Energy Stocks Avoid Market Sell-Off

It's another wild day on Wall Street, with the Dow Jones Industrial Average (DJINDICES: ^DJI  ) falling 0.6% and the Nasdaq Composite down 1% in late trading.

Once again, the sell-off seemed to come from nowhere and fly in the face of positive economic data. The Thomson Reuters/University of Michigan index of consumer sentiment rose to an initial April reading of 82.6, the highest level since July. Strong consumer sentiment doesn't guarantee economic growth, but with consumers accounting for 70% of GDP it's a good place to start.  

Consumers haven't been willing to pay more at the pump recently, which is pinching Chevron's margins. Source: Chevron.

Big Oil outshines the market
With markets down big, it's notable that the two bellwether energy stocks on the Dow are holding up well. ExxonMobil (NYSE: XOM  ) was down just 0.1% while Chevron (NYSE: CVX  )  was the Dow's second-best stock of the day, climbing 0.6%.

Ironically, this comes a day after Chevron said first-quarter earnings will be lower sequentially and output will be down from a year ago. Refining margins on the West Coast are also expected to be down, although the Gulf Coast should be improved.  

Costs are rising for developing oil, pinching margins because prices haven't kept pace. But those lower expectations were already baked into the stock and investors weren't shocked to learn that income will fall.

Massive rigs like this now play a major roll in Big Oil's production. Source: ExxonMobil.

Over at ExxonMobil, shareholders are scheduled to vote on one environmental resolution at a May 28 meeting. Environmentalists and other activists had hoped to get two other proposals regarding greenhouse gas restrictions and hydraulic fracturing on the ballot, but a those proposals were pulled in a March 20 deal with the groups. Instead, ExxonMobil recently released an assessment of risk associated with oil fields and other assets from carbon limits and climate change and will also disclose risks of fracking.  

You might wonder why two companies facing challenges from the macro environment, as well as activists, could be holding their value; you have to take a broader look at the market to understand why. Energy is about as stable an investment as can be found right now, and as investors flee from high P/E tech stocks these are seen as safer investments.

That doesn't change the long-term challenges for Big Oil, but it explains why they're holding up well today.

3 stock picks to ride America's energy bonanza
Chevron's profit is down and ExxonMobil is facing climate change pressure but that doesn't change the fact that 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 (1)

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: 2912576, ~/Articles/ArticleHandler.aspx, 9/4/2015 7:11:05 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...

Travis Hoium

Travis Hoium has been writing for since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things.

Today's Market

updated Moments ago Sponsored by:
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASD 4,683.92 -49.58 -1.05%

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 4:30 PM
^DJI $16102.38 Down -272.38 -1.66%
CVX $76.67 Down -1.59 -2.03%
Chevron CAPS Rating: ****
XOM $72.46 Down -1.33 -1.80%
ExxonMobil Corp CAPS Rating: ****