Saddled with a year-to-date loss of almost 7%, the Industrial Select Sector SPDR (NYSEArca: XLI) is the third-worst performer among the nine select sector SPDRs. Only the Utilities Select Sector SPDR (NYSEArca: XLU) and the Energy Select Sector SPDR (NYSEArca: XLE) have been worse.
Unfortunately, for industrials, a sector frequently used as a gauge of economic health and broader market sentiment, things could worse before they improve. A strong U.S. dollar and declining energy sector capital spending are among the issue plaguing industrial ETFs this year. U.S. manufacturing, which makes up 12% of the economy, could remain weak on the lingering effects of the dollar and fuel costs. [Industrial ETFs Could Also Slip On Oil]
“Peaking in February, the ETF has lost roughly 9% through Monday’s trading. And this month, it joined utilities, energy and basic materials as the only ones with moving average death crosses in place. Each has its 50-day average below its 200-day average and that is not a healthy condition,” reports Michael Kahn for Barron’s.
Dow component General Electric (NYSE: GE) is XLI’s largest holding at 10.2% of the ETF’s weight, but the fund’s nine other top 10 holdings contain four other Dow components – 3M (NYSE: MMM), Boeing (NYSE: BA), United Technologies (NYSE: UTX) and Caterpillar (NYSE: CAT). That means the Dow has an indelible impact on XLI and that’s not good with the blue chip index down 3.6% over the past week.