Broader market

On November 15–22, 2017, US equity indexes like the Dow Jones Industrial Average Index (DIA), the S&P 500 Index (SPY), and the S&P Mid-Cap 400 Index (IVOO) had negative correlations of 83.6%, 70.1%, and 68.6%, respectively, with US crude oil January futures.

Is Wall Street Resisting US Crude Oil’s New 2017 Highs?

In the seven calendar days to November 22, 2017, US crude oil January futures rose 4.5% and closed at a 2017 high on November 22, 2017. During this period, the S&P Mid-Cap 400 Index, the S&P 500 Index, and the Dow Jones Industrial Average Index rose 2.2%, 1.3%, and 1.1%, respectively. Although the correlations between these indexes and crude oil were negative on a statistical basis, US crude oil at new 2017 highs could still be a positive sentimental driver for these equity indexes. Apart from the energy constituents in these indexes, there are other companies in the indexes that can benefit indirectly from higher oil prices.

Energy stocks account for ~6%, 3-4%, and ~9% of the S&P 500 Index, the S&P Mid-Cap 400 Index, and the Dow Jones Industrial Average Index, respectively.

The FTSE 100 Index (EWU) and the CAC 40 Index (EWQ) also had negative correlations of 61% and 87.7% with Brent crude oil January futures in the last five trading sessions. Brent crude oil futures rose 2.3% during this period. The FTSE 100 Index and the CAC 40 Index rose 0.6% and 1% during this period. Energy stocks account for more than 10% of both of these equity indexes.

These equity indexes are impacted less by natural gas. Natural gas prices usually track oil prices. A similar trend has been observed in natural gas-weighted stocks.

SPDR ETFs

On November 15–22, 2017, higher oil prices didn’t ignite energy stocks. The Energy Select Sector SPDR ETF (XLE) only rose 0.5% during this period. In the next part, we’ll discuss the relationship between XLE and oil prices.

The SPDR S&P Telecom ETF (XTL) rose 5.6% and outperformed our list of sector-based SPDR ETFs during this period. The Utilities Select Sector SPDR ETF (XLU) fell 1% and underperformed during this period.

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