Energy Stocks Soar to Begin 2019
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What is the main topic discussed in this episode?
With your Money Briefing, I'm J.R. Whalen at The Wall Street Journal in New York. After a disastrous 2018, energy stocks are on the rise, big time, in 2019. We'll tell you how much higher they're likely to go in a moment.
What are the top money and market headlines to start this episode?
First, these money and market stories you should know. The number of Americans eligible for overtime pay at work could change under a new proposal sent to the White House by the Labor Department. Details of the proposal have not been made public yet, but Labor Secretary Alexander Acosta has told Congress he was in favor of lifting the annual salary threshold from the $23,660 level set in 2004. That threshold is the level below which a worker must be paid time and a half. The new threshold is expected to come in at about $32,000 a year. And young people who do low-cost child care work for American families, also known as being an au pair, will share in a proposed $65.5 million settlement of a lawsuit brought by a dozen former workers against the companies that bring the workers to the U.S.
They claim the companies colluded to keep their wages low, ignored overtime, and ignored state minimum wage laws. And then the lawsuit says in some cases families push the limits of their duties, requiring them to do things like gardening, forbidding all pairs from eating with the family, help families move, and feed backyard chickens.
So far, 2019 has been a good year on Wall Street, but one sector that's been particularly on fire is energy, up nearly 8.5% in the first six trading days of the year. Wall Street Journal reporter Jessica Menton is here to explain why and let us know whether the sector has more room to grow. So Jessica, the energy sector was beaten down so severely last year. In fact, it really didn't even take part in the market run-up in the first three quarters of 2018.
Exactly. And something that's a bit interesting about that is because there is typically this correlation between how oil prices are performing and thus how how energy equities will do. And they really didn't take part of that. But when you look towards the tail end of last year, once oil prices were in a bear market, you clearly saw the declines there.
How could a Labor Department overtime proposal change who gets paid time-and-a-half?
And that really, I think, was just the fact that when it comes to that space, the sentiment can shift quite quickly.
And everything did shift. In fact, energy is the best performing group of stocks so far in 2019. What has brought this sector back to life?
A lot of it is really driven to the fact that these stocks have been beaten down so much that their valuations look a bit more attractive right now to investors. And when you break down sort of what was happening in the subgroups of energy, service providers were really banged up last year just because of the bottlenecks in the Permian Basin. So that's something especially ahead of earnings season that a lot of investors are going to watch.
So it was the flow of energy from the Permian Basin that was affecting the pricing?
Yes, and it was going into their earnings expectations. But if you look further out beyond 2020, some of those issues are supposed to resolve themselves.
And in terms of earnings in 2019, investors should expect to see some strong numbers during earnings season.
When you look at the fourth quarter, based on our numbers we've been pulling from FactSet, earnings companies are projected to rise 73% when you're looking at earnings growth for those companies in the S&P 500. And when you look at the S&P overall, excluding that sector, the groups are supposed to rise a little over 8%. So that's quite a bit of a difference there.
Energy sector 73%. It shows you how beaten down that group was.
Yes. Another side to that is even going forward, when you think about the earnings projections that have been downgraded just because of the particular stimulus we're not going to have this year compared to last year. Overall, if you look at all the sectors, they are going to be lower in 2019.
And you spotlight some offshore drillers in your Wall Street Journal story, some of which are up significantly, but they still have a long way to go when you consider how beaten down they were so much last year.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:05–0:18
2
What are the top money and market headlines to start this episode?
0:18–2:26
3
How could a Labor Department overtime proposal change who gets paid time-and-a-half?
2:26–5:23
4
What was the au pair lawsuit and how will the proposed settlement affect workers?
5:23–5:56
Speakers
2 identifiedMore from WSJ Your Money Briefing
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