Wall Street’s Rise: Why Oil’s Role Could Be Limited
The S&P 500 Index (SPY), the S&P 400 Mid-Cap Index (IVOO), and the Dow Jones Industrial Average Index (DIA) had negative correlations of 49.9%, 43.9%, and 20.1%, respectively, with US crude oil prices between September 28 and October 5, 2017.
In the trailing week, the S&P 400 Mid-Cap Index rose 1.5%. US crude oil (OIIL) November futures fell 1.5% during this period, and the S&P 500 Index and the Dow Jones Industrial Average Index closed in the green in the trailing week.
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The S&P 400 Mid-Cap Index has 3%–4% allocation to energy sector stocks. Both the S&P 500 Index and the Dow Jones Industrial Average Index have allocations of 6%–7% to energy sector.
European equity indexes
The FTSE 100 Index (EWU) and the CAC 40 Index (EWQ) rose 2.5% and 1.6% during the seven calendar days leading up to October 5, 2017. These two equity indexes had correlations of -28.8 and 0.7%, respectively, with Brent crude oil (BNO) active futures. Brent crude oil December futures fell 0.3% during this period. These two indexes have more than 10% allocations to energy sector stocks.
Natural gas could be of less importance for these equity indexes in the short-term because natural gas-weighted stocks correlate higher with oil prices than with natural gas.
The Energy Select Sector SPDR ETF (XLE) was the least of the gainers among the sector-based SPDR ETFs, rising only 0.2% in the past five trading sessions. During this period, the Financial Select Sector SPDR ETF (XLF) rose 2.3% and outperformed its peers.