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Trade War: Energy Sector and the S&P 500 Feel the Heat

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S&P 500’s performance 

The S&P 500 fell ~1.4% to 2,717.07 on June 25. Increasing trade tensions between the US and major economies pressured the S&P 500 on the same day. On June 25, the Trump Administration discussed restricting major economies outside the US from investing in US technology companies. Nine out of the 11 key sectors in the S&P 500 declined on June 25.

The SPDR S&P 500 ETF (SPY) fell ~1.4% to $271 on June 25. SPY seeks to track the S&P 500 Index’s performance. E-Mini S&P 500 futures rose 0.12% from the previous settlement in early morning trade on June 26.

S&P 500’s sectoral performance 

The consumer discretionary, technology, and communication services sectors fell ~2.2%, ~2.1%, and 2.1%, respectively, on June 25. These sectors pressured SPY the most on the same day.

The energy sector, which accounts for ~6.2% of the S&P 500 Index, fell 2.0% on June 25. The Energy Select Sector SPDR ETF (XLE) fell 2.0% to $73.64. XLE represents the S&P 500 Index’s energy sector.

Commodities 

August WTI oil futures fell 0.73% to $68.08 per barrel on June 25. Expectations of a rise in US crude oil production following OPEC’s meeting on June 22 could have pressured oil prices. Increasing trade tensions between the US and major economies also pressured crude oil prices.

China is one of the largest crude oil importers. China imported 23% of crude oil from the US in March. Currently, there isn’t an import tariff in China on US crude oil. If China proposes a 25% import tariff on US crude oil, it could have a negative impact on oil prices. Strong negative or positive sentiment could spread across the markets in different asset classes.

The United States Oil ETF (USO) fell ~1.8% to $13.77 on June 25. USO targets to follow active WTI oil futures’ performance. August WTI oil futures contracts rose 0.3% from the previous settlement in early morning trade on June 26. Prices rose due to the uncertainty about Libya’s crude oil exports.

July US natural gas futures fell 0.7% to $2.92 per MMBtu (million British thermal units) on June 25. These contracts will expire on June 27. Prices fell due to the rise in natural gas production. The United States Natural Gas ETF (UNG) fell 0.54% to $23.74 on June 25. UNG aims to follow active natural gas futures’ performance. August US natural gas futures contracts rose 0.1% from the previous settlement in early morning trade on June 26.

The iShares S&P GSCI Commodity-Indexed Trust (GSG) fell 1.5% to $17.14 on June 25. GSG aims to track an index composed of a diversified group of commodities futures.

In this series  

In this series, we’ll discuss the Brent-WTI crude oil spread and the WTI Cushing-WTI Midland crude oil spread. We’ll also discuss OPEC’s meeting, OPEC’s spare crude oil production capacity, and some crude oil price forecasts.

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