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How Oil Is Contributing to Wall Street’s Gains

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Wall Street’s cues  

In the seven calendar days to January 18, 2018, oil prices could have been a catalyst for US equity indexes such as the S&P Mid-Cap 400 Index (MID-INDEX), the Dow Jones Industrial Average (DJIA-INDEX), and the S&P 500 Index (SPX-INDEX). These equity indexes’ correlations with US crude oil over this period were as follows:

  • The S&P Mid-Cap 400 Index: 88.7%
  • The S&P 500 Index: 80.8%
  • The Dow Jones Industrial Average: 67.8%

US crude oil March futures rose 0.3% in the trailing week. The above equity indexes’ returns were -0.1%, 1.1%, and 1.7% with exposure of ~3%, ~6%, and ~9% in energy stocks, respectively, during this period. The S&P 500 and the Dow Jones Industrial Average Index closed at record levels on January 17, 2018.

In the trailing week, the FTSE 100 Index (EWU) (UKX-INDEX) and the CAC 40 Index (EWQ) (PX1-INDEX), which have over 10% exposure to energy stocks, had mild but positive correlations of 33.2% and 11.2% with Brent crude oil futures. During this time period, the FTSE 100 Index fell 0.8%, while the CAC 40 Index rose 0.1% compared to a 0.1% rise in Brent crude oil active futures.

Often, natural-gas-weighted stocks are affected by oil prices more so than natural gas prices. So, natural gas may not directly influence these equity indexes over the short term.

SPDR ETFs

Between January 11 and January 18, 2018, the Energy Select Sector SPDR ETF (XLE) fell 0.3%. The Health Care Select Sector SPDR ETF (XLV) rose 2.3%, the highest among our list of sector-based SPDR ETFs in this period. The Utilities Select Sector SPDR ETF (XLU) fell 0.8%, the highest in this period.

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