In Slicing Up the Dow’s ETF Sectors, a Picture Emerges

June 17, 2008 at 3:00 pm by Tom Lydon

The past few weeks have been hard on investors and their sector-focused exchange traded funds (ETFs). But not all sectors are suffering equally.

A glance at the Diamonds Trust (DIA), which tracks the Dow Jones industrial average, shows that the benchmark-tracking ETF has fallen to a near six-month low, reports Jonathan Bernstein for ETFZone. Year-to-date, DIA is down 6.6%.

The thesis for the lowered optimism toward the Dow revolves around certain economic factors: through-the-roof energy prices, unimpressive employment data, looming inflation, and the $2.8 billion in writedowns at Lehman Brothers (LEH), the nation’s fourth-largest investment bank.

The largest sector represented in the Dow is industrial materials (hence the name, don’t you know), which represents 25% of the index by market capitalization.

The Industrial Select Sector SPDR (XLI) has taken the Dow lower by around 10%, although the sector remains higher than it was three months ago. Year-to-date, it’s down 5.6%.

Financial and energy are the next largest in the Dow, represented by the Financial Select Sector SPDR (XLF) and the Energy Select Sector SPDR (XLE).

XLF has taken a nosedive, indicating that investors are wary that the credit crunch is not behind us. It’s down 17.8% year-to-date. XLE has been saved by higher oil prices, up 9.8% year-to-date.

Overall, with the exception of financials and homebuilders, these sectors have yet to dip below the lows they saw in mid-March.