NEW YORK, March 9 (Reuters) - Holding shares of U.S. energy companies has long been a rough ride for even the most committed investors. On Monday, it became even more turbulent.
The S&P 500 energy sector tumbled 20.1% on Monday, as crude prices crashed after top producers Saudi Arabia and Russia began a price war.
The S&P energy sector - already battered by concerns over the economic fallout of the coronavirus outbreak - touched its lowest level since 2004. For 2020, the sector is now down more than 40% compared to a 15% drop for the overall S&P 500.
“The last two months have been a horror movie for energy investors,” Stewart Glickman, energy analyst at CFRA Research, said in a report.
Among the 27 stocks in the sector, shares of Apache Corp and Occidental Petroleum dropped over 50% each on Monday, and Marathon Oil and Diamondback Energy dropped more than 40% apiece.
Shares of Exxon Mobil and Chevron Corp, the lone energy sector components of the Dow Jones Industrial Average, ended down 12.2% and 15.4%, respectively, while the Dow fell 7.8%.
Monday’s plunge marked a severe setback for a sector that has long been an underperformer in the stock market.
The sector’s market value as a percentage of the S&P 500 had shrunk from about 16% in mid 2008, to 3.3% as of Friday, according to Refinitiv Datastream data.
“If it hadn’t been such a highly levered sector, then I think prices probably wouldn’t get hammered as much,” said Jack Ablin, chief investment officer at Cresset Capital in Chicago. “But the fact is that the business requires huge capital commitment, and as a result of that it really puts a lot of operating and financial leverage into those businesses.”
Energy’s weight in the S&P 500 makes it the 9th biggest of the 11 S&P 500 sectors, less than utilities. But energy’s severe declines on Monday could shrink the sector’s weight below that of real estate, which had a weight of 3.2%.
Reporting by Lewis Krauskopf; Editing by Ira Iosebashvili and Sonya Hepinstall