Market Insights

Energy stocks have led the market this year, and now they’ve pulled back.

The S&P Select Energy SPDR fund (XLE) jumped to $98.97 last Friday — the highest level in almost a decade. It pulled back this week and touched $93.73 before bouncing. That was just $0.04 above its peak last September. If prices continue to hold and bounce, it could mean that “old resistance” has become “new support.” That’s a potentially bullish pattern that could reflect an uptrend.

XLE holds U.S. energy names like Exxon Mobil (XOM), Chevron (CVX) and ConocoPhillips (COP). Its members drill for oil and gas, refine it and operate pipelines. The fund has climbed 13 percent this year, more than twice the 5.9 percent gain of the broader S&P 500.

The energy sector has benefited from tight inventories, strong economic growth and potential geopolitical risk. Investors often view it as a hedge against inflation, which hasn’t slowed as much as expected. Just yesterday, Federal Reserve Chairman Jerome said “recent data have clearly not given us greater confidence” that prices are cooling.

Here are some other potential points for energy:

• China’s showing signs of recovery after a period of weakness. Its gross domestic product expanded 5.3 percent in the first quarter, half a percentage point higher than forecast.
• The International Monetary Fund boosted its 2024 global economic growth forecast from 2.9 percent to 3.2 percent.
• Morgan Stanley upgraded the sector to overweight on March 25.

Standardized Performances for ETF mentioned above

Exchange Traded Funds (“ETFs”) are subject to management fees and other expenses. Before making investment decisions, investors should carefully read information found in the prospectus or summary prospectus, if available, including investment objectives, risks, charges, and expenses. Click here to find the prospectus.

Performance data shown reflects past performance and is no guarantee of future performance. The information provided is not meant to predict or project the performance of a specific investment or investment strategy and current performance may be lower or higher than the performance data shown. Accordingly, this information should not be relied upon when making an investment decision.