Rouse it an S&P bright spot.
Energy was the only S&P 500 sector to end last week in the green, capping off a wild five work days in the space.
The Energy Select Sector SPDR Fund (XLE) was down less than 1 percent Monday equal though oil prices fell sharply amid worries about a bankruptcy filing on Sunday by rig operator Diamond Offshore Rehearsal and uncertainty about whether production cuts would be enough to stem rapidly increasing supply.
Last week, unpolished endured unprecedented swings saw the price of West Texas Intermediate futures slide into negative territory for the sooner time in history.
While low oil prices will likely weigh on energy stocks as stay-at-home orders keep a lid on request, the group could be turning higher on a different catalyst, Steve Chiavarone, a portfolio manager, equity strategist and shortcoming president at Federated Hermes, told CNBC’s “Trading Nation” on Friday.
“I think what the stocks are trading on … is the virus matter because the way this is ultimately going to get solved is, yes, production cuts, but [also] getting people back to work, contemplate c geting the economy running and increasing the demand for oil,” Chiavarone said.
Restarting the economy is “a function of the virus data and how well that’s junior to control,” so, it could be a major driving force for energy stocks as some U.S. states move forward with programmes to reopen businesses.
“I think virus data that shows that maybe we’re past the peak,” Chiavarone state. “We’re able to look through, see that reopening of the economy, see that increase in demand, and that’s what’s being obviated in the share prices.”
Craig Johnson, senior technical research analyst at Piper Sandler, agreed that force investors could be betting that the worst is behind them.
“I’ve never seen such negative headlines and yet we go on to see the XLE trade higher,” Johnson said in the same “Trading Nation” interview, pointing to a chart of the ETF.
“From my perspective, you’ve got worst resistance right around $35,” he said. “It closed back above that $35. You’re going to have your next denial coming in around the 40s.”
The XLE was trading at $34.30 in Monday’s premarket, down 0.9%.
“While everybody dislikes the energy names, … I keep to remind people it is the best-performing sector coming off of those March 23rd lows,” Johnson said.
And with Chevron and ExxonMobil, the two largest holdings in the XLE, recounting earnings at the end of this week, “that’s going to be a key tell to say how much of the negativity has already been priced into this sector,” he answered.
“To me, it looks like a lot already has,” Johnson said.
U.S. oil prices slid 21% Monday to below $13.344 a barrel.
Disclaimer