S&P 500 Energy index shows strength

Year to date, the S&P 500 Energy index has returned 48.8% compared with -19.5% for the S&P 500 ex-Energy index. However, for the five- and 10-year periods, the broader market bested the energy sector. Over the past decade, the S&P 500 ex-Energy index's 13.7% annualized return was more than double the energy index's 6%.

The energy index's return is highly correlated to commodity prices, particularly crude oil. Examining the relationship between the two, there was a 0.89 correlation between the monthly prices of the S&P 500 Energy index and West Texas Intermediate crude oil prices since January 1990.

After bottoming out in the second quarter of 2020, the sector's sales and earnings have grown quarter over quarter. For the second quarter, the consensus estimate calls for sales per share of $142.76, a 9.3% increase from last quarter, with expectations for 17.8% earnings growth.