Energy Musings - February 9, 2026
Friday's soaring stock market led to an interesting observation about solar and energy stocks that we decided to explore. We show the difference between hype and fundamentals.
Friday’s Roaring Stock Market And Conflicting Signals
Dow crosses 50,000! For the first time, the Dow Jones Industrial Average broke above 50,000 in the early afternoon on Friday. CNBC anchors had been watching for the DJIA crossing the magical threshold, and they erupted into cheers. As stock markets often do when pushing share prices or indexes above magical levels, the price falls back. That happened immediately, but that didn’t dissuade the anchors from talking about what was propelling the market rise.
When the market closed Friday, the DJIA had risen 1,207 points, a 2.4% increase, to close at 50,115.67. The rise came despite technology stocks losing $1 trillion in market value over the past week. Investors are reassessing how much risk they are willing to take owning volatile assets after the market has whipsawed, pounding some sectors and assets.
Stock market technicians will tell you that the interest in the market is broadening, as the huge investment commitments technology companies are making will cause them to alter their balance sheets and diminish their free cash flows, which have contributed to huge profit margins and driven increased price/earnings ratios that investors were willing to pay to own the shares.
The stock market’s performance prompted the following comment from Tim Murray, who oversees capital markets strategy at T. Rowe Price. “The selloff in the names that carried markets higher may have paused, but we’re instead seeing a wave of aggressive buying of altogether different stocks.” He is acknowledging the broadening of stock ownership. However, he also offered the following warning, saying, “Now, they’re all chasing to buy cheaper companies, perhaps indiscriminately.”
During Friday’s CNBC celebratory discussion, the strength of energy stocks came up. Brian Sullivan, the CNBC anchor, pointed out that although energy had performed well, so had solar stocks. We were intrigued by the comment and wondered about short-termism. That is not surprising, given the need for CNBC anchors and reporters to hype the latest news and stock market action.
One way to follow the stock market is to visit the Fidelity website. Every day, they publish the following chart, which tracks the investment performance of the 11 sectors of the Standard & Poor’s 500 Stock Index for different time periods. The chart showed that energy rose 1.89% on Friday, when the S&P 500 rose 1.97%. The market was helped materially by the 4.10% increase in the Information Technology sector, which had been beaten up since November and was rebounding.
How to follow broad stock market trends.
Looking at other time periods, year-to-date energy rose the most among S&P 500 sectors, outperforming the overall market by 15 times. Examining more extended investment periods, energy doubled the S&P 500’s performance over 5 years, trailing only the Information Technology sector. However, over the last 10 years, energy was the third-worst-performing sector, achieving only 35% of the S&P 500’s performance. Information Technology was the driver of stock market performance over the 10 years, increasing 8 times as much as energy.
But what about Brian Sullivan’s observation about solar stocks? We pulled the long-term chart of the Invesco Solar ETF (TAN) from 2008 through February 6, 2026, which he specifically targeted. If you were good at market timing and purchased TAN at its low at the end of April 2025, you would have made 107% by last Friday. However, had you bought TAN at the end of August 2023, you would be just now profitable on that trade.
Solar stocks are doing well, but that is short-term performance.
As the chart shows, had you purchased TAN at the start of 2021 after the economic recovery from COVID, you would have lost 47%. Even worse, if you were an early believer in solar and jumped to buy TAN when it was first issued in May 2008, you would have lost 79%. Timing is everything.
The NYSE Arca Oil Index (XOI) has a more extended history, dating back to 1985. If you purchased it in May 2025, as of last Friday, you only made 34%, about a third of what you would have made buying TAN. However, if you purchased XOI in January 2021, you would have made 233%, whereas your hypothetical TAN trade would have lost 47%.
The history of oil stock performance is interesting.
A worse trade would have been to buy the solar hype in May 2008 rather than the XOI. Remember, oil had been in a boom environment for the prior few years, driven by China’s industrialization. The TAN trade would have lost 79%, while the XOI trade would have made 40%.
This analysis demonstrates that hindsight is always perfect. You never buy or sell at the wrong time. That is not reality in the stock market. Long-term performance is a function of many short-term factors. Understanding what you buy or own is a cardinal principle of investing. Over the very long term, owning solid companies that manage their operations and balance sheets appropriately is key to success, especially if they return capital to you every year.
On Friday, while the stock market was soaring, global oil prices fell by about $2 a barrel into the mid-$60s. Why would energy stocks rise if the price of the product they sell is going down? It is because the stock market always looks ahead and signals the direction of the industry and its companies.
Oil prices are bouncing around based on traders’ views of the impact of geopolitical tensions with Iran on global oil supplies. The conventional forecasts call for a continuing, and likely growing, oil supply surplus. The question is whether the surplus will materialize to the extent forecasters project, or whether events and prices will alter the view.
If there is military action against Iran over the regime’s killing of protesters in the country, will the government act to shut down the Strait of Hormuz, through which 20% of the world’s liquefied natural gas (LNG) and 25% of the world’s crude oil passes? It is also possible that the world loses access to the 3.6 million barrels per day of Iranian oil exports, too. Such actions would alter the narrative of the growing global oil surplus.
There are also questions about assumptions about global oil production, given forecasters’ lower oil price predictions, such as those of the Energy Information Administration (EIA). They are calling for $52 and $50 WTI prices for 2026 and 2027, respectively. Additionally, the EIA is expecting U.S. oil production to remain high. Those price estimates are about $10 a barrel below the cost estimates supplied by petroleum executives for the major U.S. shale oil basins in the survey conducted by the Dallas Federal Reserve Bank. Expecting oil companies to invest in unprofitable oil production is a mistake. The culture of profitability in the oil patch was altered permanently following the 2014-2015 industry recession.
As the world’s largest oil producer, the U.S. is highly sensitive to oil prices and activity. Unprofitable operations will be shut down quickly. The only reason they have not been sacrificed to date is that oil prices remain about breakeven for producers.
The current strong stock market performance of energy companies indicates that investors believe oil prices will be up, rather than down, in the future. A sharp near-term price drop may still occur, but that would be the hammer that batters U.S. and global producers, causing a quick retreat in oil supply and shrinking the projected surplus. Remember, too, that lower oil prices will stimulate demand, although the increase may not be massive.
Get ready. The oil industry is poised for action. Volatility will be the watchword.