Market Extra: Energy stocks getting ready to take the lead again after crude’s August bounce, says strategist

Posted By: EN Todayon: September 04, 2023In: General Energy News

While energy stocks will likely struggle to match last year’s blowout performance, a recent crude bounce may be setting the wheels in motion for the sector to regain a leadership spot, say some strategists.

“WTI (West Texas Intermediate) put in consecutive closes above $83, including a weekly close, for the first time since last November,” said Jonathan Krinsky, chief market technician at BTIG, in a note to clients on Monday. Those back-to-back closes left the commodity at $85.50 a barrel on Friday, its highest level of 2023.

Oil prices
CL.1,
-0.01%
rose for a third straight month in August, thanks to tighter supplies that outweighed worries over weak China and overall energy demand. A so-called golden cross pattern also has some technicians optimistic about a move higher for the commodity.

Krinsky said oil, whose move was impressive in face of a stronger dollar, now looks headed to $90-$93 a barrel. And “energy equities are resuming their relative leadership,” he added, offering the following chart:

With a year-to-date percentage gain of 2.8%, the S&P 500 energy sector
XX:SP500.1010,
which includes heavyweights such as Chevron
CVX,
+1.99%
and Exxon Mobil
XOM,
+2.10%,
is about the sixth-best performing sector, though well behind the 44% return seen for information technology. Down 11.8%, utilities are the worst performers, according to Yardeni Research, which provided the following chart to clients:

One downside to crude’s climb is the pressure it will put on consumers, noted Krinsky. Sports retailer Big Five Sporting Goods
BGFV,
-3.40%,
restaurant chain Cracker Barrel
CBRL,
-1.40%,
Applebee’s owner Dine Brands
DIN,
+0.07%
and theme park group SeaWorld Entertainment
SEAS,
+1.50%
are all part of his “vulnerable consumer charts group.” Here’s a look at two of those stocks:

BTIG/Bloomberg

Charts of Big Five and Cracker Barrel pointing to possible downside ahead.

Two retail stocks headed in the other direction are athleisure wear maker Lululemon Athletica
LULU,
+6.01%
and discount chain Ross Stores
ROST,
+0.19%,
said Krinsky, offering the below charts: