Financial stocks rocketed ahead in the first quarter and Bank of America (BAC) recently received a high-profile upgrade. So why is the SPDR Select Sector Financials Fund (XLF) one of the worst performers over the last 5 days?

Aluminum giant, Alcoa, surprised Wall Street with its stronger-than anticipated earnings report. So why is the SPDR Select Sector Materials Fund (XLB) battling to stay above a critical long-term trendline?

XLB 200

Apparently, the more things change, the more they actually stay the same. As much as we may want to believe that the economy has turned a corner, the slightest disruption (e.g., European debt crisis, questionable job growth, etc.) adversely affects certain sector ETFs more than others.

Specifically, when the chips are down, investors have bailed on a variety of economically sensitive stocks. Segments like energy, materials, industrials and financials fare the worst. This has been the case whether you investigate year-over-year returns or week-over-week trading.

In contrast, non-cyclical sectors like health care and staples have weathered the recent pullback better. They’ve also been rock solid over an entire year.

Sector ETFs: The More Things Change, The More They Stay The Same?  
          5-Day %   1-Year %
Consumer Staples Select SPDR (XLP)   -1.7%   13.6%
Consumer Discretion Select SPDR (XLY)   -2.1%   14.8%
Technology Select Sector SPDR (XLK)   -2.3%   16.8%
Health Care Select Sector SPDR (XLV)   -2.4%   12.2%
Utilities Select Sector SPDR (XLU)   -2.5%   12.2%
iShares DJ Transportation (IYT)     -2.8%   -1.5%
Industrials Select Sector SPDR (XLI)   -3.4%   -1.2%
Financials Select Sector SPDR (XLF)   -3.9%   -5.9%
Materials Select Sector SPDR (XLB)   -4.2%   -8.4%
Energy Select Sector SPDR (XLE)   -4.5%   -10.9%


There are two sectors that have remained resilient: consumer discretionary and technology. A cynic might say that this is merely a function of an Apple-crazed society. Moreover, SPDR Select Technology (XLK) may cool due to seasonality shifts alone.

Nevertheless, relative strength continues to reward believers in consumer spending on non-essentials as well as business spending on technology-based solutions. Rather than fall prey to well-reasoned explanations of “why not,” it may be more sensible to embrace the market’s decision on the matter.

In sum, the share prices of resources-related businesses (e.g., energy, materials, etc.) as well as big industrial players (e.g., industrials, transports, etc.) continue to face the headwinds of slow global growth. In contrast, the markets themselves are embracing corporations that provide tech to other companies or offer consumers an opportunity to spend more than they make.

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Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

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