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How Are Oil Prices Affecting Market Sentiment?

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Mar. 25 2016, Published 12:47 p.m. ET

Oil prices below $40

US crude oil fell below the psychological level of $40 per barrel. After recovering around 57% from the low of $26 a barrel on February 11, 2016, some selling pressure has built up in crude oil. After such a huge rally, the market may view this as an opportunity to book profits.

According to the U.S. Energy Information Administration (or EIA), crude stockpiles increased 9.4 million barrels last week, which is above analysts’ expectation of 3.1 million barrels. There are worries of a supply glut, as the crude stockpiles have increased three times what analysts expected.

[marketrealist-chart id=1163529]

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Major indexes fell

The SPDR S&P 500 ETF (SPY) fell 0.66% on Wednesday, March 23, 2016. In the last month, the S&P 500 Index has almost followed the movement of crude oil (USO). When crude oil prices started to recover on February 12, 2016, the market also started to recover. When oil prices slid 4% on Wednesday, the SPY also fell 0.66%.

The Europe-tracking SPDR Euro Stoxx 50 (FEZ) also fell 1.1% as the terror attack on Brussels weighed on the index. Brussels, Belgium’s capital, is also the headquarters for the European Union (or EU). This incident occurred four months after the Paris attack in November 2015. The continuous terror attacks in Europe are adding to investors’ worries.

Major travel industries are being affected because of these incidents. The iShares Transportation Average (IYT) fell 0.67% on the same day. Major airline stocks like Delta Air Lines (DAL), American Airlines (AAL), and United Continental (UAL) could be impacted because of these incidents.

In the next article, we will analyze the performance of the energy sector.

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