Why Energy Could Spell Worry for Wall Street Bulls

Rabindra Samanta - Author

Dec. 4 2020, Updated 10:52 a.m. ET

Energy sector versus the broader market

From March 2, 2017, to March 9, 2017, the Energy Select Sector SPDR ETF (XLE) fell 2.8%, the most among the sector-based SPDR ETFs that we’ll cover in this part of the series.

US crude oil (USO) (USL) April futures fell 6.3% between March 2, 2017, and March 9, 2017. The fall in XLE corresponded with weakness in crude oil prices.

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Among the SPDR ETFs, the Health Care Select Sector SPDR ETF (XLV) rose the most, climbing ~0.3% from March 2, 2017, to March 9, 2017. During the same period, the S&P 500 Index (SPY) (QQQ) (IVV) (VFINX) fell 0.6%, and the Dow Jones Industrial Average (DIA) (DJIA-INDEX) fell 0.7%.

The fall in XLE and its components led the fall in the broader market. The energy sector accounts for ~7.6% of the S&P 500 and ~6.4% of the Dow Jones Industrial Average.

Crude oil this week

On March 9, 2017, at 11:54 PM EST, US crude oil (OIIL) April futures were trading at $49.64 per barrel, a 6.9% fall compared to their closing price on March 3, 2017. Crude oil will likely close on a negative note this week. From February 24, 2017, to March 3, 2017, crude oil rose 1.4%.

Apart from their effects on the broader market, movements in crude oil (SCO) prices can also directly affect ETFs such as the iShares U.S. Oil Equipment & Services ETF (IEZ), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), and the Guggenheim S&P 500 Equal Weight Energy ETF (RYE).


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