Is Oil’s Impact to Stocks Reaching Crescendo?

Published January 13

Stocks and oil are tightly correlated these days, as we saw in Tuesday’s trade. The relationship could tighten even further Wednesday morning. However, I wonder if the relationship breaks a bit after the report from the EIA today. Recent trading seems to me to illustrate penalized equity and energy valuations have found a level where investors are questioning if they’ve fallen too far. As Iranian “implementation” of its supply release occurs in the very near-term, we may have a “sell the news” (in this case buy) type of event, given the severe price-down of oil that has led up to the event. In other words, it’s priced in. I expect that a positive surprise from the EIA today would serve a rally for stocks, and that bad news from the EIA could only have a short-lived impact before stocks rebound. See more about oil's impact to stocks here.

Sector Security	Wednesday Early Indication
SPDR S&P 500 (NYSE: SPY)	+0.4%
SPDR Dow Jones (NYSE: DIA)	+0.6%
PowerShares QQQ (Nasdaq: QQQ)	+0.4%
iShares Russell 2000 (NYSE: IWM)	+0.2%
Vanguard Total Stock Market (NYSE: VTI)	+0.0%
Vanguard FTSE Europe (NYSE: VGK)	+0.0%
United States Oil (NYSE: USO)	+0.8%

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only. Article interests energy investors including Exxon Mobil (NYSE: XOM), BP (NYSE: BP), PetroChina (NYSE: PTR), Petrobras (NYSE: PZE), Royal Dutch Shell (OTC: RYDAF.PK), Total (NYSE: TOT), Chevron (NYSE: CVX), Repsol (OTC: REPYY.PK), ConocoPhillips (NYSE: COP), Eni SpA (NYSE: E), Sasol (NYSE: SSL), Encana (NYSE: ECA), Suncor (NYSE: SU), Imperial Oil (AMEX: IMO), Statoil (NYSE: STO), Cenovus (NYSE: CVE), Transocean (NYSE: RIG), Penn West Petroleum (NYSE: PWE), Continental Resources (NYSE: CLR), Noble (NYSE: NE), Concho (NYSE: CXO), Diamond Offshore (NYSE: DO), Ensco (NYSE: ESV), Whiting Petroleum (NYSE: WLL), Nabors (NYSE: NBR), Pride International (NYSE: PDE), Helmerich & Payne (NYSE: HP), QEP Resources (NYSE: QEP), Enerplus (NYSE: ERF), Rowan (NYSE: RDC), Cobalt (NYSE: CIE), Patterson UTI (Nasdaq: PTEN), SandRidge (NYSE: SD), Schlumberger (NYSE: SLB), Halliburton (NYSE: HAL), National Oilwell Varco (NYSE: NOV), Baker Hughes (NYSE: BHI), Weatherford International (NYSE: WFT), Cameron (NYSE: CAM), FMC Tech (NYSE: FTI), Oil States International (NYSE: OIS), Superior Energy (NYSE: SPN), Carbo Ceramics (NYSE: CRR), Helix Energy (NYSE: HLX), Pioneer (NYSE: PXD), CNOOC (NYSE: CEO), China Petroleum and Chemical (NYSE: SNP), Ecopetrol (NYSE: EC), Canadian Natural Resources (NYSE: CNQ), Apache (NYSE: APA), Anadarko (NYSE: APC), Devon (NYSE: DVN), EOG (NYSE: EOG), Chesapeake (NYSE: CHK).