Thursday wasn't a good day for the stock market, although there were some pockets of strength in an otherwise gloomy session. The Dow Jones Industrial Average (^DJI 0.29%) and S&P 500 (^GSPC 0.97%) were significantly lower, with the Dow losing more than 360 points. However, the Nasdaq Composite was able to buck the downtrend and move higher by about half a percent.

Today's stock market


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Data source: Yahoo! Finance.

The big disparity in the stock market has come from different performances from key sectors. Technology and communication services were able to gain ground on the day, lifted by strong showings among the biggest players in the business. However, the rest of the market fared much worse. Energy stocks led the way lower, with the Energy Select Sector SPDR (XLE -0.20%) plunging 5%.

There's a lot of oil in the market

Energy stocks tend to trade in line with the price of crude oil, and that was a source of pessimism today. West Texas Intermediate crude fell more than 3% to drop below the $40 per barrel level. Brent crude was down about $1 per barrel to close just over $42.

One source of trouble for the commodities market has been the above-average level of inventories of energy products. U.S. crude inventory levels kept rising last week, adding almost 5.7 million barrels of oil to already plentiful supplies. With an overall inventory of 968 million barrels, the total inventory available is well above what oil market investors have seen in recent years. That's preventing oil prices from moving substantially above the $40 mark, even with OPEC having taken steps to reduce production.

The weakness is also showing up in prices of refined products. Gasoline futures were down about 1%, as U.S. refiners have been able to import cheaper crude from Mexico as a result of a major fire at a Mexican refining facility.

Oil refinery with multiple stacks as seen from across a harbor with smooth water.

Image source: Getty Images.

Energy companies are feeling the pinch

All those factors add up to big negatives for major energy stocks. Among Dow components, ExxonMobil (XOM -0.22%) and Chevron (CVX -0.77%) were each down 4%. Smaller exploration and production companies saw even bigger losses, with QEP Resources (QEP) losing 11% and Hess (HES -1.00%) posting a 9% decline.

Refiners didn't do much better. Phillips 66 (PSX 1.10%) was a big loser, falling 8%, but Valero Energy (VLO 0.59%) and Marathon Petroleum (MPC 1.24%) suffered declines of 5% and 2%, respectively.

The big threat seems to be coming from fears that the global economy might not actually be past the worst of the coronavirus crisis. Although much of the world has seen dramatic declines in infection rates, hotspots like the U.S., Brazil, and India serve as reminders that the battle against COVID-19 is far from over. If further shutdowns become necessary, then it could send energy markets back into the same kind of downward spiral that caused so much disruption in April and May.

Investors had sent the entire stock market higher based on the hope that things would return to normal. For energy stocks, however, things haven't been normal for quite a while. It's increasingly looking as though they won't be so in the near future either.