On February 15–22, 2018, US equity indexes’ correlations with US crude oil April futures were:
- the S&P Mid-Cap 400 Index at 4.7%
- the Dow Jones Industrial Average Index at 71.1%
- the S&P 500 Index (SPY) at 58.7%
In the trailing week, these three equity indexes fell 0.8%, 0.9%, and 1%, respectively. These equity indexes have allocations of ~3%, 9%, and 6% to energy stocks, respectively. In the previous part, we discussed how the S&P 500 Index impacted energy ETFs. Bearishness in the broader market likely impacted energy stocks more than oil—based on the correlations.
US crude oil rose 2.6% in the seven calendar days to February 22, 2018, due to the factors that we discussed in Part 1. However, sentiments between equity markets and oil markets often interact with each other.
The FTSE 100 Index and the CAC 40 Index have an allocation of more than 10% to energy stocks. They had negative correlations of 37.9% and 44.9% with Brent crude oil futures in the seven calendar days to February 22, 2018. During this period, these two equity indexes rose 0.2% and 1.7%, respectively. Brent crude oil futures rose 3.2% during this period.
These equity indexes might ignore the changes in natural gas prices during this period. At times, natural gas–weighted stocks move in tandem with oil prices.
On February 15–22, 2018, the Energy Select Sector SPDR ETF (XLE) fell 1.4%—the third-largest loser on our list of sector-based SPDR ETFs. The Industrial Select Sector SPDR ETF (XLI) fell 0.3% and outperformed other sector-based SPDR ETFs during this period. The SPDR S&P Telecom ETF (XTL) fell 3.8%—the most in the trailing week.