Why Oil Might Be Troubling Wall Street



US equity indexes

On November 15–21, US equity indexes had the following correlations with US crude oil January futures:

  • the S&P Mid-Cap 400 (IVOO): 68.9%
  • the Dow Jones Industrial Average (DIA): 68.6%
  • the S&P 500 (SPY): 62.8%

These three equity indexes have exposure of ~5.1%, ~5.2%, and ~5.9% to the energy sector, respectively. The equity indexes fell 1.9%, 3.3%, and 2.9%, respectively, in the trailing week. US crude oil January futures fell 3.6% during this period.

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Oil’s fall and equity indexes

The correlation indicates a positive relationship between oil and these US equity indexes.

The factors that we discussed in Part 1 could be responsible for oil’s fall. Apart from oil’s decline, these equity indexes might have fallen due to concerns about the trade war and the fall in technology stocks.

On November 15–21, the Energy Select Sector SPDR ETF (XLE) fell 0.6%—the smallest decline on our list.

During this period, the Technology Select Sector SPDR ETF (XLK) fell 5.3%—the underperformer on our list. The Real Estate Select Sector SPDR (XLRE) rose 0.3%– the most on our list.

In the next part of this series, we’ll discuss the important price level for US crude oil next week.


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