Energy stocks see lackluster start to 2023

Yahoo Finance Live’s Ines Ferre breaks down the energy sector's returns so far in 2023.

Video Transcript

[AUDIO LOGO]

JULIE HYMAN: Are energy stocks missing out on the rally we've seen thus far this year? Markets continuing their climb-- or they have been, despite still strong inflation and Fed hawkishness. But energy is a notable sector that has been underperforming broader indices, despite record profits and a strong 2022. Yahoo Feh-- Our Ines Ferré has been digging into why. So what's going on here, Ines?

INES FERRÉ: Yeah, Julie, we've seen year-to-date a little bit of the opposite of what we saw last year. So energy last year was really the outperformer. XLE up 53% for 2022, while technology, consumer discretionary, those high-growth names were really getting beaten up.

If you look at our YFi Interactive board right now, this is a daily chart of our sectors. But I'm gonna pull up a year-to-date chart so you can see. Consumer discretionary, communication, technology, those are the big gainers for the years-- or for year-to-date. And XLE is up 0.6% year-to-date.

Now, that's compared to the S&P 500 that's up about 8% year-to-date, the NASDAQ up about 15% year-to-date. So just to give you a little bit of context on this. Even though the sector has underperformed the broader markets, on an individual name basis, you have some of these stocks that have recently hit 52-week highs.

So the energy stocks are coming from a really high level. You've got ExxonMobil up 4% year-to-date. And this stock had hit its 52-week high earlier in February. But why the muted action compared to the high-growth names? Well, oil has been rangebound. You've got WTI that's been between the low 70s and about 80. Brent Crude has been between-- in the high 70s and about $88 a barrel.

And the China re-opening, that has not been up and to the right yet. It is something that's not linear. But it is very bullish for energy stocks and for energy as a whole. It's expected that almost half of the oil demand growth this year is going to come from China.

Now, we've also seen a recent build in US crude inventories. That's also put pressure on oil prices. But look, the forecast for this year, make no mistake, is that oil is going to be more expensive coming into the summer months and really coming into that big China re-opening.

BRAD SMITH: So Ines, what are analysts expecting for energy stocks then for the rest, the remainder of 2023?

INES FERRÉ: Yeah, look, I spoke to one strategist, John Navellier, he's a friend of Yahoo Finance. He's been on the show before. He said, look, I overwhelmingly support energy stocks and prefer energy stocks compared to technology stocks. He said that's simply because energy is forecasting better revenue and earnings for 2023.

And he also said, look, technology is struggling. Even though we have seen a large rise when it comes to semis-- Semis are doing well. He does like the cloud space, as well. But if he's got to choose between energy and tech, which you've seen tech really outperforming so far year-to-date, he says he'd stick with energy.

JULIE HYMAN: Interesting. He's not the only one either. Thanks so much, Ines. Appreciate it.