Monday, September 16, 2019

Is the Oil Shock Good for Stocks?

Oil futures on Monday marked the sharpest daily rise in more than a decade after a weekend attack on major crude facilities in Saudi Arabia threatened to create a supply crunch. West Texas Intermediate crude gained 14.7 percent, to $62.90 a barrel, representing the largest daily gain since September 22, 2008.

But that might be good news for stocks. History shows that past oil shocks haven’t always caused much harm to stocks. While one-day crude-oil price jumps of more than 10 percent are usually accompanied by market losses on the same day, they have been, on average, followed by better-than-usual performance six months out, according to Dow Jones Market Data.

The S&P 500 has, on average, risen 10.2 percent in the six months following one-day, crude-oil price spikes of 10 percent or more, nearly 4 percentage points higher than the 6.3 percent average growth of the S&P 500 during other periods. The Dow has risen 8.7 percent six months after a 10 percent crude surge, versus a typical 6.1 percent rise, while the Nasdaq has seen a 15.5 percent rise compared with a typical 8.2 percent rise.

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