I always wondered how higher oil drove the markets higher. It seems counter intuitive to me that higher oil prices means rising markets, seems like people would have less money to spend elsewhere and increase production expenses on consumer goods...can anyone explain this phenominon?
Oil up doesn't always equate to markets up, but when it does, here is one of several simplified reasons as to why:
Oil up = Energy Sector Up (XLE; occurs for obvious reasons, as companies like XOM are making more $$$) = Financials Sector Up (XLF; occurs since financials heavily invest in the energy sector; hence, there is a cyclical relationship)
Thus if all other sectors remain relatively stable, the markets would be slightly higher from oil being higher. Again, this is a simplified "model," if you will, and there are other factors involved, but I hope this helps you understand the basic mechanism of oil's impact on the general market.
Yes, I will explain, you see oil companies make more money. Inflation is higher so stocks are higher. Forget about any negative consequence. You see the market goes up when the Euro/dollar goes up. When the Euro/dollar goes down it does not matter. It is all set up to get you to believe. I would say just follow the yellow brick road, but by now you can figure out for yourself that earnings and the ability of the market to predict future earnings is not what makes stocks go up and down. Crooks, thieves or (Bankers as they are sometimes called) and money supply makes markets go up and down.