Are Oil’s Gains Propelling Wall Street?
US equity indexes
On August 31–September 7, 2017, the S&P 400 Mid-Cap Index (IVOO) had the third most negative correlation of 77.6% with US crude oil active futures. In fact, the S&P 400 Mid-Cap Index fell 1%—the highest on our list of equity indexes during this period.
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In the seven calendar days to September 7, 2017, the CAC 40 Index had the least negative correlation of 45.1% with US crude oil futures. The CAC 40 Index was the only gainer among our list of equity indexes. It rose 0.6%—compared to the 3.9% gain in US crude oil October futures and a 4% rise in the Brent crude oil active futures during this period.
The Dow Jones Industrial Average Index (DIA) had the highest negative correlation of 82.1% with US crude oil active futures in the trailing week. The S&P 500 Index (SPY) and the FTSE 100 Index (EWU) had negative correlations of 80% and 66.5% with US crude oil prices during this period.
In the past five trading sessions, EWU fell 0.5%. We discussed SPY and DIA’s price performance in Part 1 of this series.
IVOO’s exposure to the energy sector is 3%–4%. For SPY and DIA, the allocation to the energy sector is 6%–7%. EWU and the CAC 40 Index have more than 10% of their total allocation in energy sector stocks.
The gain in US crude oil prices propelled a 3.4% rise in the Energy Select Sector SPDR Fund (XLE) in the past four trading sessions. XLE outperformed among the sector-based SPDR ETFs. The Financial Select Sector SPDR Fund (XLF) fell 3.3% and was the largest loser among the SPDR ETFs during this period.