uploads///XLE rose but underperfomed other SPDR sector ETF

Why XLE Underperformed Other SPDR Sector ETFs


May. 13 2016, Published 3:22 p.m. ET

Energy sector versus the market

Between May 5, 2016, and May 12, 2016, the energy sector underperformed other market sectors. The Energy Select Sector SPDR ETF (XLE) rose ~0.63% in the period, but it underperformed other SPDR ETFs. XLE was fourth from the bottom on the basis of returns among its fellow SPDR sector ETFs.

XLE’s underperformance could be attributed to the following factors:

  • The rally in crude oil (USO) (UCO) (BNO) came toward the middle of the week, whereas the SPDR S&P 500 ETF’s (SPY) (VOO) rally started early in the week.
  • The share prices of downstream companies such as Tesoro (TSO), Phillips 66 (PSX), Valero Energy (VLO), and Marathon Petroleum (MPC) experienced softness on May 12, 2016, as the crack spread fell.

TSO, PSX, VLO, and MPC make up a total of about 12.8% in XLE’s portfolio. The above table shows the performance of XLE compared to the ETFs representing other sectors.

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Oil-weighted stocks

Crude oil could close on a positive note this week compared to its 2.7% fall in the previous week. The potential of a continued rise in crude oil prices is an important factor for oil-weighted stocks such as RSP Permian (RSPP), Abraxas Petroleum (AXAS), and Clayton Williams Energy (CWEI).


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