Stock

In One Chart: Historical past says the inventory market must be in ache from rising oil costs

According to historical data, rising oil prices are likely to weaken the stock market or at least put pressure on energy-sensitive sectors. So far this has not been the case.

With data from 1986, the S&P 500 index
SPX,
-0.17%
Three-month forward yields feel subpar as oil climbs to the ninth decile, Kevin Dempter, an analyst at Renaissance Macro Research, said in a release Wednesday. The oil rally that conquered the US benchmark
CL00,
-0.67%
this week for the first time since 2014 over $ 80 a barrel, prices has lifted above the threshold.

But, as illustrated in the graph below, sector performance is inconsistent with history.

Macro Research of the Renaissance

A look at historical sector performance shows that with oil prices in the current decile, healthcare, utilities and energy perform best, while discretionary consumer staples, technology and communications services perform worst.

"Today's sector performance does not match the historical performance of the oil impact model, which suggests that rising oil prices are not having as much impact now as they have been in the past," wrote Dempter.

It makes sense that the cyclical sector has performed worst in the past due to rising oil prices, he said, as rising costs take away the marginal dollar from the consumer. However, current trends in discretionary stocks are generally still bullish, he noted.

Related: Gasoline prices at a 7-year high could weaken vacation spending: GasBuddy

However, there has been some deterioration in apparel-related stocks, Demper said, as the relative performance of the two equally weighted sub-sectors S&P 1500 Apparel Retail and Apparel, Accessories & Luxury Goods fell below their 200-day averages and traded at or near levels that would mark a negative trend change.

Stocks have been under modest pressure this week, with major indices largely lower on Wednesday when earnings season unofficially began. The Dow Jones Industrial Average
DJIA,
-0.49%
lost just under 180 points, or 0.5%, while the S&P 500 fell 0.3%. The Nasdaq Association
COMP,
+ 0.36%
jacked up the softer tone and rose 0.2%.

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