Equity Index Giant MSCI to give 10,000 Firms Global Warming Ratings

The firm, which runs the widely-tracked $60 trillion All Country World Index, is launching Implied Temperature Rise scores, which estimate whether a firm’s activities and plans are consistent with keeping global warming below 2 degrees Celsius.

“The idea is to get companies to change their strategies,” said MSCI’s head of ESG and Climate, Remy Briand, who estimates nearly 60% of firms still don’t disclose even the most basic environmental data.

MSCI’s new approach converts the current and projected greenhouse gas emissions, taking into consideration emissions reduction targets, of each company to an estimated rise in global temperature.

Projections are calculated by comparing those projected emissions with the global carbon budget that remains if the planet is to keep temperature rise this century below 2°C.

Briand laid out examples using two oil giants, Exxon Mobil and Royal Dutch Shell.

Exxon, which has been under heavy scrutiny  for its approach to climate change, produces a 4C rise score – a scenario that scientists warn would lead to unprecedented heatwaves, severe droughts, and a major rise in sea levels and mass flooding.

Shell produces an implied 2C rise, having set targets to cut the carbon intensity of its products by at least 6% by 2023, by 20% by 2030, by 45% by 2035 and by 100% by 2050.

“The message is to make the commitment more public,” Briand said.

His assumption is that because MSCI’s indexes and data are used by most of the world’s big investors, companies will need to have low implied temperature rise scores to encourage those money managers to park their cash in them.

There are currently no standardised rules around what the big global firms have to disclose about their emissions. Many also make misleading claims that they are on course to hit net zero targets, Briand said, by leaving out large chunks of their business when they make their own projections.

Briand said leaders going to the UN’s COP26 climate change conference in Scotland later this year should pledge to fix those kinds of problems.

“A wish would be to get net-zero commitments across the board for all companies,” he said. “If that happens, if it becomes compulsory across many countries, there will an acceleration in companies’ strategies”.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Marc Jones, Editing by Rosalba O’Brien)

U.S. Offshore Oil Output Lags as Louisiana Refiners Restart After Ida

Energy companies have been coping with damaged platforms and onshore power outages and logistical issues, slowing efforts to restart production. Some 88% of crude oil output and 83% of natural gas production remained suspended. Climate change is fueling deadly and disastrous weather across the globe, including stronger and more damaging hurricanes.

About 1.6 million barrels of crude oil remained offline, with only about 100,000 barrels added since Saturday. Another 1.8 billion cubic feet per day of natural gas output also was shut-in, the regulator said.

A total of 104 oil and gas platforms and five rigs remain evacuated on Sunday, down from the 288 originally evacuated.

Royal Dutch Shell Plc, the largest U.S. Gulf Coast producer, on Saturday was evaluating damage to its West Delta-143 offshore platform, which transfers about 200,000 barrels of oil and gas per day from three offshore oil fields.

The lower Mississippi River and New Orleans ports were reopened to traffic and cargo operations, the Coast Guard said on Saturday, allowing the resumption of grain, metal and energy shipments.

REFINERIES RESTARTING

Four oil refineries in Louisiana have initiated restart processes after Hurricane Ida knocked out most of the state’s oil processing. Five others have yet to resume operations, the U.S. Department of Energy said on Sunday.

Three oil refineries in the Baton Rouge area and one near New Orleans have begun to restart units, the DOE said, without naming the facilities. The four account for 1.3 million barrels per day of U.S. refinery capacity.

Utilities have restored electric power to seven of the impacted refineries since Friday, the DOE said.

Placid Port’s Allen refinery, across the River from Baton Rouge, and Delek’s refinery, at Krotz Springs, have started to resume activity during the weekend, according to industry sources. Both companies did not reply to requests for comments over the past several days.

Marathon Petroleum Corp on Friday said its 578,000 barrel-per-day (bpd) Garyville, Louisiana, refinery, the state’s largest, was in the initial stages of restarting. cut?

Exxon Mobil Corp’s had also resumed operations at its 520,000-bpd Baton Rouge refinery.

Full restoration of normal refinery output will take two to three weeks for refineries in the region, an analyst estimated.

The five refineries still shut in Louisiana account for about 1.0 million barrels per day, or approximately 6% of total U.S. operable refining capacity, the DOE said.

The restart timelines in New Orleans may take longer due to flooding and ongoing power supply issues, the DOE said. Utility provider Entergy Corp on Saturday said some of the refinery locations may be without power until Sept. 29.

Elsewhere in the Gulf of Mexico, a private dive team on Sunday was attempting to locate the source of a suspected oil spill spotted in the Bay Marchand area, the U.S. Coast Guard said.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sabrina Valle; additional reporting by Erwin Seba; Editing by Lisa Shumaker)

 

Nasdaq Ekes Out Record Finish as Wall St Ends Higher

The energy sector rose, reversing most of the losses suffered during the first three days of the week. Thursday’s performance was fueled by U.S. crude prices jumping 2% on a sharp decline in U.S. inventories and a weaker dollar.

Cabot Oil & Gas Corp and Occidental Petroleum Corp were among the largest risers, with oil majors Exxon Mobil and Chevron Corp also posting solid gains.

The technology index slipped into negative territory, as some of the industry’s largest companies saw their recent upward momentum stall.

Amazon.com Inc, Microsoft Corp, Facebook Inc and Google-owner Alphabet Inc were all under water. A notable exception was Netflix Inc, which hit an all-time high intraday.

U.S. stocks have regularly hit record highs over the past few weeks as a solid corporate earnings season and hopes of continued central bank support underpinned confidence as data showed the country’s post-pandemic economic growth was beginning to slow.

Data on Thursday showed the number of Americans filing new claims for jobless benefits fell last week, although the focus will be on the Labor Department’s monthly jobs report on Friday to set the stage for the Fed’s policy meeting later this month.

The report is likely to show job growth slowed to 750,000 in August from 943,000 the previous month.

“You have to see very wide beats or misses in this data to really change people’s minds,” said Greg Boutle, U.S. head of equity and derivative strategy at BNP Paribas.

“Investors are either in this renormalization camp that thinks inflation will not happen, or they believe there will be some persistence to inflation. Really, it will be a collection of beats or misses that will move the needle for investors and the Fed, rather than a single data point.”

Unofficially, the S&P 500 gained 12.92 points, or 0.29%, to end at 4,537.01 points, while the Dow Jones Industrial Average  gained 129.38 points, or 0.37%, to 35,441.91. The Nasdaq Composite  rose 21.15 points, or 0.14%, to 15,330.53.

Despite deadly flash floods in New York City, trading on Wall Street was operating normally.

Wells Fargo rose after three straight sessions of losses. The lender had been weighed by a report it could face further regulatory sanctions over the pace of compensating victims of a years-long sales practice scandal.

Contracting services company Quanta Services Inc jumped to a record high after saying it would buy privately held Blattner Holding Company in a deal valued at about $2.7 billion.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Shashank Nayar in Bengaluru and David French in New York; Editing by Aditya Soni and Lisa Shumaker)

Oil Up But Off Session Highs After Ida Weakens to Tropical Storm

Within 12 hours of coming ashore, the storm had weakened into a Category 1 hurricane, and has since dropped to tropical storm status. Hundreds of oil production platforms were evacuated ahead of the storm and nearly all offshore Gulf oil production, or 1.74 million barrels per day, was suspended.

After heavy winds and rains, nearly 1.2 million homes and businesses in Louisiana and Mississippi were without power on Monday and the storm’s move inland shifted the oil market’s focus to when refiners can restart and produce fuels.

Exxon Mobil Corp said on Monday it is shutting the 520,000 barrel-per-day (bpd) Baton Rouge, Louisiana, refinery units until utilities resume providing power and feedstocks are available.

“We’re in wait-and see mode on how badly the refiners will be impacted by the power outages,” said John Kilduff, a partner at Again Capital Management in New York. “There’s going to be an accounting to be done later this week as damage is assessed – I would give it some time to breathe, like a fine wine,” he said.

Brent crude rose 54 cents a barrel, or 0.74% to 73.23 by mid afternoon. The session high was $73.69, the highest since Aug. 2. U.S. crude rose 34 cents, or 0.548% to $69.08 a barrel. The session high was $69.64, the highest since Aug. 6.

U.S. gasoline was up more than 1.5%, lending support to crude. Power outages added to refinery closures on the Gulf coast and traders weighed the possibility of prolonged disruptions.

“It’s still early days,” said Vivek Dhar, analyst at Commonwealth Bank of Australia. “Oil products, like gasoline and diesel, are likely to see prices rise more acutely from refinery outages especially if there are difficulties in bringing refineries and pipelines back online.”

Brent has rallied 40% this year, supported by supply cuts by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, and some demand recovery from last year’s pandemic-induced collapse.

OPEC+ meets on Wednesday to discuss a scheduled 400,000 bpd increase in its oil output, in what would be a further easing of the record output cuts made last year.

OPEC delegates say they expect the increase to go ahead, although Kuwait’s oil minister said on Sunday it could be reconsidered.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Aaron Sheldrick; Editing by David Evans and David Gregorio)

Exxon Mobil’s Revenue to Nearly Double in Q2; Target Price $68

Exxon Mobil, an American multinational oil and gas entity, is expected to report its second-quarter earnings of $1.0 per share, which represents year-over-year growth of over 240%, up from a loss of $0.70 per share seen in the same quarter a year ago.

The U.S. largest publicly traded oil company would post revenue growth of over 90% to around $63 billion. The company has beaten earnings per share (EPS) estimates in three of the last four quarters.

Exxon Mobil shares have surged more than 40% so far this year.

Analyst Comments

“The shares of Exxon Mobil have observed a 10% decline in the past month as benchmark prices declined due to the easing of production curtailments by OPEC. The company is committed to maintaining a strong balance sheet and returning capital to shareholders in the coming years. Despite an uncertain demand-supply environment, the company’s second-quarter results are likely to benefit from high benchmark prices, assisting deleveraging plans. The second-quarter revenues are likely to grow by around 100% (y-o-y) resulting in strong earnings expansion over last year’s depressed number,” noted analysts at Trefis.

Exxon Mobil Stock Price Forecast

Sixteen analysts who offered stock ratings for Exxon Mobil in the last three months forecast the average price in 12 months of $68.73 with a high forecast of $90.00 and a low forecast of $55.00.

The average price target represents an 18.05% change from the last price of $58.22. From those 16 analysts, seven rated “Buy”, eight rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $84 with a high of $100 under a bull scenario and $41 under the worst-case scenario. The firm gave an “Overweight” rating on the oil and gas company’s stock.

“Improving FCF outlook and dividend sustainability. With a more constructive commodity price outlook, lower capital spending, and additional cash operating cost savings, the dividend is covered in 2021 and averages >100% over the next 5-years on our estimates. Improving dividend sustainability supports yield compression for Exxon Mobil (XOM) relative to CVX,” noted Devin McDermott, equity analyst at Morgan Stanley.

“Cost cuts defend the dividend. Exxon Mobil (XOM) reduced 2022-25 spending plans to $20-25 B from $30-35 B, improving dividend sustainability while limiting further pull on the balance sheet. Additionally, XOM is targeting $6 B in structural operating cost reductions which should put upward pressure on consensus FCF estimates.”

Several other analysts have also updated their stock outlook. Piper Sandler raised the target price to $69 from $63. Independent Research upped the price objective to $56.00 from $55.00. Jefferies lifted the stock price forecast to $58 from $55.

Check out FX Empire’s earnings calendar

Exxon to Sell Elastic Polymers Business to Celanese for $1.15 Billion

The deal comes as Exxon is looking to improve profit and slash debt by culling lower margin operations. It had two years ago pledged to divest $15 billion in assets by the end of 2021 and $25 billion through 2025.

Exxon said the sale includes two manufacturing sites in Pensacola, Florida and Newport, Wales along with associated product, process development and laboratory equipment, operating and administration buildings, control systems and documentation, and intellectual property.

The deal, set to close in the fourth quarter of this year, will also move about 350 Exxon employees to Celanese. It is expected to immediately add to Celanese’s 2022 adjusted earnings per share and free cash flow.

Celanese expects to finance the deal with the excess cash and the available liquidity on its balance sheet.

Reuters reported in April that Exxon Mobil was exploring a sale of its Advanced Elastomer Systems division, potentially valuing the business at around $800 million including debt, according to people familiar with the matter.

(Reporting by Arunima Kumar and Arathy S Nair in Bengaluru; Editing by Rashmi Aich and Arun Koyyur)

Climate Activists and IEA’s LaLa-Land Approach to Push Oil Prices Significantly

After a Dutch court forced Royal Dutch Shell to commit to much more stringent climate change and energy transition strategy, US majors ExxonMobil and Chevron also were defeated in their general shareholders meetings.

The American giants were hit by landmark victories of activist shareholders, as the latter gained seats on the board of ExxonMobil and others. With calls on mainstream oil and gas companies, activists and NGOs are trying not only to speed up energy transition strategies worldwide but also force oil majors to cut their production and emissions. The Dutch court case could be a watershed verdict, as the judge ordered not only Shell to cut emissions more than was proposed by the company, but also stated that Shell is responsible for the emissions of all parties in its value chain, which includes suppliers, buyers and consumers.

This activist onslaught on Big Oil was supported by a bombshell report of the International Energy Agency (IEA), Net Zero by 2050. The former oil and gas focused energy agency of the OECD stated bluntly that the world should stop investing in new oil and gas immediately. As expected, mainstream and activist media took all of these developments as a major watershed issue, the end of oil and gas was proclaimed already by some.

Since this media-genic bloodshed scenario, in which the end of Big Oil was proclaimed, some realism has returned in the market. After a short period of silence, the hydrocarbon giants started to react. In addition to the so-called Seven Sisters (IOCs), OPEC member countries already declared the ongoing IEA strategies as flawed, not relevant and having no impact on their own operations. In a reaction to the press, Saudi energy minister Prince Abdulaziz bin Salman stated “”I would have to express my view that I believe it is a sequel of the La La Land movie”.

He also asked the media “why should I take it seriously?” The Saudi official reacted to the statement by the IEA that to reach Net Zero by 2050 that oil supplies have to shrink by 8% per year, reaching 24 million bpd by 2050, in comparison to around 100 million bpd before COVID-19 hit. The Saudi reaction, supported by other OPEC members and Russia, already is proving to be right. Just shortly after its own report, the IEA needed to come out with a statement that global oil demand is showing high growth potential, hitting soon pre-crisis levels.

It seems that activist shareholders and NGOs still don’t understand the pivotal role of oil and gas in the economy. Without any other options, demand is set to grow, hitting soon 100 million bpd levels again, while no peak yet to be expected. Some could even argue that to force IOCs and other listed oil and gas operators to change their strategies and divest major parts of their business to reach Paris Agreements or the EU 55% emission reduction targets is setting up the hydrocarbon sector for a major shakedown and revamp of national oils. In the end, the next decades oil and gas will be needed, especially to stabilize the immense energy transition being implemented.

Without natural gas especially, formerly supported by the IEA as fuel of choice for the energy transition, the global energy system collapses. A major inherent flaw of activists and NGOs worldwide is that they want companies like Shell, Exxon or BP to commit suicide. By forcing them to sell assets, their specific emissions will be going down, but overall the vacuum created in the market will be filled by others. The “Others” are either private equity companies, which are not listed so no 3rd party influence, or national oils.

The latter, even acknowledged by the IEA, are looking at a very bright future. Removing production of IOCs will be not lost forever, but change into the hands of others. Supply however could be partly hampered, or politically influenced in future. Stability of hydrocarbon markets is needed, not only to commit to a sustainable economic future, but also to have the financial powers to put energy transition powers in place. The Seven Sisters will not be able to implement the major new green investments without having access to capital. Without high revenue levels from oil and gas, no options will be available to commit to lower risky projects such as offshore wind, solar or hydrogen.

In the short to mid-term, instability will be increasing substantially. Major new oil and gas projects, needed to even keep current demand-supply in check, are being threatened. If IOCs are leaving the market even more, consumers and industry will be at the mercy of private equity production parties or geopolitically instigated national oil companies. The latter two’s main strategy will be to maximize revenues, not to maximize production. Further price increases will be the result, which ever new party is owner of the fields and reserves.

For energy transition goals, higher oil prices are not the solution, as margins will attract investments, especially in a financial system looking at a glut of options. Renewables should be opting for higher production while removing demand, the latter would result in lower prices and less market interest. The current move is a Pyrus victory in Lala-land. Demand is growing, prices are still not high enough to constrain economic growth.

With oil prices at $70-80 per barrels, supply will be available but now regulated by out-of-reach parties for activists. Setting up IOCs to fall is reaping higher oil prices and continuing investments, whatever Western financials are stating. Current Green Washing accusations will now be based on upward pressure on US Dollar (Greenback) levels. Activists are clearly unknowingly pushing the world to higher prices, with geopolitically constrained supply options.

Savannah Energy in Talks to Buy Exxon’s Stake in Chad, Cameroon Assets

The British oil and gas producer is proposing to buy a 40% operated interest in the Doba oil project in Chad, and a 40% interest in the Chad-Cameroon oil transportation pipeline.

The company’s London-listed shares were last up nearly 7% at 19.25 pence.

Exxon did not immediately respond to a Reuters request for comment. Savannah Energy, which currently only operates in Nigeria and Niger, did not disclose the financial terms in discussion.

Savannah Energy on Wednesday asked for trading in its shares to be suspended until it publishes details of the proposed deal or confirms that the talks have ended.

The Doba oil project produced gross 33,700 barrels of oil per day (bopd) on average, while the Chad-Cameroon pipeline transported gross 129,200 bopd last year, the British company said.

(Reporting by Yadarisa Shabong in Bengaluru; Editing by Shounak Dasgupta)

The Little Engine That Could, and the Oil Giant That Couldn’t

By Svea Herbst-Bayliss and Jennifer Hiller

Just six months later, the fund delivered a massive blow that rippled throughout the oil-and-gas industry. Engine No. 1’s campaign forced Exxon to accept new board members who could bring about a reckoning over its business strategy and confront the risk of global climate change that many investors say Exxon has long been reluctant to address.

Companies with a market value of $250 billion like Exxon rarely face, much less lose, shareholder battles. But stakeholders familiar with Exxon’s thinking said Wednesday’s defeat was years in the making due to ongoing weak returns.

Institutional investors had grown frustrated with the company’s approach to the energy transition, trailing global rivals who promised big spending on power generation, solar and wind. In addition, Exxon failed to recognize how the investment community had become more attuned to climate change issues, which helped Engine No. 1 sway big pension funds in California and New York to its side.

Sources familiar with the company’s strategy say that Exxon was late to mount a defense against Engine No. 1, and even when it did, it concentrated on the threat to the company’s generous dividend. But analysts had for months cautioned that Exxon’s hefty indebtedness could put that dividend at risk, making its warnings of the fund’s intentions less threatening.

“Exxon Mobil worked very hard to lose this battle” over years of inattention to climate change, said Robert Eccles, professor of management practice at Said Business School at Oxford University. In December, Eccles said he thought the activists had a chance to win a board fight.

Exxon did not respond to requests for comment. Company executives have said its scale and investment approach had weathered boom-bust cycles. In a statement on Wednesday, CEO Darren Woods said that Exxon has “been very actively engaged with our shareholders, sharing our plans and hearing their viewpoints and the key issues of importance to them.”

A spokeswoman for Engine No. 1 declined to comment.

ENERGY EXPERIENCE WANTED

When the newly formed Engine No. 1 announced its campaign in early December, Exxon Mobil was closing out a disastrous 2020 due to the coronavirus pandemic that would end with $22 billion in losses.

Engine No. 1 saw an opportunity to push for changes to the company’s board, which until this year had nobody – other than CEO Woods – with experience in the energy industry, with arguments about Exxon’s spending and lack of an energy transition plan.

The fund’s top executives Chris James and Charlie Penner undertook a lengthy effort to recruit potential directors with the credentials to challenge Exxon, according to people familiar with the matter, eventually settling on four people all with energy experience.

The fund was able to tap into investors’ discontent to turn the fight into a climate referendum that cost the two sides at least $65 million. CALSters, the California teachers’ retirement fund, supported the campaign from the beginning.

Exxon sought to blunt the fund’s nominees by expanding its board and adding director Jeff Ubben, who runs a sustainable investing fund. It also sought to calm investors’ climate concerns by increasing low-carbon initiatives and lowering the intensity of its oilfield greenhouse gas emissions.

The company also reversed course on a massive oil and gas expansion program, though analysts expect it to pick up the pace of spending next year.

By April, however, Engine No. 1 was lining up more allies. New York’s $255 billion Common Retirement Fund announced it would support the dissident slate of directors, following California’s $300 billion teachers retirement fund.

FOCUS ON DIVIDEND

Exxon was taking the threat more seriously by April, but focused on investor returns, warning in a shareholder letter that Engine No. 1 wanted the company “to pursue a vague and undefined plan – which we believe will jeopardize our future and your dividend.”

The company has long prized its dividend, which during pandemic-driven oil price lows grew to a yield of more than 10%. With the company’s debt load rising to more than $69 billion last year, analysts raised frequent questions about whether the dividend could be maintained as Exxon was being encouraged to cut costs.

“The biggest surprise to Exxon was how the ‘defend the returns’ strategy did not work,” said one source familiar with the company’s thinking.

The tide turned further against Exxon on May 14 after two near-simultaneous events. First was the release of a damning report from influential shareholder advisory firm ISS that criticized the company’s failure to adjust its spending plans.

“Investors have regularly highlighted concerns about preparedness for an energy transition, yet the board did not take action decisive enough to prompt recognition from the market until after launch of the dissident’s campaign,” ISS said.

That was followed by a television appearance from Woods on CNBC, where investors said he looked unprepared for host David Faber’s questions about the ISS report, Exxon’s strategy and the board’s lack of energy experience.

Exxon for years banked on the company’s size and steady dividend to blunt investor criticism, even as it made a series of risky investments such as its purchase of XTO Energy ahead of a sharp decline in natural gas prices and a 2017 purchase of Texas shale properties as oil prices were slipping.

New York State Comptroller Thomas DiNapoli, in a statement on Wednesday, said the fund for years wanted assurance that Exxon’s board took the climate crisis seriously “and was acting to put the company on a path to succeed in the low carbon economy, and for years received platitudes and gaslighting in response.”

Blackrock Inc, the world’s largest asset manager, which supported three of four dissident nominees, said in a statement on Wednesday that Exxon invested just $10.4 billion on lower-carbon energy technologies in the last 20 years, compared with more than $20 billion in overall expenditures in 2020 alone.

On Wednesday, the company recessed its annual general meeting for an hour, as it continued to count votes. Woods then answered pre-selected questions from investors for 40 minutes, far more than the previous year’s annual meeting.

Among the questions was one about an International Energy Agency report that warned that investors should not fund new fossil fuel supply projects beyond this year if the world wants to reach net zero emissions by mid-century. Woods, however, said that “if you look at the report, it outlines the continued need for investment in oil and gas.”

 

(Reporting By Svea Herbst Bayliss and Jennifer Hiller; additional reporting by Greg Roumeliotis, Gary McWilliams and Ross Kerber; writing by David Gaffen; editing by Grant McCool)

Stocks Mixed After Disappointing Durable Goods Orders Report

Initial Jobless Claims Decline To 406,000

The U.S. has just released Initial Jobless Claims and Continuing Jobless Claims reports.

Initial Jobless Claims report indicated that 406,000 Americans filed for unemployment benefits in a week. Analysts expected that Initial Jobless Claims would total 425,000.

Meanwhile, Continuing Jobless Claims declined from 3.74 million (revised from 3.75 million) to 3.64 million compared to analyst consensus of 3.68 million.

The reports indicated that the job market continued to recover which is not surprising given the robust rebound of the U.S. economy.

Durable Goods Orders Unexpectedly Declined

Traders also had a chance to take a look at the second estimate of the first-quarter GDP Growth Rate report. In the first quarter, GDP grew by 6.4% compared to analyst consensus which called for growth of 6.5%.

Durable Goods Orders declined by 1.3% month-over-month in April compared to analyst consensus which called for growth of 0.7%.

Today, traders will also evaluate Pending Home Sales report for April. Analysts expect that Pending Home Sales increased by 0.8% month-over-month after growing by 1.9% in March.

S&P 500 futures are swinging between gains and losses after the release of these economic reports.

Traders will also keep an eye on the developments in U.S. government bond markets as Treasury yields have started to move higher, and the yield of 10-year Treasuries is currently trying to settle back above 1.60%. Higher yields are bearish for high-flying tech stocks, and the continuation of the current upside momentum may put some pressure on S&P 500.

WTI Oil Faced Resistance Near The $66 Level

WTI oil has recently made another attempt to settle above the $66 level but failed to develop sufficient upside momentum and pulled back.

Oil traders remain focused on rumors about Iran nuclear deal negotiations. The market received contradictory signals in recent days, and it looks that oil will need additional upside catalysts to move higher.

Energy-related stocks have been under some pressure in recent trading sessions, and it looks that this pressure may grow after Exxon Mobil and Chevron suffered some defeats in recent shareholder votes due to environmental concerns while Shell lost in a Dutch court and would have to set more ambitious emissions goals.

For a look at all of today’s economic events, check out our economic calendar.

Exxon Scrambles to Stave Off Dissidents as Board Fight Nears Climax

By Jennifer Hiller and Svea Herbst-Bayliss

Exxon Mobil Corp has lagged other oil majors in its response to climate change concerns, forecasting many more years of oil and gas demand growth and doubling down on investments to boost its output – in contrast to global rivals that have scaled back fossil fuel investments.

A dissident shareholder group led by tiny fund Engine No. 1 is seeking to replace as many as a third of the 12-member board of directors at Wednesday’s shareholder meeting, the first major boardroom contest at an oil major that makes climate change the central issue.

Shareholders, led by Engine No. 1, have said the world is changing quickly as governments and companies move to reduce the emissions from fossil fuels that are warming the planet, and that Exxon Chief Executive Darren Woods needs to make big changes to ensure the company’s future value to investors.

Engine No. 1, which has put up a slate of four nominees, has successfully rallied support from institutional investors and shareholder advisory firms upset with Irving, Texas-based Exxon for its weak financial performance in recent years. It has just a $50 million stake in Exxon, which carries a market value of nearly $250 billion.

“The world around them is changing,” said Aeisha Mastagni, a portfolio manager at California State Teachers’ Retirement System, which backed the activists.

The proxy fight has taken on “monumental” importance, Mastagni said.

BlackRock Inc, Exxon’s second-largest shareholder, joined the dissidents, as it will support three of Engine No. 1’s nominees, Reuters reported on Tuesday.

In a Wednesday news release, Engine No. 1 cautioned shareholders that Exxon may contact them to attempt to sway them into voting for the company’s nominees, a signal that each side is still trying to woo investors to their side.

“Engine No. 1 urges shareholders not to fall prey to any such strategic efforts that may result in unintended consequences with respect to the overall result,” the hedge fund said in its release.

Exxon has fought to keep climate activists at bay, spending tens of millions of dollars on a high-profile PR campaign, agreeing to publish more details of its emissions and coming out in support of carbon reduction. Activists have said it is too little, too late, and that Exxon needs a less reactive strategy.

“This proxy fight reflects this broad change in how our political leaders, our business leaders and our fellow shareholders are stepping up and taking these immense risks seriously,” New York State Comptroller Thomas DiNapoli said.

The state’s pension fund in April said it backed Engine No. 1’s slate.

“My bet is activists win a couple of seats and it is short-term negative ExxonMobil,” independent oil analyst Paul Sankey said in a Wednesday note.

On Monday, Exxon said it would add two new directors to its board, one with climate industry experience, in an attempt to win enough institutional support.

Exxon added three new directors to its board earlier in the year as the pressure from Engine No. 1 and hedge fund D.E. Shaw, which voiced similar complaints, mounted. D.E. Shaw kept its dealings with Exxon largely out of the limelight.

“We have one of the strongest boards in corporate America,” Woods said in an interview last week.

Exxon’s board understands the company’s complexity and supports a path toward carbon reductions in the Paris accord, Woods said, referring to the international agreement aimed at combating climate change.

Exxon shares were down 0.2% in Wednesday morning trading. The stock has lagged its peers over the last five years.

DIFFICULT CHALLENGE

The viability of Exxon’s climate strategy and past resistance to shareholder concerns lay behind BlackRock’s vote, people familiar with the decision said.

Exxon can expect strong support from retirees and smaller investors that count on the company’s rich dividend. Proxy fights are notoriously difficult for challengers, said a hedge fund executive not involved in Exxon.

Preliminary vote results are expected by midday. Results will show if there is broad support among energy investors for a transition to cleaner fuels necessary to limit worldwide temperature increases. There will be no need for new oil and gas projects if investors want net-zero carbon emissions by 2050, the International Energy Agency said this month.

Wednesday’s vote “is a good example of activist stewardship to help the company get the board it needs for the energy transition,” said Robert Eccles, a professor at Saïd Business School at the University of Oxford.

Graphic: Exxon returns lag global peers – https://fingfx.thomsonreuters.com/gfx/ce/xegpbddwxpq/Pasted%20image%201621953583853.png

(Reporting by Jennifer Hiller in Houston and Svea Herbst-Bayliss in Boston; editing by Gary McWilliams, Will Dunham, Michael Perry and Emelia Sithole-Matarise)

Big Week for Big Oil

In the lead up to these key events, which serve as key barometers for the global oil industry’s outlook, Exxon Mobil’s share prices have been on a tear, surging 36% so far in 2021. Having formed a technical “golden cross” in mid-January, the stock’s uptrend since November remains firmly intact. However, with its 14-day relative strength index (RSI) flirting with overbought territory, this stock has been prone to dip once that 70 threshold is reached.

Key considerations for Exxon Mobil’s Investor Day

When Exxon held its investor day in 2020, the world had yet to fully realize the full extent of the damage wrought by Covid-19. Now, some 12 months later and with the astonishing recovery in oil prices since, investors will be eager for more details on how Exxon intends to forge ahead into the post-pandemic era:

  • Investment strategy

Greater capital expenditure, with the aim of taking advantage of the oil price recovery, could also threaten Exxon’s massive pledge of $15 billion in annual dividends. The company stated recently that its cashflow would be enough to meet its dividend commitment at $50 Brent.

Yet, markets will be cognizant of Exxon’s latest earnings announcement on 2 February, declaring its first annual net loss since its 1999 merger that created the largest US oil company, also its first annual net loss in about 40 years. In the aftermath of a year to forget for Big Oil, investors want to know whether Exxon can get that tricky balance right between strengthening its balance sheet and the spending required to take advantage of future opportunities, all while trying to appease dividend-hungry shareholders.

  • Carbon emissions

Exxon’s European rivals, such as BP, Royal Dutch Shell, and Total, are already making the shift to curb oil and drastically lower their carbon emissions by 2050. In contrast, Exxon has been loudly criticized over their apparent reluctance to match their rivals’ adoption of the green agenda.

It remains to be seen how much Exxon will warm up (no pun intended) to a net-zero carbon goal. With that in mind, Exxon appointed activist investor Jeff Ubben to its board just this week to give Exxon a more environmentally-friendly tilt while also setting up a new business unit to focus on low-emission technologies.

Still, much more is likely required out of Exxon in order to appease activist investors such as Engine No.1, which holds over $400 million in Exxon shares.

While Exxon Mobil’s Investor Day holds plenty of potential developments to rock its share prices, more volatility could be in store for Big Oil stocks the day after.

OPEC+ supply decision looms

On Thursday, OPEC+ is set to decide on the output levels for its 23 members for April, and could restore as much as 1.5 million barrels per day (bpd) back into global markets next month. That 1.5 million figure includes Saudi Arabia’s voluntary cuts of 1 million bpd that had been implemented throughout February and March.

Markets are already expecting the alliance to ease at least 500,000 bpd back into the world, hence the declines in oil benchmarks in recent sessions as they ponder the prospects of OPEC+ taps being loosened. Confirmation that a full 1.5 million bpd being flooded back into global markets starting next month could even drag Brent back to sub-$60 levels once more, and pare down its 21% in year-to-date gains.

To be clear, this isn’t to suggest we could see oil prices capitulate this week. The global demand recovery appears robust enough to absorb more incoming barrels of oil in April. However, it’s the supply side of the equation as will be determined by OPEC+ this week that could determine whether Brent above $60/bbl is warranted in the immediate aftermath.

The decision by OPEC+ wouldn’t just impact Brent and WTI crude prices, but is also likely to feed into the stock prices of oil companies over the coming days. With investors having plenty to digest over the next couple of days, this pair of events could dictate how oil-linked assets perform over the immediate term.

Written on 03/03/2021 07:00 GMT by Han Tan, Market Analyst at FXTM

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Exxon Mobil Posts Record Loss in Wild 2020 as COVID-19 Pandemic Hurts Demand

Exxon Mobil, an American multinational oil and gas corporation, ended 2020 in a bad shape as the energy company reported a record annual loss in the wild year due to the COVID-19 pandemic-driven-slowdown that hurt energy prices and demand.

Irving, Texas-based multinational oil and gas corporation said its fourth-quarter loss was $20.1 billion included unfavourable identified items of $20.2 billion, primarily non-cash impairments; earnings excluding identified items were $110 million, or $0.03 per share assuming dilution. That was a little better than the Wall Street consensus estimate of $0.01 per share.

Last year, ExxonMobil reduced annual cash operating expenses by $8 billion, of which $3 billion are structural reductions. The Company expects to generate additional annual savings of $3 billion by 2023, resulting in total structural annual expense reductions of $6 billion, including savings from a global workforce reduction.

Exxon Mobil (XOM) guided to the low end of the capex range for 2021 but demonstrated at $50 Brent it could spend at the high end of its budget in 2021 and 2025. While positive on the surface, this could suggest XOM is unlikely to further reduce capex in outer years below its current budget. CCS could be a risk mitigation venture at a minimum and a commercial opportunity at best. Maintain Market Perform,” said Jason Gabelman, equity analyst at Cowen and company.

Exxon Mobil shares, which plunged over 40% in 2020, closed 1.58% higher at $45.63 on Tuesday.

Exxon Mobil Stock Price Forecast

Fifteen analysts who offered stock ratings for Exxon Mobil in the last three months forecast the average price in 12 months at $51.42 with a high forecast of $74.00 and a low forecast of $39.00.

The average price target represents a 12.69% increase from the last price of $45.63. From those 15 analysts, six rated “Buy”, six rated “Hold”, and three rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $57 with a high of $84 under a bull scenario and $22 under the worst-case scenario. The firm currently has an “Overweight” rating on the oil and gas company’s stock.

“Lower ’21 spending, further capital plan flexibility, and incremental cost cuts increase FCF and dividend cover, supporting yield compression. A more proactive approach to low-carbon investments helps mitigate energy transition risks, while also offering new attractive growth options. Reiterate Overweight,” said Devin McDermott, equity and commodity analyst at Morgan Stanley.

Several other analysts have also recently commented on the stock. UBS raised the price target to $48 from $45. HSBC upped the price objective to $52.5 from $49. JP Morgan upgraded Exxon Mobil from a “neutral” rating to an “overweight” rating and raised their price objective to $56 from $50. Cowen and company increased the stock price forecast to $48 from $36.

In addition, Jefferies gave an underperform rating and price target of $39. Credit Suisse Group restated a “neutral” rating and issued a $52 price objective. Zacks Investment Research downgraded to a “hold” rating from a “strong-buy” and set a $51 target price.

Analyst Comments

“Improving FCF outlook and dividend sustainability. With a more constructive commodity price outlook, lower capital spending, and potential for additional cash operating cost savings, the dividend is covered in 2021 and averages 100% over the next 5-years on our estimates. Improving dividend sustainability supports yield compression for Exxon Mobil (XOM) relative to CVX,” Morgan Stanley’s McDermott added.

“Cost cuts defend the dividend. XOM reduced 2022-25 spending plans to $20-25 billion from $30-35 billion, improving dividend sustainability while limiting further pull on the balance sheet. Additionally, XOM is targeting a 15% reduction in cash operating costs, a level we expect it to exceed.”

Upside and Downside Risks

Risks to Upside: 1) Higher commodity prices, including liquefied natural gas (LNG). 2) Successful execution of major capital projects. 3) Permian well performance improvements. 4) Additional cost cuts -highlighted by Morgan Stanley.

Risks to Downside: 1) Lower commodity prices. 2) Cost overruns on major capital projects. 3) Service cost inflation in the Permian erodes returns. 4) Geopolitical risk could impact production volumes and/or returns; Guyana is a particular focus now.

Check out FX Empire’s earnings calendar

Exxon Mobil Shares Move Lower Amid Reports About Mega Merger Talks In 2020

Exxon Mobil Video 01.02.21.

CEOs Of Exxon Mobil And Chevron Talked About Merger In 2020

According to recent reports, CEOs of Exxon Mobil and Chevron discussed a potential mega merger in early 2020. However, the talks yielded no results, and the companies are not discussing a potential merger at this point. Both companies declined to comment on the issue.

The reports highlight the pressure felt by oil majors due to coronavirus pandemic and energy transition. Typically, a merger leads to lower costs and greater market power, but it is not clear whether gigantic companies like Exxon Mobil and Chevron can merge without material problems and attention from anti-trust agencies.

The mega merger story failed to provide any support to both stocks which are losing ground in today’s trading session despite stronger oil prices. Perhaps, some traders believe that such a merger is not possible due to antitrust concerns, while other are worried about the companies’ future in a world that tries to shift away from oil due to climate concerns.

All Eyes On Exxon Mobil’s Earnings Report

Exxon Mobil will provide its quarterly earnings report on February 2 before the market open. Analysts expect that the company will report earnings of just $0.02 per share. However, Exxon Mobil’s performance is projected to improve significantly in 2021, and analysts call for earnings of $0.56 per share in the fourth quarter of 2021.

The recent earnings report from the other company in the story, Chevron, was not inspiring as it reported a GAAP loss of $0.33 per share and missed analyst estimates on both earnings and revenue. If Exxon Mobil also reports a loss, its shares may find themselves under additional pressure.

As usual, traders and investors will also focus on dividend sustainability. Currently, Exxon Mobil’s dividend yield is well above 7% as the company refused to cut its dividend despite the major blow dealt by the coronavirus pandemic. In this light, the market will pay close attention to the company’s cash flows as it tries to evaluate whether Exxon Mobil will be able to maintain its high dividend in the upcoming years.

For a look at all of today’s economic events, check out our economic calendar.

Stock Pick Update: Dec. 16 – Dec. 22, 2020

In the last five trading days (December 9 – December 15) the broad stock market has been trading within a short-term consolidation following its recent record-breaking run-up. The S&P 500 index has reached new record high of 3,712.39 a week ago on Wednesday. Then it retraced some of the advance before going back up on Monday-Tuesday this week.

The S&P 500 index has lost 0.31% between December 9 open and December 15 close. In the same period of time our five long and five short stock picks have gained 1.32%. Stock picks were relatively much stronger than the broad stock market last week. Our long stock picks have gained 0.91% and short stock picks have resulted in a gain of 1.73%. So short stock picks’ performance outpaced the benchmark return on the downside.

There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

Our last week’s portfolio result:

Long Picks (December 9 open – December 15 close % change): XOM (+0.77%), EOG (+0.62%), PGR (+4.73%), BK (+0.51%), MMM (-2.10%)
Short Picks (December 9 open – December 15 close % change): LNT (-0.81%), CNP (-1.64%), ABBV (-4.28%), DHR (-0.16%), APTV (-1.75%)

Average long result: +0.91%, average short result: +1.73%
Total profit (average): +1.32%

Stock Pick Update performance chart since Nov 18, 2020:

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, December 16 – Tuesday, December 22 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (December 16) and sold or bought back on the closing of the next Tuesday’s trading session (December 22).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s .

Based on the above, we decided to choose our stock picks for the next week. We will choose our 5 long and 5 short candidates using trend-following approach:

  • buys: 2 x Energy, 2 x Financials, 1 x Communication Services
  • sells: 2 x Utilities, 2 x Real Estate, 1 x Consumer Staples

Buy Candidates

XOM Exxon Mobil Corp. – Energy

  • Stock broke above its short-term downward trend line, uptrend continuation play
  • The support level is at $40 and resistance level is at $44-47 (short-term target profit level)

COP ConocoPhillips – Energy

  • Possible short-term bull flag pattern, uptrend continuation play
  • The support level is at $42 and resistance level is at $45-50

WFC Wells Fargo & Co. – Financials

  • Possible short-term bull flag pattern – uptrend continuation play
  • The support level is at $29.50 and resistance level is at $30.00

Summing up , the above trend-following long stock picks are just a part of our whole Stock Pick Update . The Energy and Financials sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today .

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Stock Pick Update: Dec. 9 – Dec. 15, 2020

In the last five trading days (December 2 – December 8) the broad stock market has further extended its long-term uptrend. The S&P 500 index reached new record high of 3,708.45 yesterday. The S&P 500 index has gained 1.33% between December 2 open and December 8 close. In the same period of time our five long and five short stock picks have lost 0.23%. Stock picks were relatively weaker than the broad stock market. Our long stock picks have gained 1.30%, but short stock picks have resulted in a loss of 1.76%. So long stock picks’ performance closely followed the benchmark.

There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

Our last week’s portfolio result:

Long Picks (December 2 open – December 8 close % change): WMB (+6.00%), COG (-4.53%), PGR (+3.21%), CB (+0.51%), MMM (+1.29%)

Short Picks (December 2 open – December 8 close % change): NEE (-0.62%), EXC (+0.49%), SPG (+7.62%), WELL (+3.69%), WMT (-2.36%)

Average long result: +1.30%, average short result: -1.76%

Total profit (average): -0.23%

Stock Pick Update performance chart since Nov 18, 2020:

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, December 9 – Tuesday, December 15 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (December 9) and sold or bought back on the closing of the next Tuesday’s trading session (December 15).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s .

Based on the above, we decided to choose our stock picks for the next week. We will choose our 5 long and 5 short candidates using trend-following approach:

  • buys: 2 x Energy, 2 x Financials, 1 x Industrials
  • sells: 2 x Utilities, 2 x Health Care, 1 x Consumer Discretionary

Buy Candidates

XOM Exxon Mobil Corp. – Energy

  • Stock broke above its short-term downward trend line, uptrend continuation play
  • The support level is at $40 and resistance level is at $44 (short-term target profit level)

EOG EOG Resources, Inc. – Energy

  • Possible short-term bull flag pattern, uptrend continuation play
  • The support level is at $47 and resistance level is at $54

PGR Progressive Corp. – Financials

  • Stock broke above its short-term downward trend line
  • The support level is at $86 and resistance level $98-100

Summing up , the above trend-following long stock picks are just a part of our whole Stock Pick Update . The Energy and Financials sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today .

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

3 Stocks for Investors Chasing High Paying Dividends

Interest rates were already near historic lows before the COVID-19 pandemic and look like remaining that way for the foreseeable future as the Federal Reserve encourages more borrowing to stimulate the economy. As an alternative to keeping cash squirreled away in a low-interest saving account or government bond, investors can chase a higher return on their money by purchasing high paying dividend stocks.

Bear in mind, companies can slash or reduce their dividend at any time. For example, the major airline stocks pulled their dividends earlier this year amid the uncertainty surrounding travel during the health crisis. In saying that, let’s take a closer look at the three stocks in the S&P 500 that each offer a dividend of over 7%. Currently, the average stock in the index yields 1.8%.

Exxon Mobil Corporation

With headquarters in Irving, Texas, Exxon Mobil Corporation (XOM) explores for and produces crude oil and natural gas. The global energy giant has increased its annual dividend for 33 consecutive years at an average of 3.53% each year. Investors currently receive a healthy forward dividend yield of 8.29%.

As of Nov. 26, 2020, the stock has a market capitalization of $172.55 billion and trades around 25% higher over the past month. From a chart perspective, a recent breakout above a 10-month downtrend line may trigger a retest of the early June swing high at $55.36.

Altria Group, Inc.

Altria Group, Inc. (MO) manufactures and sells cigarettes, smokeless products, and wine in the United States. Although not everyone’s cup of tea, the cigarette maker issues a smoking hot annual dividend of $3.44 per share, equaling an 8.52% yield. Furthermore, the company’s dividend has increased by an average of 11.75% annually for the past 11 straight years.

Altria shares have a market value of $75 billion and trade up a modest 3.33% over the last month as of Nov. 26, 2020. Technically, the price continues to find resistance from the top trendline of a descending channel that may see a decline to the pattern’s opposing side at $35.75.

AT&T Inc.

AT&T Inc. (T) provides telecommunication, media, and technology services through four segments: Communications, WarnerMedia, Latin America, and Xandr. The $206.58 billion communications titan pays a $2.08 dividend per share, with a yield of 7.17%. Impressively, the 37-year-old Dallas-based company has raised its dividend by an average of 2.04% each year for the past 36 consecutive years.

As of Nov. 26, 2020, AT&T stock has gained 4.21% over the last month, outperforming the telecommunications sector average by about 1%. Chart wise, the shares have consolidated since breaking above a multi-month downtrend line earlier this month. A breakout from this level could spark a rally to the June swing high at $33.24.

For a look at today’s earnings schedule, check out our earnings calendar.

AstraZeneca’s Vaccine Trial Results Boost Markets

AstraZeneca Reported Encouraging Trial Results But Its Stock Is Set To Open Lower

AstraZeneca has just reported that its COVID-19 vaccine had efficacy of up to 90%.

The company tested two dosing regimens. The first one, which showed efficacy of 90%, included a half dose of the vaccine followed by a full dose a month later. Interestingly, the second regimen, which included two full doses separated by a month, showed efficacy of just 62%.

AstraZeneca’s shares are down by more than 1% in premarket trading as traders focused on the headline efficacy rate of 70% which included results of both dosing regimens.

However, the world has just received another COVID-19 vaccine, and the markets can’t ignore it. S&P 500 futures are gaining more than 0.5% in premarket trading as traders believe that mass vaccination will soon provide huge support to the economy.

PMI Reports Indicate That The Services Segment Is Under Pressure

Soon after the market open, traders will have a chance to evaluate flash PMI reports for November. U.S. Manufacturing PMI is projected to decline from 53.4 to 53, while Services PMI is expected to decrease from 56.9 to 55. Numbers above 50 show expansion so PMI reports are projected to show that the economic recovery continues at a healthy pace.

PMI reports from other countries, which were released earlier today, indicated that services were hit hard by the second wave of the virus.

In the UK, Services PMI declined from 51.4 in October to 45.8 in November but remained well above the analyst consensus of 42.5. Meanwhile, Euro Area Services PMI declined from 46.9 to 41.3 compared to analyst consensus of 42.5.

The current analyst estimate for U.S. Services PMI looks rather optimistic, and it remains to be seen whether the services segment managed to continue its recovery at a healthy pace despite the second wave of the virus.

Oil Tries To Settle Above The $43 Level

Not surprisingly, positive vaccine news provided material support to the oil market, and oil made an attempt to settle above the $43 level.

Meanwhile, energy-related stocks are ready to continue their rebound. Shares of major oil companies like Exxon Mobil and Chevron are already gaining ground in premarket trading.

Back in August, oil’s upside move was stopped at $43.75, and oil is slowly climbing towards this important level. If oil manages to get above $43.75, oil-related equities will likely experience a major boost.

For a look at all of today’s economic events, check out our economic calendar.

Exxon Mobil Posts Third Straight Loss in Q3 as COVID-19 Pandemic Hurts Demand; Target Price $23 in Worst Case

Exxon Mobil, an American multinational oil and gas entity, reported a loss for the third consecutive time in Q3 2020 as the oil and gas company continues to struggle from the COVID-19 pandemic-driven slowdown, sending its shares down over 2% on Friday.

The U.S. largest publicly traded oil company reported third-quarter 2020 loss of $680 million, or $0.15 per share assuming dilution. Third-quarter capital and exploration expenditures were $4.1 billion, bringing year-to-date spending to $16.6 billion, more than $6 billion lower than the prior-year period.

Exxon Mobil posted an adjusted loss of 18 cents per share, better than market expectations of a loss of 25 cents per share.

“Exxon Mobil introduced preliminary 2021 capex of $17.5 billion at the midpoint, in-line with Consensus. Exxon Mobil reaffirmed it is planning to fund the dividend without increasing gross debt,” said Jason Gabelman, equity analyst at Cowen and Company.

“We estimate Exxon Mobil ’21 CF will be $5 billion short of covering the dividend; stock performance today could be dictated by other levers to cover that funding gap. 3Q20 earnings beat consensus, though CFO was below the forecast,” Gabelman added.

At the time of writing, Exxon Mobil shares traded 2.48% lower at $32.15 on Friday; the stock is down about 50% so far this year.

Executive Comments

“We remain confident in our long-term strategy and the fundamentals of our business, and are taking the necessary actions to preserve value while protecting the balance sheet and dividend,” said Darren W. Woods, chairman and chief executive officer.

“We are on pace to achieve our 2020 cost-reduction targets and are progressing additional savings next year as we manage through this unprecedented down cycle.”

Exxon Mobil Stock Price Forecast

Nine equity analysts forecast the average price in 12 months at $43.00 with a high forecast of $55.00 and a low forecast of $33.00. The average price target represents a 32.84% increase from the last price of $32.37. From those nine analysts, two rated “Buy”, six rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $44 with a high of $85 under a bull-case scenario and $23 under the worst-case scenario. The firm currently has an “equal-weight” rating on the oil and gas company’s stock. Goldman Sachs Group upgraded shares of Exxon Mobil to a “neutral” rating from a “sell” and lifted their stock price forecast for the company to $36 from $33.

Several other analysts have also recently commented on the stock. Scotiabank upgraded shares of Exxon Mobil to a “sector perform” rating from a “sector underperform” and set a $45 price target on the stock. Credit Suisse Group started coverage and set a “hold” rating and a $47 price target on the stock. At last, Truist lowered their price objective to $41 from $44 and set a “hold” rating on the stock.

Analyst Comments

“Attractive investment opportunities, but above average execution risk. Exxon Mobil (XOM) reduced its 20/21 capex plans, deferring but not abandoning its counter-cyclical growth strategy. Capex ultimately needs to move higher to stabilize the business, and while XOM does have high-quality investment opportunities, funding the capital program and the dividend will strain the balance sheet absent higher commodity prices, making dividend sustainability a lingering risk,” said Devin McDermott, equity and commodities strategist at Morgan Stanley.

“High capex limits FCF. Higher spending and more exposure than peers to current downstream & chemicals margin weakness lead to lower FCF yield. Earnings growth targets appear hard to achieve with current downstream & chemicals margins,” McDermott added.

Upside and Downside Risks

Upside: 1) Higher commodity prices, including liquefied natural gas (LNG). 2) Successful execution of major capital projects. 3) Permian well performance improvements- highlighted by Morgan Stanley.

Downside: 1) Lower commodity prices. 2) Cost overruns on major capital projects. 3) Service cost inflation in the Permian erodes returns. 4) Geopolitical risk could impact production volumes and/or returns; Guyana is a particular focus now.

Check out FX Empire’s earnings calendar

U.S. Stocks Set To Open Lower As Tech Stocks Slide After Earnings Reports

Big Tech Stocks Are Losing Ground In Premarket Trading

S&P 500 futures are losing ground in premarket trading as leading tech stocks are under pressure after the release of third-quarter earnings reports.

Shares of Apple, Microsoft, Facebook and Amazon are losing ground in premarket trading, while shares of Alphabet are gaining more than 6% due to healthy growth of Google’s ad sales.

Elevated expectations are the biggest problem for tech stocks right now. For example, Apple shares are up by 57% year-to-date while Amazon stock gained almost 74% since the beginning of the year.

In this situation, it is not enough to simply beat analyst estimates on both earnings and revenue – the market wants to see a path for robust growth in the future. That said, it remains to be see whether the current premarket sell-off will  turn into a serious multi-day pressure on tech stocks as many traders are waiting for a pullback to initiate their positions in market leaders.

Oil Fails To Rebound As Coronavirus Continues To Surge

Oil remains under pressure after yesterday’s sell-off as traders evaluate risks of additional lockdowns. Yesterday, U.S. recorded more than 91,000 new cases of the disease, so coronavirus will likely get back to the headlines right after the U.S. presidential election.

Meanwhile, Exxon Mobil reported its third-quarter results, missing analyst estimates on revenue and beating them on earnings. Chevron also beat earnings estimates but failed to live up to revenue expectations.

This trading session is set to be chalelnging for oil majors as their revenues were hit hard by the pandemic while oil is trading near the $36 level amid virus fears.

Personal Spending Increased By 1.4% In September

U.S. has just provided Personal Income and Personal Spending reports. Personal Income increased by 0.9% month-over-month in September compared to analyst estimates which called for growth of 0.4%. Personal Spending grew by 1.4% compared to analyst consensus of 1%.

Both reports were better than expected and can provide some support to stocks during today’s trading session. The strength of Personal Spending is especially welcome as it shows that consumers remained confident in September.

For a look at all of today’s economic events, check out our economic calendar.