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.”