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Is Wall Street Insulated from Oil’s Moves?

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Equity indexes

On August 17–24, 2017, US equity indexes such as the S&P 500 Index (SPY), the Dow Jones Industrial Average Index (DIA), and the S&P 400 Mid-Cap Index (IVOO) had negative correlations of 4.7%, 25.1%, and 7.1% with US crude oil active futures. The S&P 400 Mid-Cap Index rose 0.3%, while US crude oil October futures rose 0.4% during this period. In Part 1, we already discussed how the other two equity indexes performed.

The S&P 400 Mid-Cap Index has a 3%–4% allocation to energy stocks. For the S&P 500 Index and the Dow Jones Industrial Average Index (DIA), the energy sector allocation is 6%–7%.

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In the seven calendar days to August 24, 2017, the FTSE 100 Index (EWU) rose 0.3%, while the CAC 40 Index (EWQ) fell 0.7%. These equity indexes also had negative correlations of 45.3% and 9.3% with oil prices during this period. Both of these equity indexes have more than a 10% allocation to the energy sector.

SPDR sector-based ETFs

In the trailing week, the Energy Select Sector SPDR ETF (XLE) rose 1.1% and was the third-largest gainer among SPDR sector-based ETFs. During this period, the Utilities Select Sector SPDR Fund (XLU) rose 1.4% and was the largest gainer. The Consumer Staples Select Sector SPDR Fund (XLP) was the largest loser with a fall of 1.6% in the last five trading sessions.

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