Crude oil, natural gas, and the S&P 500 Index
Last week, US crude oil (USO) (OIIL) (USL) (SCO) April futures rose 0.4%, while natural gas April futures fell 5.6%. The S&P 500 Index (VFINX) (SPY) (QQQ) (IVV) rose 0.7% during the same week. The Energy Select Sector SPDR ETF (XLE) fell the most among the sector SPDR ETFs. It fell 1.4% from February 17 to February 24, 2017. The fall in XLE was on the back of a small rise in oil prices and weakness in ExxonMobil (XOM) and Chevron (CVX) stock prices. ExxonMobil and Chevron fell 0.8% and 0.2% during this period. Together, these two stocks account for ~31% of XLE.
Among SPDR ETFs, the Utilities Select Sector SPDR ETF (XLU) rose the most. It rose ~4.1% from February 17 to February 24, 2017. For a deeper analysis of how the sector SPDR ETFs performed last week, read What Energy’s Underperformance Is Doing to the S&P 500 Index.
Last week, the S&P 500 Index closed at 2,367.3—a record high. In the past four trading sessions, crude oil and the S&P 500 Index moved in the same direction on a closing price basis three times. Natural gas and the S&P 500 Index moved in the same direction two times.
The correlation in the last four trading sessions between crude oil and the S&P 500 was 48.1%. The correlation between natural gas and the S&P 500 was -90.2%. However, the correlation between natural gas and the S&P 500 during this short period isn’t useful. Natural gas–weighted stocks are less aligned to natural gas’s price movements.
The sentiment in broader financial and commodity markets globally can impact securities and commodities across the markets. On the other hand, weakness in the crude oil market in the past caused equity markets to fall due to fear. Notably, the energy sector accounts for ~7.3% of the S&P 500 Index. So, movements in energy prices can also directly sway the broader market index. The recent fall in energy stocks limited the gains in the broader market.
Source : http://marketrealist.com/2017/02/higher-oil-prices-arent-helping-wall-street/