Energy stocks led a second day of selling on Wall Street on Monday, with the sector heading for its worst two-day performance in nearly 2½ years.
The S&P 500 energy sector fell more than 2.5 percent, led lower by American independent driller Hess, natural gas fracker Chesapeake Energy and oil giant Exxon Mobil. Over the two-day stock market sell-off, the sector is down 6.4 percent, its worst performance since August 24, 2015.
Crude oil prices also fell as investors dumped risk assets, with international benchmark Brent crude and U.S. West Texas Intermediate crude both losing about $2 a barrel, or roughly 3 percent, since the end of Thursday’s session.
Oil prices have come under pressure from a rising U.S. dollar as the correlation between the greenback and crude futures reasserts itself. There are also fresh signs that U.S. output is offsetting OPEC’s deal to limit production, with American supplies topping 10 million barrels a day in November for the first time since 1970.
Hess was one of the two biggest losers, down about 5 percent on the day, after reporting a bigger-than-expected quarterly loss. The company’s guidance on 2018 production was about 9 percent below the Street’s expectations, according to Capital One Securities.
“Want to get more positive on HES given world-class Guyana asset …, but can’t point to much that warrants upgrade from Underweight,” Capital One analyst Phillips Johnston said in a research note on Monday.
Hess vied for the biggest decline with Chesapeake Energy, which is down about 19 percent over the last week since announcing it would lay off about 13 percent of its workforce.
The earnings report from Hess continued a string of weak earnings from U.S.-headquartered oil and gas companies.
Exxon, which on Friday badly missed expectations for profits due in part to weakness in its U.S. exploration and production segment, was the third biggest laggard. Shares were down more than 9 percent over the last two sessions.
Integrated oil peer Chevron, which also disappointed on earnings on Friday, fell about 8 percent on Friday and Monday.
“Earnings were significantly weaker than expected,” said Rob Thummel, portfolio manager at Tortoise Capital Advisors, referring to Exxon and Chevron. “That’s what’s really driven the S&P energy stocks off more significantly.”
Shares of energy stocks have lagged the rebound in crude oil futures since June. During that period, oil prices have risen nearly 50 percent, while the S&P energy sector has run-up almost 9 percent.
While Thummel believes that’s an opportunity, he says it’s been disappointing for investors already exposed to energy stocks.
“I think it’s just a clear indicator that people don’t believe the oil price,” said Thummel. “They think it’s too high. They think it’s coming down.”
