Oil and natural gas are sliding again to multi-year lows, and once again it is having an influence on stocks. What’s important is to understand the outsized influence this near-daily drop in oil (six months and running!) is having on corporate earnings.
Even though the energy sector is only roughly 8 percent of the market capitalization of the S&P 500, the decline in earnings in that sector has been so dramatic that it is affecting earnings estimate for the entire S&P 500.
On December 1st, analyst anticipated that Energy earnings for Q1 2015 would decline 13.8 percent compared to Q1 2014, according to S&P Capital IQ. As of Monday, analysts expect Energy earnings for Q1 2015 to decline 41.0 percent.