Please ensure Javascript is enabled for purposes of website accessibility

The Stock Market Plunge Didn't Just Take Out Tech Stocks

By Dan Caplinger – Sep 8, 2020 at 4:20PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Find out what part of the market fell nearly as much.

The latest in volatile moves for the stock market continued on Tuesday, carrying over through the holiday weekend to extend losses. Declines ranged from between 2% to 3% for the Dow Jones Industrial Average (^DJI -1.71%) and the S&P 500 (^GSPC -1.51%) to a more than 4% plunge for the Nasdaq Composite. Investors seemed generally nervous with the pace of the market's rise in recent weeks, especially within the technology sector.

Today's stock market

Index

Percentage Change

Point Change

Dow

(2.25%)

(632)

S&P 500

(2.78%)

(95)

Nasdaq Composite

(4.11%)

(465)

Data source: Yahoo! Finance.

Yet even though tech stocks did get punished on Tuesday, they weren't the only group to suffer big declines. Also falling were energy companies. With the Energy Select Sector SPDR (XLE -0.80%) falling almost 4%, there was a lot happening in the oil market to keep investors on their toes.

Breaking the rules

Part of the surprise for investors Tuesday was that in general, different parts of the market have moved in different directions lately. When tech falls, other industries tend to rise. When tech bounces, those same industries often give back some of their past gains.

Yet the energy sector had its own worries to deal with on Tuesday. Over the weekend, Saudi Arabia announced that it would cut prices for shipments to refineries in the U.S. and Asia. The move signaled the oil producing nation's intent to get back some of its lost market share.

Sky near sunset with silhouetted oil wells in foreground.

Image source: Getty Images.

The impact on energy markets was severe. Crude oil fell almost $3 per barrel to drop below the $37 mark. October gasoline futures were down more than $0.07 per gallon to $1.10.

Stocks get hit hard

As you'd expect, energy stocks felt the pain. Majors like Chevron (CVX -0.76%) and Royal Dutch Shell (RDS.A) were down almost 4%.

For smaller exploration and production companies, the news was much worse. Apache (APA -2.17%) was down almost 11%, and Diamondback Energy (FANG -0.37%) and Continental Resources (CLR 0.34%) were off nearly 10%. A host of other companies saw similar declines.

Transocean (RIG -0.40%) was one of the biggest losers, dropping 24% and staying just barely above the $1 per share mark. The offshore drilling specialist is particularly sensitive to falling oil prices, as extra costs of working offshore make the economics even more difficult during tough times.

At its core, the problem that the energy markets are having is that supply and demand remain out of balance. Even though many businesses in the U.S. and elsewhere have restarted operations, the appetite for energy products simply hasn't recovered to pre-crisis levels. Meanwhile, cash-hungry producers don't want to cut their activity even if it's necessary to boost prices to sustainable levels.

Unfortunately for energy investors, that dynamic doesn't look likely to change anytime soon. Until it does, more bad news could be in the offing for oil stocks  and the investors who own them.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc
RDS.A
Transocean Ltd. Stock Quote
Transocean Ltd.
RIG
$2.47 (-0.40%) $0.01
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$28,725.51 (-1.71%) $-500.10
Apache Corporation Stock Quote
Apache Corporation
APA
$34.19 (-2.17%) $0.76
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,585.62 (-1.51%) $-54.85
Chevron Corporation Stock Quote
Chevron Corporation
CVX
$143.67 (-0.76%) $-1.10
Continental Resources, Inc. Stock Quote
Continental Resources, Inc.
CLR
$66.81 (0.34%) $0.23
Diamondback Energy, Inc. Stock Quote
Diamondback Energy, Inc.
FANG
$120.46 (-0.37%) $0.45
The Select Sector SPDR Trust - The Energy Select Sector SPDR Fund Stock Quote
The Select Sector SPDR Trust - The Energy Select Sector SPDR Fund
XLE
$72.02 (-0.80%) $0.58

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.