The energy sector, the seventh-largest sector weight in the S&P 500, has been the worst-performing sector in the U.S. this year, but that could be set to change as some of the group’s biggest names give investors reasons to cheer with improving profits.
The Energy Select Sector SPDR (NYSEArca: XLE), the largest exchange traded fund dedicated to energy stocks, rose slightly last week following upbeat first-quarter profit reports from Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX). Dow components Exxon and Chevron are the two largest U.S. oil companies and are major components in XLE and rival ETFs such as the Fidelity MSCI Energy Index ETF (NYSEArca: FENY) and the Vanguard Energy ETF (NYSEArca: VDE).
The challenge for energy equities is that some oil market observers see more declines coming for crude. Oil traders are concerned over how fast U.S. shale oil producers will increase production to capture the rising prices.
“Already, analysts are forecasting profit blowouts even larger than those registered when Exxon and Chevron disclosed first-quarter results on Friday. Exxon is seen lifting per-share earnings by 132 percent while Chevron is expected to post its biggest second-quarter profit in three years,” reports Joe Carroll for Bloomberg.