Exchange traded funds tracking the basic materials sector often broadcast strength or weakness in the broader market because the highly cyclical industry is sensitive to the global economy, energy prices and emerging markets.

Materials ETFs have been lagging the S&P 500 the past year and have often faltered before the overall market.

The iShares Dow Jones US Basic Materials (NYSEArca: IYM) is down about 17% the past 12 months, compared with a gain of 0.8% for the iShares S&P 500 (NYSEArca: IVV).

Other ETFs following the sector include Materials Select Sector SPDR (NYSEArca: XLB), Vanguard Materials ETF (NYSEArca: VAW) and First Trust Materials AlphaDEX (NYSEArca: FXZ).

Top holdings include chemical companies such as Dow Chemical (NYSE: DOW) and miners such as Freeport-McMoRan (NYSE: FCX).

The performance of materials sector ETFs can foreshadow softness in the global economy. For example, basic materials were exhibiting relative weakness versus the S&P 500 in early 2011 before the August waterfall sell-off.

“The materials and energy sectors of the S&P 500 have performed the worst since the broad market declines began in early May. Global economic slowdowns have occurred in many important markets, especially in the Eurozone and in BRIC countries,” writes Dave Fry at ETF Digest.