Energy Sector Plummeting on Sinking Oil

The energy sector has experienced more of a “bust” than a “boom” thus far in 2015. To give some perspective, the S&P Energy Sector was down a solid 1.16% in afternoon trading Monday, much worse than industrials which were down 0.79%, and financials (likely weaker on the heightened prospect of Greece exiting the Eurozone), down 0.76%.

Today’s pressure on the sector can be attributed to oil hitting a five-month low, down $4.43 per barrel or 7.73%, and settling around $52.50 per barrel. This is due, in part, to Greece’s referendum vote, which was an overwhelming “no” against further austerity. In fact, Monday was the worst daily performance since an 8.7% plunge on February 4, and the second-biggest drop of the year.

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The energy sector really took a beating during the second quarter of 2015.

“The anticipated 63% drop in sector EPS [2Q] year-over-year is the antithesis of American Pharoah, as it trails everything else by a ridiculous margin,” said S&P Capital IQ equity analyst Stewart Glickman. He notes that crude oil prices are the main culprit impacting the sector.

Meanwhile, Glickman believes oil services should remain weak as they continue to offer pricing concessions to keep upstream customers from heading for the exits. “All in all, a weak quarter expected for Energy, with few places to hide,” he said.

In addition, the energy sector profoundly impacted the S&P 500‘s EPS. As of July 2, Capital IQ reported that aggregate 2Q 2015 S&P 500 operating EPS estimates were seen falling 4.3% year-over-year, which would be the first drop since 3Q 2009, with most of the blame on energy stocks. However, when excluding energy, 2Q S&P 500 EPS would be up 3.8%.

Select energy stocks that are really under pressure this year include: Chesapeake Energy (NYSE:CHK), down a whopping 45% year-to-date, Consol Energy (NYSE:CNX), down 35.5% and Diamond Offshore Drilling (NYSE:DO) down 30.7%.

U.S. stock indices were also feeling the pinch today as the S&P 500 was down 0.4% at around 2,069, the Dow down nearly 0.3% to 17667, and the Nasdaq down over 0.3% to around 4992.