The price of crude has taken a drastic plunge amid worries about slowing demand for fuel and the prospect of further tightening by the Federal Reserve leading to recession. But at the same time, shares of energy companies have continued to climb.
Oil prices and energy stocks are closely interlinked — so this discrepancy is an odd one and could mean that lower gas prices may not be here to stay.
What’s happening: The price of West Texas Intermediate crude oil, the US benchmark, which is a large driver of gas prices, has fallen to its lowest level of the year this week — under $72 a barrel. It was trading above $120 a barrel in the summer.
In the third quarter, 81% of all energy companies in the S&P 500 reported earnings above estimates, the highest of any sector, according to Factset data. The energy sector reported the highest year-over-year earnings growth of all 11 sectors, at 137.3%.
Exxon and Chevron are also speculating that crude prices will remain elevated and that demand will grow.
What’s next: In the end, the divergence may be temporary: In four of the five major splits between oil and energy stock prices since 1990, oil returned to a rally in the year that followed, according to Bespoke Investment Group.
Mortgage rates fall for the fourth week in a row
The 30-year fixed-rate mortgage averaged 6.33% in the week ending December 8, down from 6.49% the week before, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.10%.
Mortgage rates have risen throughout most of 2022, spurred by the Federal Reserve’s unprecedented campaign of hiking interest rates to tame soaring inflation. But mortgage rates have tumbled in the last couple of weeks, following reports suggesting inflation may have finally reached its peak.
The rate drops come amid concerns over lackluster economic growth, said Sam Khater, Freddie Mac’s chief economist.
“Over the last four weeks, mortgage rates have declined three quarters of a point, the largest decline since 2008,” said Khater. “While the decline in rates has been large, homebuyer sentiment remains low with no major positive reaction in purchase demand to these lower rates.”
FTX’s Sam Bankman-Fried agrees to testify
Sam Bankman-Fried appears to have changed his mind about testifying before Congress.
“You must answer for the failure of both entities that was caused, at least in part, by the clear misuse of client funds and wiped out billions of dollars owed to over a million creditors,” the senators wrote.
Brown and Toomey said in their letter that the committee would “consider further action if he does not comply.”
“Once I have finished learning and reviewing what happened, I would feel like it was my duty to appear before the committee and explain,” Bankman-Fried wrote. “I’m not sure that will happen by the 13th.”
But in another tweet early on Friday, Bankman-Fried said he was willing to testify on December 13. “I still do not have access to much of my data — professional or personal. So there is a limit to what I will be able to say, and I won’t be as helpful as I’d like,” he added.