Not surprisingly, the SPDR S&P 500 ETF (NYSEArca: SPY) was a prime beneficiary of Wednesday’s rally that saw U.S. stocks notch their best one-day surge in several years.
“Sensing a floor in equities or at least a bounce, clients of exchange-traded funds poured more than $5 billion into the largest stock ETF Wednesday, a sum equal to all the money they pulled out as shares plunged the previous week,” reports Lu Wang for Bloomberg.
Some market observers forecast the sudden jump for the benchmark U.S. index, noting that big declines in small time frames often give way to upside.
According to Bespoke Investment Group, after the 28 times since 1980 the index experienced a weekly plunge of over 5%, the S&P 500 on average was up 0.5%, gained 1.7% over the next four weeks and increased 5% over the next 12 weeks, reports Julie Verhage for Bloomberg.
Additionally, after a weekly 5% or more plunge, the index exhibited a positive return 60.7% over the following week, 60.7% over the following four weeks and 71.4% over the following 12 weeks since 1980. [How Broad Markets Will Play out After a Dip]
According to Barclays, historical trends suggests that the equity market recovery has more room to run, reports Jamie Chisholm for the Financial Times.
Barclays’ equity strategy team found that since 1940 there have been 10 instances when the S&P 500 plunged by at least 10% in four sessions.