After yet another volatile week of energy price fluctuations, it appears that crude oil is gearing up to play the role of stock-market cavalry. As sectors such as retailing and financial services struggle, the rebounding energy patch just might rescue investors.
GAP (GPS) last week reported that comparable sales for March 2016 were down 6%, compared to a 2% increase last year. GAP shares plunged a staggering 13.84% on Friday and have declined nearly 20% over the past five days, presaging more troubles ahead for a slowing retailing sector. The retailer also warned that it started April with excess levels of inventory.
Another major retailer, L Brands (LB) , which operates Victoria's Secret Lingerie, PINK and Victoria's Secret Beauty segments, fell 4.34% on Friday after the company announced that Victoria's Secret would slash 200 jobs and restructure.
Signs of distress among Gap, L Brands and other bellwether retailers have spooked investors about the retailing sector in general. Over the past five days, Macy's (M) has tumbled 7.61%, and the SPDR S&P Retail ETF (XRT) has fallen 5.14%. Retail is now home to some of the most vulnerable stocks on the market, as the American consumer starts to tighten the purse strings.
However, energy prices appear to be on an upward trajectory, helping lift investor spirits. Whether the momentum lasts will become clearer this week, as key earnings and economic reports are unveiled.
Oil prices rose about 7% last week, driven by signs of resilient economic growth, meaningful cuts in energy production, and a weakening dollar. Major energy stocks that have been beleaguered all year posted the following gains over the past five days: Devon Energy (DVN) (9.36%), Murphy Oil (MUR) (5.59%), ConocoPhillips (COP) (4.4%), and Chevron (CVX) (2.16%).