The stock market has been going like gangbusters lately, but Tuesday morning brought most of the good times to a close, at least briefly. Technology stocks got a small bump to buck the overall trend, but investors generally seemed to need a rest after the furious pace of the market's advance over the past couple of months. As of just after 11 a.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was down 207 points to 27,366, and the S&P 500 (SNPINDEX:^SPX) had fallen 23 points to 3,209. However, the Nasdaq Composite (NASDAQINDEX:^COMP) picked up 9 points to 9,934.

Yesterday, energy stocks were the heroes of the market, climbing on hopes that a return to more normal conditions might finally spell relief for some of the hardest-hit oil exploration and production companies in the industry. However, today's news brought a more somber tone to the oil and gas market. As it turns out, Chesapeake Energy (OTC:CHKA.Q) -- which saw such huge gains on Monday -- might be running out of time, and that's led to a trading halt and new worries about a possible imminent bankruptcy filing.

Several oil wells in a shadowed field near sunrise or sunset.

Image source: Getty Images.

From hero to zero

It's rare to see such an about-face in the course of two days, but the troubles for Chesapeake Energy hardly come as a surprise. For years, Chesapeake was one of the best-respected energy companies in the industry, with exposure to valuable assets and using smart strategic vision to make lucrative plays in fast-growing areas for exploration. Having once focused more on natural gas, Chesapeake made a pivot toward crude oil production when it became clear that natural gas would likely stay stuck in its holding pattern indefinitely. Then oil prices sank, leaving the highly leveraged Chesapeake in danger and starting a clock for the company to see a crude-price recovery to help it restructure its debt. Instead oil prices have sunk further, and that sent Chesapeake's stock price below $0.20 per share before it executed its recent 1-for-200 reverse split.

Yet on Monday, investors seemed to see light at the end of the tunnel for Chesapeake. News that OPEC and Russia had agreed to extend production cuts through the end of July provided a floor under oil prices, preventing them from giving up some of the gains that crude had clawed back in recent weeks. Suddenly energy investors were hopeful that even the companies in the most precarious financial positions might be able to outlast the downturn and avoid bankruptcy.

Is bankruptcy finally coming for Chesapeake?

Yet on Tuesday morning, the New York Stock Exchange halted shares of Chesapeake after some preliminary trades signaled a huge decline coming. Reports surfaced that the Oklahoma City-based energy company is preparing for an imminent Chapter 11 bankruptcy filing, and shareholders now have to contemplate the very real possibility that they'll get wiped out in a bankruptcy reorganization.

The problem for Chesapeake investors is that creditors are first in line, and they want to make sure they get paid. The company has been warning for some time that bankruptcy is a possibility, having hired investment banking advisors to help it evaluate strategic alternatives and seek ways to save itself. Yet without a massive rise in oil prices -- even bigger than what we've seen so far -- Chesapeake had only limited time to keep its lenders at bay.

Unfortunately, the damage could go well beyond Chesapeake. Several oil stocks are in similar financial straits, and if Chesapeake does indeed file for bankruptcy protection, it could lead to distressed asset sales that could make it even tougher for other exploration and production companies to work their way out of their own situations.

Eventually, a recovering economy might make it possible for energy prices to return to their past levels. But in the process, a lot of companies could end up sharing Chesapeake's fate.