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This has not been a good year for the stock market. The S&P 500 is down nearly 20% and with two trading days left in the year, investor hopes of a miraculous recovery have been dashed.
But even when the broader market is losing, there are still winners, and there were quite a few of them this year, primarily in energy, which has been the best-performing sector of 2022.
These are the big winners and losers of the year.
Winners: The story of 2022 has been energy.
Brutally high oil and gas prices were the talk of the town this year and one of the biggest contributing factors to skyrocketing inflation. That’s bad news for drivers, but it ended up being great for the energy industry, since oil prices and energy stocks are so closely intertwined.
The energy sector has so far gained more than 60% this year, significantly outperforming all other sectors in the S&P 500. No other sector has gained even 5% year to date.
Occidental Petroleum has been the biggest gainer of the year in the S&P 500, up 122% year to date.
Constellation Energy (CEGDX) is in second place, up 109%, and Hess (HES) is in third place, up 94%. Rounding out the top ten are Marathon Petroleum (MPC), Exxon (XOM), Schlumberger (SLB), APA (APA), First Solar (FSLR), Halliburton (HAL) and Marathon Oil (MRO), all between 70 and 80% east. year.
Oil and gas prices have been falling in recent weeks, but are still higher than in recent years. That has contributed to record profits at major energy companies. The net income of global oil and gas producers is expected to double by 2022 to a record $4 trillion, according to the International Energy Agency.
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 the 11 sectors, at 137.3%.
The losers: This was the year that there were no more free lunches in Silicon Valley.
Big Tech has rocketed to new heights over the last decade as companies enjoyed a low interest rate and low inflation environment. That is no longer the case, the prices of technology and communications shares clearly reflect this.
Energy technology solutions company Generac Holdings (GNRC) is the worst-performing stock in the S&P 500 so far this year, down about 74%. In second place is dating app company Match Group (MTCH), which is down 70%. Elon Musk’s Tesla (TSLA) is also down 70%, making the auto-tech company the third-worst performer this year. Meta, Facebook’s parent company, also appears among the ten lowest stocks, down 65%.
That’s quite a shakeup, earlier this year Tesla was the fifth most valuable company in the S&P 500 and Meta was sixth.
Big tech had a nightmare year in 2022: It collectively lost nearly $4 trillion in market value in 2022. That’s a lot when you consider that the 10 worst-performing stocks in the S&P 500 have wiped out a market value of around $1.6 trillion.
Even Apple, generally considered more resilient than other tech companies, is down 31%, more than the overall market in 2022.
Wall Street expects a tech rebound next year, but with more interest rate hikes on the way and a possible recession, investors may be left waiting.
Sam Bankman-Fried bought a nearly 7.6% stake in Robinhood (HOOD) earlier this year, financed with $500 million borrowed from his hedge fund. The same person who, according to prosecutors, was illegally channeling client funds from his affiliated platform, FTX.
In an affidavit that emerged Tuesday, Bankman-Fried said he and FTX co-founder Gary Wang borrowed more than $546 million from the Alameda Research hedge fund. He then used the money to buy a large stake in Robinhood, my colleague Allison Morrow reports.
Why it matters: Bankman-Fried’s stake in Robinhood is now at the center of a separate multinational legal battle over assets associated with the bankrupt FTX crypto empire.
Four separate entities have claimed the approximately 56 million shares, worth approximately $450 million. SBF really wants to keep those shares for itself; it is relying on them as a source of payment for legal expenses, according to FTX.
It is not clear from court documents whether the $546 million used to buy the stake included funds that prosecutors say were stolen from client deposits at FTX.
Meanwhile, the recent crypto winter has been bad news for Robinhood. The company laid off 23% of its staff in August after cutting 9% of its employees in April. Shares of the online brokerage are down nearly 60% year-to-date.
Southwest (LUV) is in the midst of a service collapse, canceling thousands of flights during the busiest days of the year and leaving a trail of angry investors, government officials, employees and tens of thousands of customers stranded in its wake.
Shares of the company fell about 5% on Wednesday after a 6% drop on Tuesday, their biggest drop in five months. Commercial airliner is currently down around 27% this year as investors fear the worst for the company’s fate that can’t seem to be fixed.
So what happened? Experts, employees, and even the CEO all admit that the Southwest disaster has been decades in the making, my colleague Alicia Wallace reports.
“We’ve had these issues for the last 20 months,” Capt. Casey Murray, president of the Southwest Airlines Pilots Association, told CNN this week. “We’ve seen these kinds of crashes happen on a much more regular basis and it really just has to do with outdated processes and outdated IT.”
Murray noted that Southwest’s old scheduling system hasn’t changed much since the 1990s. Chief Operating Officer Andrew Watterson told employees this week that the outdated scheduling system was the main culprit behind the outage.
Southwest’s peer-to-peer model didn’t help either. The operational approach involves aircraft flying consecutive routes, picking up crews at those locations and relying on short response times.
“When they have cancellations in an area, it really spreads, because they don’t necessarily have their crews and pilots in the right positions,” said Jeff Windau, a senior equity research analyst at Edward Jones. “They just develop from city to city, and when that is interrupted, it is very difficult for operations to flow smoothly again.”
Southwest acknowledged many of the concerns raised by Murray and others.
“Part of what we suffer from is a lack of tools,” Southwest CEO Bob Jordan told employees in a memo obtained by CNN. “We have talked a lot about modernizing the operation and the need to do it.”
Whats Next: The Transportation Department said it is investigating Southwest’s spate of cancellations and customer service delays. President Joe Biden said his administration “is working to ensure airlines are held accountable.”
Democratic Sens. Ed Markey of Massachusetts and Richard Blumenthal of Connecticut issued a new letter Tuesday asking Southwest to pay for what they say were avoidable vacation cancellations.
“Southwest plans to issue a $428 million dividend next year – the company can afford to do right by the consumers it has wronged,” they wrote. “Southwest should first focus on its customers stranded at airports and stuck in endless waits.”
Meanwhile, other airlines are doing their best to pick up the slack. United and American Airlines (AAL) said they would place price caps on travel to and from select cities designed to help customers of the airline in crisis return home without breaking the bank.
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