Equity indexes

On November 30–December 7, 2017, the S&P Mid-Cap 400 Index (IVOO) had the highest correlation of 43.8% with US crude oil January 2018 futures on our list of US equity indexes. Between these two dates, the S&P Mid-Cap 400 Index fell 0.8%—the most on our list of US equity indexes. US crude oil prices fell 1.2% during this period. Energy stocks account for ~3% of the S&P Mid-Cap 400 Index (IVOO).

Is Oil’s Fall Impacting Wall Street’s Returns?

The Dow Jones Industrial Average (DIA) and the S&P 500 Index (SPY) had correlations of 1.3% and 22% with US crude oil January 2018 futures in the trailing week. During this period, these equity indexes fell 0.3% and 0.4%, respectively. The magnitude of the fall in these equity indexes is in the order of their correlations with oil prices—higher correlated indexes fell more. Energy stocks account for ~9% and ~6% of DIA and SPY.

The FTSE 100 Index (EWU) and the CAC 40 Index (EWQ) had negative correlations with Brent crude oil February 2018 futures on November 30–December 7, 2017. Their correlations with Brent crude oil prices were -88.7% and -52.7%, respectively. Brent crude oil February futures fell 0.7% during this period. The FTSE 100 Index fell 0.1%, while the CAC 40 Index rose 0.2% during this period. Energy stocks account for more than 10% of these two equity indexes.

These equity indexes wouldn’t have been impacted by the 8.7% fall in natural gas prices in the past five trading sessions. Natural gas–weighted stocks follow oil prices closer than natural gas.

SPDR ETFs

In the last five trading sessions, the Energy Select Sector SPDR ETF (XLE) fell 0.7%. The Financial Select Sector SPDR ETF (XLF) was the outperformer among the sector-based SPDR ETFs and rose 1.2% during this period. The SPDR S&P Telecom ETF (XTL) fell 3.5%—the most during this period.

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