Tech Soars, Energy Sinks So Far In 2020 Equity Sector Horse Race
James Picerno | Feb 05, 2020 07:38AM ET
US equity sector performance in 2020 is a study in contrasts. At the high end of year-to-date results: technology shares. Meanwhile, energy continues to suffer as the big loser, based on a set of ETF proxies.
Technology Select Sector SPDR (NYSE:XLK) has surged 8.1% year to date through Tuesday’s close (Feb. 4). After yesterday’s strong 2.6% rally, XLK ended the session at a new high for the fund.
Get The News You Want
Tech’s gain is even more impressive in relative terms: XLK’s 8.1% gain is far ahead of the US stock market’s 2.2% year-to-date rise, based on SPDR S&P 500 (NYSE:SPY).
Get The News You Want
As for red ink, nothing compares with the loss for energy, which is currently posting the worst sector performance in 2020: Energy Select Sector SPDR (NYSE:XLE) has tumbled 11.8% so far this year.
Energy shares are suffering from a combination of worries over softer global growth linked to the spread of the coronavirus and rising caution on the future for fossil fuels as investors increasingly focus on the blowback from global warming.
Get The News You Want
“It’s a real challenging environment for every energy company,” advises Doug Terreson, who analyzes the sector at Evercore ISI. “The real wild card is if the coronavirus is going to get much worse.”
Get The News You Want
For now, a demand shock is roiling the energy business, as Bloomberg reported earlier this week:
Get The News You Want
Chinese oil demand [for crude oil] has dropped by about 3 million barrels a day, or 20% of total consumption, as the coronavirus squeezes the economy, according to people with inside knowledge of the country’s energy industry.
Get The News You Want
The drop is probably the largest demand shock the oil market has suffered since the global financial crisis of 2008 to 2009, and the most sudden since the Sept. 11 attacks. It could force the hand of OPEC and its allies, which are considering an emergency meeting to cut production and staunch the decline in prices.
Get The News You Want
Get The News You Want
With the exception of energy, bullish momentum continues to dominate the sector ETFs listed above, based on two sets of moving averages. The first compares the 10-day moving average with its 100-day counterpart — a proxy for short-term trending behavior (red line in chart below). A second set of moving averages (50 and 200 days) represents an intermediate measure of the trend (blue line). Through yesterday’s close, all the ETFs (save XLE) are posting upside trending behavior.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.