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Is Oil Pushing Wall Street Higher?

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US equity indexes

On September 13–20, US equity indexes had the following correlations with US crude oil November futures:

  • the Dow Jones Industrial Average (DIA): 16.5%
  • the S&P 500 (SPY): 0.1%
  • the S&P Mid-Cap 400 (IVOO): -13.1%

These three equity indexes have ~5.2%, ~5.9%, and ~5.1% exposure to the energy sector, respectively. The equity indexes rose 2%, 0.9%, and 0.3%, respectively, in the trailing week. US crude oil October futures rose 2.8% during this period.

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Is oil pushing Wall Street higher?

Based on their correlations, these equity indexes have either ignored or moved inversely to oil prices.

On September 13–20, the Energy Select Sector SPDR ETF (XLE) rose 1.7%—the third-highest gainer among the SPDR ETFs that break the broad market into subsectors. In the previous part, we discussed that oil prices might be behind XLE’s rise. Despite a low or negative correlation, oil prices might have supported these equity indexes.

In the past five trading sessions, the Financial Select Sector SPDR ETF (XLF) rose 3.4%—the largest gainer. The Utilities Select Sector SPDR ETF (XLU) has fallen 2.3%—the largest decline on our list during this period.

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