It’s pretty easy to find free-fall stocks these days, especially in sectors like technology and travel and leisure, but the energy giant Exxon Mobil (XOM) is correcting in an orderly manner.
Before examining your current base, let’s review your performance over the last few periods of time:
- Year to date: + 47.13%
- Three months: + 1.58%
- One month: + 2.50%
Yes, you read that right. Throughout all these time periods, Exxon Mobil has made a profit. This is despite a correction in the actions that began on 9 June. On July 14, it fell to a $ 83.14 structure low, a 21% drop from high to low.
Since then, Exxon Mobil has recovered along with the broader market, with a 4.2% advance in shares in July.
Is Exxon Mobil representative of the wider energy sector, or is it an atypical value? And the peak of the sector in mid-June marked the high point for the foreseeable future?
Exxon Mobil easily constitutes the largest share of the S&P 500 energy sector, with 23.31% of the sector’s weights. That, along with Chevron (CLC)which reaches 21.19% of the total weighting, clearly influences the performance of a sector-traded fund, such as the Energy Select Sector SPDR ETF (XLE).
This ETF only tracks the highly capitalized energy sector of S&P, so it is a good indicator for this corner of the market.
Exxon Mobil maintains the key mobile average
The broader sector, along with its two main components, has followed similar trajectories in recent weeks, although Exxon Mobil had a more superficial correction than Chevron and the sector as a whole. In fact, Exxon Mobil has managed to stay above its 200-day moving average, while Chevron and the XLE ETF fell below that key price line. Both are trading above their 200-day averages, with a bullish trade boost this week.
For much of this year, energy has been a rough diamond, while the wider market ran out of gas.
To date, energy remains the only sector showing an increase.
However, this image is slightly different in shorter periods of time. Last month, large-cap energy stocks fell 1.59%, while all but the materials are showing gains. Of course, in all cases, these gains are due to the rise of the entire market last week.
Returning to the question of whether energy has reached its peak (for now), there is a simple reason that explains much of recent performance: energy stocks fell along with crude oil prices. This not only reduces the profits of oil companies, but investors are worried that Federal Reserve interest rate hikes could lead to a recession. This would mean less energy expenditure, not only from consumers at the gas pump, but also from industrial users.
Economic recovery gives some juice to energy
Faster economic acceleration than expected after the Covid closures in 2020 boosted energy quotas, which performed lower than other industries and sectors over the previous decade.
Within the energy sector itself, Exxon Mobil stands out as a fully integrated explorer, producer and marketer. It continues to make significant new discoveries, such as those off the coast of Guyana, which the company announced in April.
According to Exxon Mobil, these discoveries increased the resource estimate on the Stabroek block to nearly 11 billion barrels.
The company reports second-quarter results on July 29, ahead of the opening bell. If you plan to hold a position in the stock, please note this date. It’s okay to keep profits, especially if your stocks are a well-established large capitalization, the business model is clear. However, even in a case like this, a surprise on the earnings report – even if the company is making a profit – can bring down the shares.
Analysts expect Exxon Mobil to earn $ 3.32 per share, which would be a gain of more than 200% over last year’s quarter. According to MarketBeat earnings data, the company lost estimates in the most recent quarter. This did not greatly affect stock performance, however, until the entire sector reversed.
Regardless of whether investors decide to reward or punish energy stocks as a whole, Exxon Mobil – and Chevron – will continue to put pressure on the entire sector based on their large size. Even if the current rally runs out (and can be), or if more economic constraints cause energy to be disadvantaged, these companies will not be on the downside. Eventually, as with the wider market, they will recover.