What’s Happening In the Energy and Technology Sector of the Global 2022 Energy Market: The Best-Performing Stock Year So Far
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What’s happening: It’s been a shaky year full of economic uncertainty, geopolitical chaos, elevated inflation and a hawkish Fed. The only thing that has driven stocks in the market up this year has been the energy sector, which has risen 60% year to date.
But even when the overall market is losing, there are still winners – and there were quite a few of them this year – mostly in energy, which has been the best-performing sector of 2022.
Gas and oil prices have been falling in recent weeks, but they’re still higher than they have been over the past few years. That’s contributed to record-breaking profits at major energy companies. The net income of global oil and gas producers is expected to double in 2022 to a record $4 trillion, according to the International Energy Agency.
81% of energy companies in the S&P 500 reported earnings above estimates in the third quarter, which is the highest percentage of any sector. The energy sector reported the highest year-over-year earnings growth of all 11 sectors, at 137.3%.
Big tech had a nightmare year in 2022– collectively losing nearly $4 trillion in market value in 2022. If you take the 10 worst-performing S&P 500 stocks into account, they have wiped out a market value of about $1.6 trillion.
Generac Holdings, an energy technology solution company, is the worst performing stock in the S&P 500 this year, down about 74%. Coming in second is dating app company Match Group, down 70%.
Why it Matters: A Multiparty Legal Battle over the Robinhood Shares of FTX and the Southwest Airlines Scheduling System During the August 20th Flight Outage
With more interest rate hikes on their way, investors may be left waiting, even though Wall Street hopes for a Tech rebound next year.
Why it matters? Bankman-Fried’s stake in Robinhood is now at the center of a separate, multinational legal battle over the assets associated with FTX’s bankrupt crypto empire.
Four separate entities have laid claim to the approximately 56 million shares, worth about $450 million. SBF really wants to hold on to those shares himself– he’s leaning on them as a source of payment for legal expenses, according to FTX.
The $546 million used to purchase the stake was not clear on whether the funds were stolen from customer deposits in FTX.
The recent winter has been bad for the company. The company cut 9% of it’s employees in April before laying off 23% of its staff in August. The stock of the online broker is down over 50% this year.
The commander of the Southwest Airlines pilots told CNN this week that they had been having problems for 20 months. “We’ve seen these sorts of meltdowns occur on a much more regular basis and it really just has to do with outdated processes and outdated IT.”
On Wednesday, the company’s stock fell as much as 5% after a drop of nearly 9% on Tuesday. The airliner is currently down about 27% this year as investors fear the worst for the fate of the company that just can’t seem to get it together.
Southwest’s scheduling system hasn’t changed a lot since the 1990s. Andrew Watterson, COO, told employees this week that the scheduling system was the main cause of the outage.
Southwest had a model called the point-to-point. The operational approach involves airplanes flying consecutive routes, picking up crews at certain locations and using a short turn around time.
“When they have cancellations in one area, it really ripples through, because they don’t necessarily have their crews and their pilots in the right positions,” said Jeff Windau, senior equity analyst of equity research for Edward Jones. “They just kind of build on from city to city to city, and when that gets disrupted, it’s very difficult to get the operations flowing smoothly again.”
Source: https://www.cnn.com/2022/12/29/investing/premarket-stocks-trading/index.html
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Democratic senators from Massachusetts and Connecticut have written to Southwest demanding that they cover holiday cancellation costs.
“Southwest is planning to issue a $428 million dividend next year – the company can afford to do right by the consumers it has harmed,” they wrote. Southwest should focus on the stranded passengers at the airports.
They are doing their best to pick up the slack. United and American Airlines
(AAL) said they would place price caps on travel to and from select cities designed to help the melted-down airline’s customers get home without breaking the bank.
It is recommended to kill your darlings when you are afflicted with the tendency to deliver copy above your requested word count.
But what’s been most surprising is that market-cap titans, traditionally expected to weather storms on Wall Street well, haven’t held up against the rising macroeconomic tides.
Big, established companies that offer long-term growth potential got crushed. Just look at Apple. Even the Oracle himself, Warren Buffett, thought it was a good idea to purchase more Apple shares in early 2022, but the stock is now down 29% for the year (Buffet’s Berkshire Hathaway
(BRKA) is doing fine, though, up over 3% this year). The blue chip has fallen a lot.
Tech companies have long been seen as invincible, essentially money-printing machines by investors. That hasn’t been the case this year as both Microsoft andAlphabet stock have nosedived. Facebook parent company Meta, which is down 64% in 2015, experienced the largest drop in market value over a single day of trading in February. The company lost money.
Moderna (MRNA) was one of the top performing stocks of the year thanks in part to its covid vaccine and is now one of the worst, down 25% this year.
Walmart is in the red this year, down 2%.
Surprising to the upside: There have been some companies that have been able to keep chugging along in 2022. Consumer staples posted their best relative performance to the S&P 500 since 2008 this year. Coca-Cola
(KO) shares, up nearly 8%, trounced markets this year. Mondelez is up 1.5%.
In a year when the entire tech sector is struggling, IBM has grown, and so has the company. The company is “trading well above its historical range,” wrote Bernstein Research analysts in a recent note. But “given its defensive characteristics and historical performance, we believe that IBM
(IBM) is likely to fare well if we continue to have pressured markets, and likely to lag major indices if we enter a recovery period,” they said.
Bank of America CEO Brian Moynihan said last month that the continued strength of the US consumer was one of the reasons why the economy was not in a recession. The National Retail Federation estimates that 20% of retail sales are due to consumer spending in the last two months of the year.
American bank accounts are quite strong, but they are beginning to decline. Credit card balances increased year over year in the third quarter. Since 2004 the New York Fed has kept track of the data.
“Against this backdrop, we expect consumers will rein in their spending further in coming months,” said Gregory Daco and Lydia Boussour, economists at EY Parthenon. “Real consumer spending should see modest growth in the final quarter of the year, but we expect it will barely grow in 2023.”
With interest rates likely to go up in the future and economic uncertainty growing, consumers could run out of money at a bad time, according to my colleague.
The Great New Year: The Best of the Best. The S&P 500 had Five Companies That Have More Than One Stocks, and the Most Valued the Most
2022 has been a wild ride, and I’m so grateful that you joined me for it. I’m hoping that before the bell helped balance the economy, which is often bad and good.
So as you count down to the New Year, please take a moment to congratulate yourself – you survived this year. You should take a break from your portfolio, no matter what state it is in.
The Nasdaq Composite Index was down 0.1% Friday, close to its lowest level since July 2020. The tech heavy index is down by over twenty percent this year.
Russia’s invasion of Ukraine, snarled supply chains and another year of Covid turned markets on their head this year. Inflation surged around the globe and central banks hiked rates at a historic pace to keep price hikes from spiraling out of control. In order to contain the swine flue, China sometimes shuts down entire cities. Despite the cut off in energy supplies, recession fears cause demand to fall in the second half of the year. Intense storms and climate change upended markets, too.
And while stocks had a miserable year, bonds fared even worse. Bonds are unattractive to investors because of inflation, rate hikes and a strong dollar.
Inflation, which briefly rose above 9% in the United States — a 40-year high — hurt economic growth, even as consumers continued to spend. It mostly hurt corporate profits.
S&P 500 companies’ earnings are expected to have grown just 5.1% this year, well below the average annual increase of 8.5% that Wall Street posted over the past 10 years, according to John Butters, senior earnings analyst at FactSet.
Energy, which boomed as oil and gas prices surged earlier this year, made up the entirety of Wall Street’s profit gains. The S&P 500 earnings would have fallen if it weren’t for energy.
Growth stocks, or shares of companies that are expanding their business quickly, got hammered particularly hard. Investors value these firms based on expectations for future profits. Those look less enticing in a world in which interest rates are going up.
At the start of the year, the S&P 500 had five companies that were worth more than the average company. In terms of value, Meta is 19th place and now the 11th most-valuable firm.
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