the S&P 500 Index (SNPINDEX: ^ SPX) It closed relatively flat on July 21, an increase of 5.5 points, or 0.17%. However, although the index was not very volatile, oil stocks rose higher. Nine of the top 10, and 17 of the top 20 winners in today’s index were oil and gas reserves, including Occidental Petroleum (NYSE: OXY) and Devon Energy (NYSE: DVN), both up to more than 10%.
Today’s oil stocks surge came as oil prices rose following the news that the European Union reached a massive $ 2.1 trillion stimulus deal to help its member countries deal with the deep recession of the coronavirus that caused the drop in world oil demand and prices.
In other notable news, Tesla (NASDAQ: TSLA) It is slated to report second quarter results tomorrow, July 22, on what could be an enormously important day. If the company reports a profit, that would mark a fourth consecutive quarter of positive earnings, making the company eligible to join the ranks of the S&P 500.
Image source: Getty Images.
Big deal for the EU that raises prospects for the embattled oil market
While many tech and consumer goods stocks have rebounded in recent months, the oil and gas industry remains stuck in a swamp of oversupply. Global producers have dramatically reduced production, but excess crude in storage continues to affect the industry’s ability to increase production without again affecting prices. Today’s EU stimulus news helps provide some relief, as demand is likely to rise and economic output to rise, which should hopefully help perpetuate the continued recovery in oil demand.
At least that’s what investors are betting. Crude prices rose more than 2%, lifting almost all S&P 500 oil stocks today. In addition to small independent producers, oil giants. ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) It gained 5% and 7%, respectively, today.
Here’s the caveat: Crude prices are still below $ 45 a barrel, and many independent oil producers continue to struggle with low prices and weak demand. Without a sustained increase in oil demand and the discipline of producers not to flood the market again and affect prices, the oil industry remains full of risks. Well capitalized and diversified integrated specializations such as ExxonMobil, Chevron and Phillips 66 (NYSE: PSX) It should have little trouble surviving the recession, but investors should not expect a rapid recovery in pre-fall prices.
Will Tesla make a profit and join the S&P?
Tesla, with a market capitalization of more than $ 290 billion at recent prices, would be the 13th largest company in the S&P 500 if it were a member. But since the company has yet to deliver four consecutive quarters of positive net income, it has not qualified as eligible for the index.
That could change on July 22, when the company reports earnings. Does matters? In short, it could be another catalyst to move the company’s already stratospheric stock price even higher, as index funds following the S&P 500 index have to buy stocks.
Three of the five largest funds in the US are S&P 500 Index Funds: Vanguard S&P 500 Index Fund (NASDAQMUTFUND: VFIA.X) and Vanguard S&P 500 ETF (NYSEMKT: VOO) (managed as a single fund), with more than $ 533 billion in assets, the SPDR S&P 500 ETF Trust (NYSEMKT: SPY), with more than $ 290 billion in assets, and the Fidelity 500 Index Fund (NASDAQMUTFUND: FXAI.X), with more than $ 229 billion in assets. Add the eighth largest ETF, the iShares Core S&P 500 ETF (NYSEMKT: IVV) and its more than $ 200 billion in assets, and funds managing more than $ 1.2 trillion in assets would have to make room for a new share among the top 15.
It all revolves around whether Tesla can make a profit or not; Shares fell 4.5% today as analysts lined up to lower their prior expectations before earnings. Tune in tomorrow to find out what happens next.
Notable news: Coca-Cola says the worst is over, Microsoft’s earnings are coming
Investors were already expecting an ugly second-quarter report from Coca Cola (NYSE: KO), and the beverage giant met that expectation. Revenue fell 28% and profit fell 32%, but demand has steadily improved with each passing month; Global volumes fell 25% in April, but in June they were only down 10%, and through early July volumes only decreased in the mid-single digits. Investors had a smile at Coca-Cola earnings today; Shares gained 2.3%.
Looking towards tomorrow Microsoft Corp (NASDAQ: MSFT) is slated to report its fourth-quarter tax earnings on July 22 after the market closes.
