True or false – the S&P 500 dropped 33 points (1.64%) yesterday because of an underperforming energy sector. Answer: Totally false. Large capitalization energy names only took 5 points out of the S&P, or 15% of the decline. Technology was more the culprit, with 6 of those 33.7 down points. Health care (5 points) and Industrials/Financials (4 points each) are also to blame. The simple fact is that energy only has an 8.2% weighting in the S&P 500, less than 5 of the 10 industry groups in the index. So how about energy as the culprit of the small/mid cap declines? Nope – the energy weighting in the Russell 2000 (down 2.1% yesterday) is only 3.4% and similarly low for the S&P 600 Small Cap Index at 3.3%. Bottom line: recent market volatility isn’t about just energy stocks. Rather, it is more related to macro worries over interest rates and global growth and (to a lesser degree) about the damage lower commodity prices may inflict on the energy sector of the U.S. economy.
Today we started off strong and climbed the wall of worry until about 2pm. That’s when crude broke $60. The S&P proceeded to lose about 20 handles onto the close. The index still managed to close up 9 handles on the day though.
Biotech was having a great day, but came down a bit when the market got soft on the crude news.
I have adjusted some stops on the P&L so take a look. Tomorrow is Friday and its been a wild week.
Have a great night.
Joe