Investors should keep tabs on ETFs tracking the utilities sector because they can provide important clues on overall risk appetite in the market.
Utilities stocks are a traditionally defensive and stable sector that investors often favor when they’re seeking safe havens to ride out market storms.
When utilities ETFs are outperforming the market, it can mean investors are gun-shy. When they trail the market, investors are often in a risk-on mindset.
Utilities ETFs outperformed the S&P 500 in May but have been about neck-and-neck with the market the past two months.
After a glitch in computer algorithms pushed utilities exchange traded funds into volatile action Wednesday, utilities stocks were weaker along with the broader equities market Thursday.
SPDR Utilities Select Sector Fund ETF (NYSEArca: XLU) and Vanguard Utilities Sector ETF (NYSEArca: VPU) are among the largest ETFs indexed to the sector. [Algos Gone Wild: Utilities ETFs ‘Flash Smash’]