Are Wall Street Indexes Motivated by Oil’s Moves?


Dec. 4 2020, Updated 10:53 a.m. ET

Wall Street

On January 25–February 1, 2018, Wall Street indexes like the S&P 500 Index (SPY), the S&P Mid-Cap 400 Index (IVOO), and the Dow Jones Industrial Average Index (DIA) had above 80% correlations with US crude oil futures. The correlations are listed as:

  • the S&P Mid-Cap 400 Index at 99%
  • the S&P 500 Index at 89%
  • the Dow Jones Industrial Average Index at 86.7%

From the correlations, we can conclude a strong relationship between US crude oil futures and these three equity indexes. The indexes have ~3%, ~6%, and ~9% exposure to energy sector stocks. IVOO, SPY, and DIA fell 1.5%, 0.6% and 0.8% in the trailing week. During this period, US crude oil futures rose 0.4%.

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In the trailing week, the FTSE 100 Index (EWU) (UKX-INDEX) and the CAC 40 Index (EWQ) (PX1-INDEX) fell 1.6% and 0.5%, respectively. Brent crude oil futures declined 0.5% during this period. These equity indexes have over a 10% allocation to energy stocks. Their correlations with Brent crude oil futures in the trailing week are:

  • the FTSE 100 Index at -1.1%
  • the CAC 40 Index at 27.1%

Often in the short term, natural gas–weighted stocks are more aligned to oil compared to natural gas prices. So, natural gas could have a weaker relationship with these equity indexes.


On January 25–February 1, 2018, the Energy Select Sector SPDR ETF (XLE) fell 1.9%—the second-highest loser among sector-based SPDR ETFs. The SPDR S&P Telecom ETF (XTL) rose 0.8%—the largest gainer among sector-based SPDR ETFs during this period. The Materials Select Sector SPDR ETF (XLB) fell 2.7%—the most during this period.


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