Have US Equity Indexes Made Oil’s Fall Sharper?



US equity indexes

On January 31–February 7, US equity indexes had the following correlations with US crude oil March futures:

  • the Dow Jones Industrial Average (DIA): 20.5%
  • the S&P 500 (SPY): 16.3%
  • the S&P Mid-Cap 400 (IVOO): 12.8%
  • the Nasdaq Composite (ONEQ): -7.1%

These four equity indexes have exposure of ~5.2%, ~5.9%, 5.1%, and ~0.5% to the energy sector, respectively. The equity indexes rose 0.7%, 0.1%, 1%, and 0.1%, respectively, in the trailing week. US crude oil March futures fell 2.1% during this period.

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Oil’s fall and equity indexes

The correlations indicate a mild positive relationship between oil and most of these US equity indexes. However, the fall in the bullish sentiments in the broader market might have made oil’s fall sharper. The factors discussed in Part 1 might have impacted oil and broader markets.

On January 31–February 7, the Energy Select Sector SPDR ETF (XLE) fell 0.9%—the second-lowest fall among the SPDR ETFs that break the broad market into subsectors. US equity indexes are slightly in the green territory, which might have been behind XLE’s small fall. During this period, the Technology Select Sector SPDR ETF (XLK) rose 2%. XLK was the outperformer among sector-based SPDR ETFs. The Communication Services Select Sector SPDR ETF (XLC) fell 1.5%—the underperformer among sector-based SPDR ETFs.

Next, we’ll discuss the important price level for US crude oil next week.


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