Energy stocks dive as oil drops
Energy stocks dived again Wednesday as oil dropped to its lowest price since last summer, extending their dismal start to the year. Gains for healthcare and technology stocks helped restrict losses for broader market indexes.
Crude dropped for a third straight day and touched its lowest price since August on expectations that supplies of oil will far outweigh demand. Even a report showing that U.S. inventories shrank last week did little to change the tide.
Benchmark U.S. crude lost 98 cents, or 2.3%, to settle at $42.53 a barrel. Brent crude, the international standard, fell $1.20, or 2.6%, to $44.82 a barrel.
The price of oil has now dropped more than 20% this year, breaking into what traders call a bear market. How much of an effect that will have on most 401(k) accounts will depend on how much it undercuts energy firms’ profits, and whether the pain will spill into other areas of the market.
Accelerating corporate profits and expectations that they’ll continue have been a big reason for the stock market’s rise this year, and energy companies were expected to provide some of the biggest gains.
Energy stocks in the Standard & Poor’s 500 index tumbled 1.6% on Wednesday, a day after falling 1.2%. They are down nearly 15% for the year; meanwhile, the overall S&P 500 is up 8.8%.
Losses for the broad S&P 500 were milder Wednesday because of strong gains by healthcare and tech stocks.
Red Hat, an open-source software company, jumped 9.6% to $98.58, one of the biggest gains in the index, after reporting better-than-expected earnings for its latest quarter. Its forecast for revenue and earnings this fiscal year also beat expectations.
La-Z-Boy soared 22.1% to $32 after reporting quarterly earnings that easily topped analysts’ expectations. Its customers have been shifting toward higher-priced and more profitable products for the company, such as leather items.
In overseas markets, the Shanghai composite rose 0.5% after index provider MSCI said it will include 222 of what are called Chinese A-shares in its Emerging Markets index. The move will probably cause big shifts of money into mainland Chinese stocks by mutual funds and other investors.
The 10-year Treasury yield held steady at 2.16%.
The euro rose to $1.1167 from $1.1128. The dollar fell to 111.34 yen from 111.41 yen.
Gold climbed $2.30 to $1,245.80 an ounce, silver fell 4 cents to $16.37 an ounce and copper rose 5 cents to $2.60 a pound.
Natural gas fell 1 cent to $2.89 per 1,000 cubic feet. Heating oil dropped 3 cents to $1.36 a gallon. Wholesale gasoline fell 1 cent to $1.41 a gallon.