US equity indexes
On October 4–11, US equity indexes had the following correlations with US crude oil November futures:
These three equity indexes have exposure of ~5.9%, ~5.2%, and ~5.1% to the energy sector, respectively. The equity indexes fell 6%, 5.9%, and 5.8%, respectively, in the trailing week. US crude oil November futures fell 4.5% during this period.
Oil might have a little role in equity indexes’ plunge
The correlation indicates a stronger relationship between oil and these US equity indexes. However, the factors that we discussed in Part 1 could be responsible for oil’s fall. Rising yields, earnings, and trade war concerns might have pulled the broader market.
On October 4–11, the Energy Select Sector SPDR ETF (XLE) fell 5.7%—the fourth-lowest decline 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 fall along with these equity indexes’ plunge.
Next, we’ll discuss the important price level for US crude oil next week.