Does energy have a 'silver-lining' as tech sector enters correction?

Shares of semiconductor company Micron Technology (MU) slide in pre-market trading, contributing to the ongoing sell-off in tech stocks that has now brought the S&P 500 technology sector into official correction territory. Investors were disappointed in Micron's fourth-quarter earnings reported yesterday after the close despite beating revenue estimates and narrowing losses in adjusted earnings per share.

While the technology sector faces challenges, Michael Arone, Chief Investment Strategist for State Street Global Advisors' U.S. SPDR Business, sees opportunities for investors in the energy sector amid rising oil prices, though it might not be beneficial to the consumer.

"I don't think [oil] is a market catalyst — on one hand, I think it's great for energy companies, energy service companies, and the like, which is why we like it from an investment standpoint," Arone tells Yahoo Finance, adding the caveat: "I think that really has a negative impact on consumer spending potentially on businesses... I do think that that poses a challenge going forward for the economy

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

BRAD SMITH: The Micron Technology, they are sinking in premarket trading. Investors were hoping for Micron's earnings to rescue the tech sector and other stocks from that September slump, but the chip-maker's weak financial results only added to the pressure here. The disappointing news came the day after the S&P 500 tech sector officially hit correction territory, falling 10% from recent highs, the sell-off fueled by the Fed's hawkish tone and fear of higher for longer interest rates.

Now joining us we've got Michael Arone, who is the State Street Global Advisors US chief investment strategist. First and foremost here, when you look kind of broad strokes around the equity landscape right now, is there anything that gets you, as Brian Sozzi would say, hot and sexy at this point in time?

MICHAEL ARONE: I don't know. Listening to you and Brian--

BRIAN SOZZI: Oh, you know it, Michael. Come on, you're feeling hot and sexy this morning. Come on.

MICHAEL ARONE: I'm always feeling hot and sexy, Brian. But listen, I think what's interesting here is that listening to both of you, I'm reluctant to pile on the negativity. I'm looking for some silver linings here. One of the areas that we do like is energy. So energy continues to be supply-constrained at a time when we're trying to make this transition from a fossil fuel-based economy to something else. The stocks are cheap.

They've demonstrated great capital discipline. They're returning both capital through dividends and buybacks to shareholders. And you know, it looks like OPEC and its partners want to keep supply constrained and prices high. As a result, we think energy shares are kind of interesting at this point of the cycle, and they've been reacting a little bit better of late from that-- from that standpoint.

BRIAN SOZZI: Yeah, I feel you, Michael. Look, we had yesterday Exxon shares close at a record high. That is catching a bit here in the premarket. But let's stay on oil here. We have oil prices climbing to near $100 a barrel. Doesn't that raise the risk of just wrecking this economy? I mean, we're slow growth here and really taking valuations down even further. I'm trying to understand how is oil at $100 a barrel a positive market catalyst into October?

MICHAEL ARONE: So, I don't think it is a positive market catalyst. So on the one hand, I think it's great for energy companies, energy services companies, and the like, which is why we like it from an investment standpoint. So Brad saying, hey Mike, are there any silver linings in the equity space, I think energy is of those.

But here's the thing, Brian, exactly as you're pointing out, I think that really has a negative impact on consumer spending potentially, on businesses in terms of business fixed investment, and I do think that that poses a challenge going forward for the economy. So it's interesting as an equal weighted consumer discretionary sector has hit three-month relative lows, energy is hitting highs. I think there's some symmetry there.

So what's good for energy stocks is probably not good for the consumer, and I would extend that to businesses. And you're seeing that reflected in some of the share prices of late. And I think that contributes to some of the concerns around the consumer. So that is one of the areas that I flagged. You guys were talking about it in terms of the consumer potential slowdown and spending is a risk to this market, is a risk to the economy going forward.