Standard & Poor’s Investment Policy Committee reiterated its confidence in energy stocks today, favoring investment strategies that overweight exposure to this sector.

The firm’s council of senior economists and equity analysts based its position on historical and current performance results of this group against broad market benchmarks as well as on attractive valuations and high earnings visibility amid a slowing economic environment.

“Energy stocks in the S&P 500 Index beat the ‘500’ in 2004 and 2005, as well as in the three-year stretch of 2000-2002. But lengthy periods of market outperformance are not uncommon for these issues,” said Sam Stovall, Standard & Poor’s chief investment strategist. “S&P’s Investment Policy Committee continues to believe that investors should overweight their exposure to energy stocks in the S&P Energy Index and take advantage of recent price weakness to add to holdings.”

Standard & Poor’s currently has a positive fundamental outlook on the energy sector overall, which is projected to post an 11% year-over-year increase in operating earnings this year. Despite solid estimated EPS growth, the sector sports the lowest P/E in the S&P 500, trading at only 9.9 times estimated 2006 EPS, versus 15.0 times for the broader market.

In addition, according to Standard & Poor’s chief technical strategist, Mark Arbeter, “Crude oil prices have paused after running up near the Katrina highs of $70/barrel. We believe that oil prices will find strong support in the $55 to $57 zone, and are setting up for another run at all-time highs. A close above the $70 level would be very bullish technically and would set-up a run to the $80 area, in our opinion. After some consolidation, we think additional gains are likely.”

The best performing sub-industry of the S&P 500 Energy sector year-to-date is Oil and Gas Equipment and Services, which has risen 8.2% vs. a 2.8% gain for the broader sector. Standard & Poor’s Equity Research remains positive on the group based on continued high levels of capital spending by oil and gas producers, which should bolster demand for services, including production optimization and other technologically advanced services.