Strong Retail Sales Send Dow Up 1%; Can ExxonMobil and Chevron Power Stocks Higher?

The Dow Jones Industrials (DJINDICES: ^DJI  ) finished Monday on a positive note, regaining their highs of the day and closing up 146 points, or nearly 1%. The Dow moved higher initially after positive reports of retail-sales growth in the U.S. economy, and just when it appeared that the average might give up all of its gains in the final hour of trading, the Dow bounced back and jumped more than 100 points in 45 minutes to finish near its highs of the day. Contributing to the gains were ExxonMobil (NYSE: XOM  ) and Chevron (NYSE: CVX  ) , both of which rose more than 1% in showing the continued importance of oil and gas exploration and production to the economy as a whole.

Looking at the fundamentals
At their most basic level, ExxonMobil and Chevron profit when oil and natural gas prices rise. Today, oil futures markets cooperated, with May crude rising $0.31 per barrel to climb above the $104 level and contracts further in the future rising by even larger amounts. Natural gas, on the other hand, edged down $0.06 to $4.56, as winter weather finally starts to wind down and give way to what has traditionally been a weaker season for the clean-burning fuel.

But the energy revolution in the U.S. has had ripple effects around the world, and Chevron and ExxonMobil have found themselves at the center of the resulting boom. Obviously, neither of the two massive oil giants can have their needles move nearly as easily as a small exploration and production company like Goodrich Petroleum, whose shares soared 30% Monday after announcing a solid hit on its bet in the Tuscaloosa Marine Shale play in the Mississippi Delta region. But given just how widespread discoveries like that have been, both in the U.S. and around the world, it takes a company the size of Exxon or Chevron to take full advantage of the scope of the energy boom going on worldwide.

Source: Chevron.

Skeptics point out that it will be next to impossible for ExxonMobil or Chevron to sustain significant production growth over the long run. In order to overcome the natural decline of existing wells, the two companies would have to make massive acquisitions at what would likely be increasingly expensive prices. In many ways, shareholders might be better off if Chevron and ExxonMobil admit the upper limit of their size and work on maximizing the value of their depreciating assets. That won't stop the two companies from working on potential growth initiatives like Chevron's solar projects, but it does mean that investors don't fear them as much as they would other, less steward-like companies.

With the broader stock market on somewhat shaky ground, though, ExxonMobil and Chevron have the virtue of stability and consistent income, with shareholder capital returned through healthy dividends and huge buybacks. For those who fear corporate management teams that could fritter away billions in free cash flow, both Chevron and ExxonMobil have the discipline to act prudently. That's more than enough for many frightened investors right now, and if the energy boom continues, it could also lead to further gains for the two energy giants and their share prices.

3 stock picks to ride America's energy bonanza
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2914986, ~/Articles/ArticleHandler.aspx, 9/4/2015 12:53:24 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

Today's Market

updated Moments ago Sponsored by:
DOW 16,091.82 -282.94 -1.73%
S&P 500 1,918.26 -32.87 -1.68%
NASD 4,681.87 -51.63 -1.09%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/4/2015 12:38 PM
^DJI $16091.82 Down -282.94 -1.73%
CVX $76.93 Down -1.33 -1.70%
Chevron CAPS Rating: ****
XOM $72.52 Down -1.27 -1.72%
ExxonMobil Corp CAPS Rating: ****