Wall St Week Ahead-Surging US energy shares reflect robust growth, inflation worries
shares are soaring as investors benefit from rising oil prices and a stronger-than-expected economy, while seeking to protect their portfolios from a feared resurgence of inflation.
The S&P 500 energy sector is up about 17% in 2024, roughly doubling the broader index's year-to-date return. Its gains have accelerated in recent weeks, making it the S&P 500's best performing sector in the past month.
One key driver is the price of oil: U.S. crude has risen 20% year-to-date due to an unexpectedly strong U.S. economy and worries over a broadening Middle East conflict.
Some investors also believe rising energy shares could hedge against U.S. inflation. Consumer price rises have proven more stubborn than expected this year, threatening to restrain the broader stock rally by undermining expectations for how much the Federal Reserve will cut rates in 2024.
«If inflation is going to pop up again… the hedge is to have some commodities exposure,» said Ayako Yoshioka, senior portfolio manager at Wealth Enhancement Group.
The portfolios she manages have been overweight in energy stocks, including those of oil majors Exxon Mobil and Chevron, as she noted more disciplined capital spending by energy companies.
Among the top energy sector performers so far this year were Marathon Petroleum, up 40%, and Valero Energy, up 33%.
The economy will be in focus in the coming week as first-quarter earnings season heats up, with reports from Netflix, Bank of America and Procter & Gamble. Monthly U.S. retail sales out on Monday will
