Lower Oil prices is bad news for energy stocks but good for the rest

Ed Mertiri |

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The S&P 500 ended a three-week losing streak last week, advancing 6.5%, the second-best weekly return so far in 2022. Last week was one of just two weeks that saw a gain in Q2, with over two-thirds of weeks so far in 2022 ending in negative territory.

While oil prices declined the rest of the market reacted positively. S&P 500 Energy was the sole U.S. large-cap segment that finished the week in the red with a loss of 1.6%, while Consumer Discretionary and Health Care were neck-to-neck for the top spot with 8.2% gains each. Conservative lower priced stocks have been the outperformers for several weeks. Without the leadership from Energy stocks the baton has been passed to other defensive sectors. High priced growth stocks continue their underperformance and weighing on broad market performance.

Coming up this week, tomorrow’s release of the S&P Case-Shiller Home Price Index for April is expected to show continued but moderating house price gains across the U.S. While the index is essentially released on a 2 month delay and will not reflect the sharp increase in mortgage rates over the last 8 weeks, investors will look at overall trends. Also, of note this week is Thursday’s PCE release of May data – the Fed’s preferred inflation measure. This is another economic measure that has a delayed release and will likely reflect the more press popular CPI report that surprised with a peak inflation reading for May, released two weeks ago.

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