Energy Sector ETFs

After trailing the broader markets for most of the year, energy sector stocks and exchange traded funds are finally leading the charge.

Energy Select Sector SPDR Fund (NYSEArca: XLE) has been outperforming the S&P 500 since mid-April.

The energy sector shows attractive valuations, with component holdings in the XLE at a price-to-earnings ratio of 12.45, compared to the 16.4 P/E of SPY.

The energy sector was the second-best performing sector, slightly behind technology stocks, last week as the strengthening oil market and better jobs report help push the S&P 500 to record highs. [VIX ETFs Drop on Jobs Report as S&P 500 Clears 1,600]

“The oil market has broken out and the jobs report is the biggest catalyst,” said Jeff Grossman, president of BRG Brokerage and a New York Mercantile Exchange floor trader, said in a Bloomberg article. “The stock market is strong and everything is going higher.”

“People had been a bit nervous about oil demand and economic growth,” Michael Lynch, president of Strategic Energy & Economic Research, said in the article. “This report gives people a sense that maybe the U.S. economy will not pause, but instead may accelerate in the second quarter.”