.5. The prior reading was 50.1 for October 2015. A reading of below 50 indicates contraction in the economic activity of the sector.

Both the PMI and ISM readings question the strength of the US economy and the likelihood of a rate hike, leaving investors with an option for equity investment.

December 1, 2015, witnessed an overall rally in all sectors of SPY. A total of 415 of the ETF’s 501 constituent stocks yielded positive returns on the day.

Industrial stocks rose on December 1. These included airlines Delta Air Lines (DAL), Southwest Airlines (LUV), Quanta Services (PWR), and D.R. Horton (DHI), which fell after the attacks in Paris. These stocks rose 2.6%, 2.5%, 2.3%, and 2.2%, respectively, on the day.

Next, let’s look at market responses to other economic data releases on the day.

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