Wall Street Is Stubbornly Bullish on Downtrodden Energy Stocks
Why the Federal Reserve's Building Renovation Costs $2.5 Billion
Salt Lake City Turns Winter Olympic Bid Into Statewide Bond Boom
Milan Corruption Probe Casts Shadow Over Property Boom
How San Jose's Mayor Is Working to Build an AI Capital
Energy boasts the highest percentage of buy-rated equities among the 11 sectors in the S&P 500 Index: roughly three in four members have buy recommendations, compared with roughly half in the broader market, according to data compiled by Bloomberg. Plus, sell-side analysts see energy stocks rising about 16% over the next 12 months, second only to the health-care segment and roughly double the projected gain for the overall index.
Energy stocks — one of three index segments in the red this year — appear to have room to run. They're the cheapest S&P 500 sector based on price-to-earnings ratio, and Trump is a cheerleader for the industry, calling for companies to 'drill, baby, drill.'
'The thesis that some people have is that multiples and valuations are very, very low right now,' Leo Mariani, analyst at Roth Capital Partners, said in an interview.
Looking further into the future, the sector is expected to post the highest earnings growth in 2026, according to Bloomberg Intelligence.
Challenges ahead
Of course, it's understandable why investors may be skeptical about Wall Street's bullish take.
US crude prices have dropped about 7% this year, hurt by the fallout from Trump's trade war and a drive by OPEC+ to restore curbed supplies. Also, the sector doesn't have much momentum: Energy stocks have underperformed the market for four of the last five quarters.
BMO Capital Markets expects US energy producers' second-quarter earnings to fall 30% compared to the first three months of the year, and for cash flows to drop 15% in the same period because of weaker crude prices, according to analyst Phillip Jungwirth.
'Is there a catalyst to dramatically change that and reverse that over the next 12 months? I'm not sure there's anything that's super clear,' Roth Capital's Mariani said, adding that sentiment in the sector is weak among institutional investors. His price targets for the sector are generally lower than many on the Street.
Still, there are reasons to consider the stocks. For one thing, energy stocks have a history of protecting investors against accelerating inflation. They were the top-performing sector in 2022, when US consumer prices were surging. That role as a hedge may come into play again amid the risk that Trump's tariffs lift prices in the months ahead.
Then there's Trump's spending bill, which removed credits for renewables and gave oil and gas producers some benefits, even if that hasn't led to an immediate rally in energy stocks.
Wall Street analysts may be waiting on further moves from the White House, according to Michael Casper, senior equity strategist at Bloomberg Intelligence.
'Trump was touted as someone that would help US energy producers,' he said in an interview.
Elon Musk's Empire Is Creaking Under the Strain of Elon Musk
A Rebel Army Is Building a Rare-Earth Empire on China's Border
Thailand's Changing Cannabis Rules Leave Farmers in a Tough Spot
How Starbucks' CEO Plans to Tame the Rush-Hour Free-for-All
What the Tough Job Market for New College Grads Says About the Economy
©2025 Bloomberg L.P.
Inicia sesión para acceder a tu portafolio
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
3 minutes ago
- Yahoo
Jackson Hole, key retail earnings, and fresh economic data: Here's everything the stock market is watching this week
Markets are kicking off another news- and data-heavy week. Investors are watching for the July Fed minutes, fresh housing data, and a slew of retail earnings. The spotlight will be on Fed Chair Jerome Powell's comments at Jackson Hole on Friday. Get ready for another big week for the stock market. Investors are staring at a handful of catalysts on the radar this week, with a slew of fresh earnings reports and key signals from the Fed on the docket. All could be influential in determining the path ahead for Fed rate cuts — a bullish catalyst investors have been waiting for all year. Odds for a cut next month have edged down slightly since last week, but markets are still pricing in an 85% chance the Fed will cut rates by a quarter of a percentage point at the September meeting, according to the CME FedWatch Tool. Here's what investors will be reacting to this week. Fed minutes Investors will be paying close attention to the minutes from the Fed's July policy meeting on Wednesday. The meeting minutes will give markets more insight into the central bank's thoughts about inflation, the strength of the US economy, and its outlook for rate cuts going forward. It comes at a crucial time for the Fed, which is at a crossroads over the direction of monetary policy. Powell has continued to signal this year that the Fed is comfortable keeping rates steady, as officials wait to see the inflationary impact of tariffs. But inflation data has been mixed recently. Consumer prices rose in-line with economists' expectations last month, but wholesale inflation rose more than expected in the latest producer price index, a sign that more inflationary pressures could be building. Meanwhile, the job market has shown signs of cooling. The US added fewer jobs than expected in July, while job gains in May and June were revised downward by a combined 258,000. "Traders will be closely watching the minutes for more insight into the future rate-cut trajectory," Aaron Hill, an analyst at FP Markets, wrote in a note. "Still, the slowdown in the labour market data, as noted above, firmly swung the pendulum in favour of easing policy next month." "At the margin, the minutes of the July 29-30 FOMC meeting (Wed) could fill in some blanks about how dug in the doves were and how intransigent the inflation hawks might've been in late July," Ed Yardeni, the president of Yardeni Research, wrote over the weekend. Retail earnings Investors are also waiting on a slew of earnings reports from major retailers this week. Here are the companies on deck to report their second-quarter results: Tuesday Wednesday Thursday Friday Home Depot (HD) TJX Companies (TJX) Lowe's (LOW) Target (TGT) Walmart (WMT) BJ Wholesale Club (BJ) The coming reports will give investors a glimpse into how the US consumer is faring. Weak earnings are likely to fan concerns about economic growth and raise expectations for a Fed rate cut next month. Markets are looking at the coming earnings reports as "key signposts" this week, top economist David Rosenberg said. "In terms of the mood of the US consumer, it is none too good (and as we saw in Friday's retail sale report, there is a trend in place towards dining in over dining out which is a sure sign of consumer frugality," the Rosenberg Research founder wrote in a note. Jackson Hole All eyes will be on Fed Chair Jerome Powell on Friday. The central bank chief is set to speak at the Fed's annual Jackson Hole symposium, where he's expected to set the agenda for future rate cuts. Markets are also eager to see if the Fed Chair comments on the independence of the central bank. President Donald Trump has continued to pressure Powell to lower interest rates, and is narrowing his list of potential Fed candidates. The speech could "well be a market-mover" this week, Rosenberg added. "One hawkish surprise could come from any commentary about how the weakness in the labor market of late has come largely from the supply side, and the 'break-even' for job growth to keep the unemployment rate steady is far lower than it used to be," Rosenberg wrote. "We expect the Federal Reserve to use Jackson Hole as an opportunity to prepare the markets and signal towards a 25 basis point cut in September and a potentially accommodating stance through year-end. Since this will be Powell's last Jackson Hole conference as Fed Chair, he'll likely reinforce the need for Fed independence from the Executive Branch," Richard Saperstein, the chief investment office of Treasury Partners, wrote in a note. Stocks could see some selling pressure once Powell speaks on Friday, strategists at Bank of America wrote in a note last week. "Dovish Powell at Jackson Hole = buy rumor, sell fact profit-taking," a team led by Michael Hartnett said. Read the original article on Business Insider
Yahoo
3 minutes ago
- Yahoo
Bausch + Lomb board members resign after Icahn agreement ends
(Reuters) -Bausch + Lomb said on Monday Brett Icahn and Gary Hu have resigned from its board of directors after the termination of the agreement with billionaire Carl Icahn and some of his affiliates. The agreement, dated June 21, 2022, ended after the Icahn group's net long position in Bausch Health Companies, Bausch + Lomb's parent, fell below the required threshold. On Friday, Bausch Health said Paulson Capital, along with certain affiliates and managed funds, increased their position in the company and acquired about 34.7 million common shares previously held by the Icahn Group. In April, Carl Icahn had built an economic interest covering about 34% of Bausch Health's shares. Sign in to access your portfolio
Yahoo
3 minutes ago
- Yahoo
Vulcan Elements signs rare earths supply deal with ReElement Technologies
(Reuters) -Vulcan Elements, a North Carolina-based rare earth magnet manufacturer, has agreed to buy a supply of the critical minerals from ReElement Technologies that will be sourced outside of China. The companies, both of which are privately held, declined to give precise financial terms but said that the price is "significantly below" the floor of $110 per kilogram that the U.S. Department of Defense guaranteed to MP Materials last month for the two most popular rare earths. The contract was signed in mid-July, Vulcan said. Rare earth oxides are used to make metal that can then be turned into magnets for use in fighter jets, radar and other military applications, as well as consumer electronics. "This pricing will enable Vulcan to be competitive in global markets," Vulcan CEO John Maslin told Reuters. "We wanted to make sure the unit economics made sense." Indiana-based ReElement, which licenses its technology from Purdue University, will supply Vulcan with "thousands of metric tons" of rare earth oxides annually for five years beginning in 2026 from outdated electronics or from mine sites, said CEO Mark Jensen. ReElement says it can supply the rare earths to Vulcan below $110 per kilogram because of its use of a processing technique known as chromatography, which is different than the industry-standard solvent extraction used by many of its peers. "We are laser focused on cost," Jensen told Reuters. "We will see where the market goes, but right now we're focused more on the market price versus that price floor." Reuters was first to report last month that the Trump administration is considering extending that price floor to other firms, news that was relayed in a close-door Washington meeting attended by Vulcan, ReElement and others.
