Has the Broader Market Helped Oil Keep Its Pace?

In the trailing week, US equity indexes had the following correlations with US crude oil active futures:

• the S&P 500 (SPY): 59.2%
• the S&P Mid-Cap 400 (IVOO): 40.4%
• the Dow Jones Industrial Average (DIA): 27.8%

Sign up for Bagels & Stox, our witty take on the top market and investment news, straight to your inbox! Whether you’re a serious investor or just want to be informed, Bagels & Stox will be your favorite email.

These three equity indexes have exposure of ~5.4%, ~3.7%, and ~5.4% to the energy sector, respectively. The equity indexes returned 0.3%, 0.8%, and -0.9%, respectively, on April 4–11. US crude oil active futures rose 2.4% during this period.

The correlations indicate a positive relationship between oil and most of the US equity indexes. In recent months, movements in the broader market have dominated oil prices. Apart from the broader market, the ongoing conflict in Libya and US sanctions on Iran and Venezuela are other important reasons for oil’s rise.

In the trailing week, the Energy Select Sector SPDR ETF (XLE) rose 1.4%. XLE was the largest gainer among the SPDR ETFs that break the broad market into subsectors. The rise in oil might have helped XLE’s upside.

The Materials Select Sector SPDR Fund (XLB) fell 0.8% and underperformed the SPDR ETFs in the trailing week. Most of the SPDR ETFs ended in the green.