SPY, VOO Rise as S&P 500 Avoids Correction Territory

The S&P 500 stopped just short of correction territory last week and it’s looking like it may avoid one for now. 

On a closing basis, the index fell as much as 8.5% below its all-time high, just a tad under the 10% threshold that marks the start of a correction. But after rallying over the past several days, the S&P 500 is now only down 4.1% from its highs. 

The SPDR S&P 500 ETF Trust (SPY) and Vanguard S&P 500 ETF (VOO), which track the index, both closed up about 1.65% in Tuesday trading. 

Perhaps this is just a temporary bounce before the index heads lower again, but if deleveraging was the main cause of last week’s sell-off rather than a significant deterioration in the economic outlook, then the bulls may have success wrangling back control of the markets from the bears.

U.S. stocks rose Tuesday afternoon as Wall Street responded to cooler-than-expected inflation data and anticipated consumer price updates. 

The SPDR S&P 500 ETF Trust (SPY) gained 1.2%, the SPDR Dow Jones Industrial Average ETF Trust (DIA) increased 0.7%, and the Invesco QQQ Trust (QQQ) climbed 2%. 

Volatility subsided after a tumultuous week, with the ProShares VIX Short-Term Futures ETF (VIXY) falling 3.8% Small- and micro-cap ETFs benefited from Lifeway Foods’ 45% stock surge. 

The VictoryShares Small Cap Free Cash Flow ETF (SFLO) rose nearly 1%, while the iShares Micro-Cap ETF (IWC) gained 1.4%. Lifeway’s jump followed news of the “Life Back to Lifeway” campaign launched by major shareholders Edward and Ludmila Smolyansky. 

They filed a consent statement with the SEC, seeking to replace the current board of directors, including CEO Julie Smolyansky, citing poor corporate governance and financial results.

Wholesale inflation, as measured by the producer price index (PPI), rose a less-than-expected 0.1% last month, fueling hopes that the Fed would cut rates in September as inflation continues to cool.

Rate cuts would stimulate the market broadly, particularly effecting rate sensitive ETFs and sectors like Treasury bonds and tech.

XLK, the Technology Select Sector SPDR Fund jumped more than 2% in early trading Tuesday as the stumbling tech sector dug out of a recent dip. The fund was boosted by a roughly 19% allocation to Nvidia, which popped more than 5%.

According to etf.com data, Nvidia ETFs were the top gainers Tuesday. 

NVDL, the GraniteShares 2x Long NVDA Daily ETF soared nearly 10%, while NVDU and NVDX, the Direxion Daily NVDA Bull 1.5X Shares and T-Rex 2X Long NVIDIA Daily Target ETF both jumped over 9%. 

XLY, the Consumer Discretionary Select Sector SPDR Fund also led the way higher on Tuesday, notching a 1.5% gain. The fund was helped in part by Starbucks, which today named Chipotle CEO Brian Niccol as its new top executive. Starbucks rose more than 20%. 

Other consumer discretionary funds with Starbucks allocations also performed well. MILN, the Global X Millennial Consumer ETF edged 1.3% higher.