S&P 500 Sinks on Earnings as Oil Price Flops, US Dollar Jumps
The most recent analysis of the Current Financial Situation by the Federal Reserve Bank of Dallas looks at the Interaction between the Federal Reserve’s Targeted Asset for the Stabilization of Prices and the S&P 500. The S&P 500’s earnings are based on oil prices and more specifically, the price of West Texas Intermediate crude oil (WTI).
When oil prices soar, the S&P 500 stock index suffers because of its reliance on the price of WTI. The market value of all S&P 500 companies is affected when oil prices rise dramatically, as in the current situation.
The index takes the breakeven point for the index to be determined by analysis of oil prices. If it occurs at a level that is below the value determined by the index then the Dow will fall, with little effect on the index’s own bottom line. If, however, the index breakeven point is above the values determined by the index, then the index will benefit from the increase in oil prices.
According to this analysis, the lower the index’s breakeven point happens to be, the more drastic the effects will be on the index. The upward pressure on the Dow is going to be more significant in the case where the index price is more than two standard deviations above the weighted average price of the index.
If the index price is higher than the weighted average price of the index, then the upward pressure on the Dow is going to be more negative. On the other hand, if the index price is less than two standard deviations above the weighted average price of the index, then the downward pressure on the Dow will be more substantial.
Again, since the lower the index’s breakeven point happens to be, the more severe the affects will be on the index. The Dow will be more affected if the index price is above the weighted average price of the index.
The next analysis shows that the lower the Breakeven Point is, the more severe the effects on the index will be. As stated above, the index price is going to be more affected if the index price is above the weighted average price of the index.
The lower the breakeven point is for the index, the more pronounced the effects will be on the index. The Dow will drop if the index price is less than two standard deviations above the weighted average price of the index.
Thus, the index will continue to decline when the index price is below the average for the weighted average price of the index. As soon as the index price happens to be below the average index price, the downward pressure on the Dow will be more acute, which will result in an increase in the downward pressure on the Dow, which will provide additional support to the index.
The lower the price of oil for the index is, the more pronounced the effects are going to be on the index. As soon as the index price happens to be below the average index price, the downward pressure on the Dow will be more acute, which will result in an increase in the downward pressure on the Dow, which will provide additional support to the index.
It is important to remember that the market value of all stocks is determined by the market value of the index. Therefore, if the index price is above the weighted average price of the index, the value of the market value of all stocks will increase as the market value of the index increases.
The lower the index’s breakeven point happens to be, the more severe the affects will be on the index. the market value of all stocks will increase as the market value of the index increases.