The sell-off in the oil markets has weighed on capital spending from the energy sector as producers hold off on new projects, pressuring U.S. industrial companies and sector-related exchange traded funds.
Over the past year, the Industrial Select Sector SPDR (NYSEArca: XLI) declined 10.8%, Vanguard Industrials ETF (NYSEArca: VIS) dropped 9.2%, iShares U.S. Industrials ETF (NYSEArca: IYJ) fell 9.2% and Fidelity MSCI Industrials Index ETF (NYSEArca: FIDU) decreased 10.3%.
The industrial sector has dipped almost 8% year-to-date, making them the third worst performing S&P 500 group of the year, reports Nicole Bullock for the Financial Times.
“[Industrials] are the transmission mechanism between the energy sector and the rest of the economy,” Nicholas Colas, chief market strategist at Convergex, told the Financial Times.
According to S&P Dow Jones Indices, capital expenditures at energy companies declined 30% in the third quarter as oil prices continued to drop off.
General Electric (NYSE: GE) recently warned of increased pressure from falling crude oil prices, which weighed on the company’s division serving oil and gas industries.