Energy Sector Outperforms Technology on the Stock Market

This year, the energy sector is demonstrating the best yield performance in the stock market, outpacing technology. The SPDR Energy ETF (XLE) has risen by 29% since June 30 and by 55.4% since the beginning of the year, whereas the SPDR Technology ETF (XLK) has remained virtually unchanged since June 30. None of the 'Magnificent Seven' companies — Nvidia, Microsoft, Apple, Alphabet, Tesla, Meta, and Amazon — made it into the top 20 performers of the S&P 500 over the last 13 weeks. Meanwhile, Nvidia has become a $5.1 trillion company and alone represents 7.4% of the S&P 500 index.

The growth in energy has been driven by the continuous rise in oil prices amid increasing supply tensions, especially in the Middle East. Since December, the price of West Texas Crude oil has risen from approximately $57 to $99 per barrel. Analysts expect ExxonMobil (XOM) to report third-quarter revenue of $106 billion compared to $85.3 billion a year earlier, with earnings per share of $4.03 versus $1.88 a year ago. Similar forecasts are in place for Chevron (CVX): expected revenue is $61.7 billion compared to $49.7 billion a year earlier. Investors in energy services, such as Halliburton (HAL) and SLB, are counting on additional orders as the situation in the region normalizes.

The aggregate earnings per share growth of energy companies in the S&P 500 is projected at 127.6% year-over-year according to FactSet. Such a sharp improvement in performance has been unexpected for most investors. Among major sector ETFs, healthcare (XLV) has been second only to energy since June, showing a yield of 13.2%.