Although the U.S. stock market is faring well, the shadow of the Eurozone debt crisis is still looming, and the possibility of a Greek exit from the euro currency is creating a fear factor in the market. Defensive sectors such as utilities are popular with investors during times of uncertainty. [Utilities ETFs Lag Market After 2011 Rally]
Products in this sector are useful and necessary for daily living, such as water and power, giving the sector stable demand, reports Eric Dutram for ETF Daily News. The stable yield from XLU is also attractive, and is profitable given the low expense ratio of 0.18% . [Defensive ETFs for a Market Pullback]
As Treasury yields are below 1.8%, the need for capital appreciation is top priority for investors. Most utility companies that XLU holds pay out a nice, stable distribution.
Utilities Select Sector SPDR
Tisha Guerrero contributed to this article.