US retail sales
US (SPY) (VOO) retail sales rose 0.6% in June on a month-over-month basis, according to the United States Census Bureau’s report on July 15, 2016. The expectation was for an increase of 0.1%. The better-than-expected retail sales number is a positive sign for the US economy.
Key economic indicators and crude oil
The US retail sales number is one of the most important economic data points. It can impact interest rate decisions because it impacts the consumer spending component in the GDP calculation. The market’s expectation of a rate hike following the news could boost the US Dollar Index (UUP). It could have a negative impact on crude oil prices. However, strong retail sales numbers and a strong economy could mean strong crude oil demand. This would support crude oil prices. Read How Has the US Dollar Affected Oil Prices? to learn more.
Impact on energy stocks
Our analysis here is important for crude oil–weighted stocks such as Abraxas Petroleum (AXAS), Triangle Petroleum (TPLM), RSP Permian (RSPP), Northern Oil & Gas (NOG), Oasis Petroleum (OAS), and Denbury Resources (DNR). Economic data and the correlation of crude oil prices with the US Dollar Index also impact ETFs like the Direxion Daily Energy Bear 3X ETF (ERY), the First Trust Energy AlphaDEX ETF (FXN), the United States Brent Oil ETF (BNO), the Energy Select Sector SPDR ETF (XLE), and the United States Oil ETF (USO).
In the next part of this series, we’ll look at the weather forecast and how it could impact natural gas prices.