The Energy Select Sector SPDR Fund ETF (NYSERCA:XLE), which follows the energy sector, fell by 4.5% in the second quarter of 2024, exactly opposite to the performance of the broader S&P 500 index (SP500), which rose by 4.6% During the same period.
The fund, made up of companies that participate in Oil production, drilling, refining and transportation were among the The worst performing S&P 500 sectors for a period of one month, ending below 0.62%.
However, the ETF to date had increased by 8.3% but it was still far from the increase close to 15% in the benchmark index for the same period. Crude Oil Futures (CL1:COM) have increased by 11.9%while the S&P 500 Energy Index (SP500-1010) has increased by 9.1% till the date.
Within the index, the Energy Equipment and Services Index (SP500-101010) fell by 5.7%while the index of oil, gas and consumable fuels (SP500-101020) rose by 10.6% till the date.
Inflows and outflows into US energy sector equity funds have been in the red for most weeks in the second quarter of 2023. The energy-focused ETF has seen a net outflow of $613.89 million during the quarter.
Image source: etfdb.com
Main movements to date
- Winners:
- Targa Resources (TRGP) +48%
- Diamondback Energy (FANG) +31%
- Williams (Mexico) +22%
- Valero Energy (VLO) +21%
- Marathon Oil (MRO) +19%
- Losers: APA Corp. (THE WATER) -18%
- SLB (SLB) -9%
- Halliburton (HAL) -7%
- EQT Corp. (QT) -4%
- ConocoPhillips (COP) -1%
What quantitative measures say
XLE is rated a Buy by Seeking Alpha's Quant Rating system with a score of 4.05 out of 5, backed by A+ in liquidity and A in the expense category. The ETF earned an A- for its momentum. However, it earned a B+ in dividends and a D- in risks.
What analysts say
Finding Alpha contributor JR Research said in its June 14 report that XLE's strong “B+” Momentum Rating underscores the strength of its buying sentiment. They added that the recent pessimism does not suggest a significant trend reversal toward a bearish bias. XLE's relatively attractive 3.3% dividend yield should attract income investors as the Federal Reserve moves closer to cutting interest rates.
“Energy sector earnings growth estimates are not falling off a cliff. Stakeholders have remained disciplined in their production capacity, which has helped keep crude oil prices relatively high. As seen with falling buyer sentiment… Saudi Arabia’s influence cannot be underestimated. Normalizing EV growth underscores the complexities of the energy transition thesis. To bolster the energy requirements of the ai upcycle, more robust data center growth estimates are likely to require buy-in from all energy players. In other words, I have not assessed enough structural weakness in the energy sector thesis to convince me to change my bullish assessment of its growth prospects,” they said in the report. The author has maintained a “Buy” rating for the fund.