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.