Energy Stocks Slump Again on China Virus Fears

Pedestrians wearing masks walk in Shanghai, China, on Jan. 23. (Qilai Shen/Bloomberg News)

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Energy stocks have quickly reverted to being among 2020’s worst performers as fears increase that China’s deadly coronavirus will hit oil demand.

The S&P 500 energy index fell as much as 2.2% early Jan. 27, extending its drop for a sixth-straight session. The group is down more than 7.5% this month as West Texas Intermediate hovers just above $53 per barrel.

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“Energy has gone from buy the dip to don’t touch, at least in the near term,” Piper Sandler analysts led by Bill Herbert wrote in a note to clients. The sector’s underperformance comes as the group is already battling weak investor interest and attempting to undo last year’s underperformance.

Stock laggards Jan. 27 include HollyFrontier Corp., Concho Resources Inc., Schlumberger Ltd. and Halliburton Co., all down about 3% or more. Fourth-quarter earnings for the group continue, and some analysts are pondering whether or not 2020 guidance updates can bring some optimism.

“We expect 4Q E&P earnings to come with capital-efficient ‘20 guidance,” Morgan Stanley wrote in a note to clients. “While this offers a tailwind through earnings season, the macro backdrop remains challenging, supporting our preference for E&Ps with low costs & scale,” the bank added.

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