Despite the stock market reaching new highs this year, ExxonMobil and Wells Fargo–the nation's largest energy firm and third-biggest bank, respectively–have posted massive stock losses, yielding the two biggest market value plunges of 2020 as their sectors struggle to recover from a breakneck fall spurred by the coronavirus pandemic.
KEY FACTS
ExxonMobil and Wells Fargo shares have plunged an eye-popping 40% and 45% this year, respectively, tanking each firm's market value by roughly $120 billion and $100 billion–more than any other stock market loss incurred by a U.S. firm in 2020, according to Bloomberg data.
Both firms hail from the year's worst-performing sectors, per S&P 500 returns, with energy plummeting 37% while financials are down 6%, compared to a nearly 15% gain for the broader index.
ExxonMobil's 2020 plunge is its worst yearly performance ever, sparked by an all-out oil price war between Saudi Arabia and Russia that pushed the price of an oil barrel down to negative territory in April for the first time in history.
Still-low oil prices and uncertain demand forced the storied descendent of John D. Rockefeller's Standard Oil to devalue its natural gas properties in North and South America by almost $20 billion this quarter, and analysts like Raymond James' Pavel Molchanov worry the firm won't be able to continue paying dividends to investors without selling assets or taking on debt.
It's been just as bad for Wells Fargo: Plagued by ongoing regulatory scandals and a recently lifted Federal Reserve mandate that barred banks from buying back shares during the pandemic, the firm's stock plunge is the year's worst among firms with a market value over $100 billion.
CEO Charlie Scharf said in July he was targeting $10 billion in annual cost cuts, and the following month Wells Fargo became one of the first banks to resume job cuts after pausing them due to Covid-19, with some reports indicating the firm could be looking to cut as many as 63,000 jobs through 2024.
BIG NUMBER
$525 billion. That was Exxon's market capitalization at its peak in 2007; it's now down to about $175 billion. To compare, Wells Fargo has fallen to about $123 billion from a high of $320 billion at the start of 2018.
KEY BACKGROUND
It's been a terrible year for cyclical sectors like energy and financials, which tend to outperform during periods of economic prosperity but fall hard during recessions. However, some experts think a turnaround is in store as widespread vaccination moves closer to becoming reality. In a note to clients earlier this month, Bank of America analysts called financials and energy their top two sectors for 2020, calling them "unapologetically cyclical" and the "new growth stocks."
WHAT TO WATCH FOR
Some Wall Street firms, however, still aren't too keen on the year's worst-performing sectors. "While downside risks remain in the form of second or even third wave of infections and renewed lockdown measures, optimism around Covid-19 vaccines could make 2021 a tale of two halves for U.S. banks," Fitch Ratings analysts said in a note December 15, reiterating a negative rating for the sector and saying performance shouldn't ramp up until later in the year once vaccination efforts prove economically fruitful. S&P Global Platts' Chris Midgley shared a similar outlook for energy just one day prior, saying, "While in the long term we are optimistic about a rebound of oil demand, in the short term we expect things to worsen, with increased second-wave lockdowns resulting in much weather gasoline demand."
SURPRISING FACT
Despite U.S. stocks piling on nearly $6 trillion in market value this year (second only to 2019's $7 trillion gain), according to the Wilshire Total Value Index, only 300 of the S&P's 500 constituent firms have climbed in value this year. Heading up losses are Carnival and Norwegian of the embattled cruise industry. They're down nearly 60% each, representing diminished market value of about $30 billion combined.
TANGENT
Who's right behind ExxonMobil and Wells Fargo? AT&T, Chevron and Boeing are down $74 billion, $68 billion and $61 billion, respectively.
