Basic materials exchange traded funds were crushed Wednesday along with energy-sector ETFs as commodities sold off and key component Freeport-McMoRan (NSYE: FCX) dropped more than 5%.
The iShares Dow Jones US Basic Materials (NYSEArca: IYM) was down 3% while silver and oil led the decliners in the commodities complex. The $1.2 billion ETF has about 9% in Freeport-McMoRan.
The basic-materials ETFs had lagged the S&P 500 year to date with a gain of roughly 6% through Tuesday’s close, according to investment researcher Morningstar.
On a sector basis, the ETF has 55% in chemicals stocks and more than 30% in mining and metals.
“Most materials companies produce commodity products and operate in a highly cyclical industry,” Morningstar says in a profile of iShares Dow Jones US Basic Materials.
“Aside from issues relating to cyclicality, many holdings in this fund face volatile raw material and energy prices, high fixed costs, and growing competitive threats from new, and potentially lower-cost, production capacity outside the U.S.,” it notes.
iShares Dow Jones US Basic Materials
