Here's why oil is such a problem for corporate earnings

CNBC ^ | 12 January 2015 | Bob Pisani

[Lorianne]

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. Think about that: in 5 weeks, earnings expectations for the entire Energy group have gone from down 13.8 percent to down 41.0 percent.

That is the biggest drop in earnings for any sector since the bank stocks collapsed in Q4 2008.

[EagleUSA]

The idea of reduced taxation just drives the liberals nuts...yes, it might even force them to practice some fiscal restraint....heaven forbid!!!

[FatherofFive]

US oil companies buy pipe, made in America by Americans. The steel is shipped on trucks driven by Americans. The fields are tended by Americans, who eat in restaurants employing Americans. The oil companies pay royalties to Americans who own the land.

But Americans will take their savings and send it to China.

[spodefly]

Didn’t oil prices fall dramatically right before the big crash in ‘08?

[GeronL]

lower energy costs is good for the economy, maybe not certain stocks I guess

[Lurkina.n.Learnin]

Right after they spiked up dramatically.

[batterycommander]

Airlines will make dough from the cheap fuel.

[Leroy S. Mort]

Didn’t oil prices fall dramatically right before the big crash in ‘08?

Crude Oil Price History Chart

[ClearCase_guy]

When the price of an important commodity drops significantly, some folks lose money, and others gain money.
When the price of an important commodity rises significantly, some folks lose money, and others gain money.

I think they call that economics.

[E. Pluribus Unum]

There will be a lot of upside-down mortgages in North Dakota soon.

[bicyclerepair]

If gas is cheaper, won’t people buy more.

If people buy more gas won’t they be paying MORE tax?

[E. Pluribus Unum]

Fracking has changed the supply-side of the supply-and-demand curve drastically. With 90-million people out of the labor force, demand ain’t gonna catch up anytime soon.

[doosee]

Last August, a Houston area high school opened their $58 million football stadium. hmmmmmmmmmmm