- After Friday's solid gains, energy stocks plunge at the start of the week, leading Wall Street[1] sell-off
- Sharp pullback in oil[2] and natural gas[3] prices weighs on the sector, but risk-averse sentiment exacerbates the decline
- Despite Monday's price action, energy stocks maintain a bullish outlook on solid earnings growth potential
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U.S. stocks plummeted on Monday in the afternoon trade, extending the previous week's sell-off amid widespread capitulation. The energy sector, however, led Wall Street's slide amid weakness in oil[5] and natural gas prices, with futures contracts for both commodities down 6 and 10% respectively at the time of this writing. Against this backdrop, Exxon Mobil (XOM) and Chevron (CVX) plunged nearly 7% in midday trading, their worst drop since June 2020.
Oil's pullback appears to be in response to concerns about the demand outlook amid ongoing lockdowns in China due to the COVID-19 current wave, although the risk-averse mood is clearly exacerbating the correction. At the same time, speculation that the European Union may temporarily delay the roll-out of the latest round of punitive measures against Russia, which calls for a ban on oil imports from that country, is also weighing on crude. While the bloc is likely to move forward on phased-in embargo sometime in the coming weeks, negotiations have hit a roadblock, with several member states seeking exclusions and more time to secure alternative energy sources to vote in favor of the sanctions package.
Related: Energy Stocks Look Attractive on Soaring Oil[6]
Focusing on energy stocks, Monday's move may also be related to some profit-taking, as the outlook for the sector has not changed overnight. Despite today's drop,
