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.
What does this mean for earnings for the overall S&P 500? On December 1, analysts were expecting Q1 earnings for the entire S&P 500 to be up 8.6 percent.
As of Monday, they're expecting earnings to be up only 4.6 percent.
From up 8.6 percent to up 4.6 percent. That is a drop of 4 percentage in just 5 weeks. That is a lot, and most of it is due to the decline in Energy.
Here's another way to look at it: Q1 earnings for the Energy sector were cut by $7.7 billion from December 1 through today. The S&P 500 as a whole saw a cut of $9.1 billion during the same period. So Energy is $7.7 billion/$9.1 billion = 84 percent of the decline in the dollar value of the earnings decline we have seen in the past five weeks.
See why the market is so focused on oil for the moment? If oil keeps dropping, estimates will be lowered even more.