A combination of an annual inflation gain at a 41-year high, an aggressively hawkish Fed and surging energy prices have roiled the stock markets. Gasoline prices are already hovering near $5 levels, and in the last five days, the S&P 500 index (SPX) is down 9.5% while the tech-heavy NASDAQ Composite index (NDX)is down 11.2%. This means, finally, broader indices are in bear territory and panic is more than evident in plummeting stock prices.
Rising gasoline prices impact a broader set of industries, with oil stocks benefitting from higher revenues, expanded margins, and, in the current scenario, robust cash flow generation. Names such as Occidental Petroleum (OXY), Pioneer Natural (PXD), and Range Resources (RRC) have been clear winners of this trend, with increased value creation for their shareholders in the form of buybacks and higher dividends.
All these names have delivered nearly 100% returns over the past year, and the TipRanks stock comparison tool indicates analysts continue to see further double-digit gains in them.
At the other end of the spectrum are industries such as transportation, consumer goods, and food that are at the receiving end of rising oil prices (Brent crude and Texas Intermediate crude have been hovering at their highest levels since the last recession) and labor prices. This possible adverse impact is more pronounced for Uber (UBER) and Delta Airlines (DAL).
Uber
In the case of Uber, the impact of gasoline will be felt both in ride-hailing and food deliveries. The company has introduced a surcharge on fares and deliveries in markets including the U.S., Canada, and India to lower the impact of rising fuel prices. In India, the company is facing trip cancellations and, in some instances, a refusal to turn on air conditioning by drivers.
Furthermore, the company’s Head of Rides Unit, Dennis Cinelli, stepped down this month. Last month, Raj Beri, the Head of Uber’s grocery unit, stepped down.
Shares of the…