Plenty of sectors slumped in October, but few performed as poorly as the energy sector. The S&P 500 Energy Index notched one of its worst monthly performances on record and the Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy exchange traded fund, tumbled nearly 13%. Prior to October, the energy sector had been a solid performer this year.
A combination of diminished global output and rising global demand have helped reduce the global supply glut that dragged on oil prices for years. Production cuts from the Organization of Petroleum Exporting Countries and their allies have largely contributed to the cut in supply. Meanwhile, expanding economies around the world has bolstered demand for raw materials such as crude oil.
Some market observers see rebound potential in the energy patch. XLE is showing some signs of bouncing back, gaining 1.50% over the past week.
“When you look at the energy names, it’s a sector that hadn’t performed very well but we’re starting to see the relative performance of energy pick up,” said Craig Johnson, chief market technician at Piper Jaffray, in an interview with CNBC.
Other Factors for Sector ETFs
Investors may consider looking into to financial and energy sector ETFs as the Federal Reserve raises benchmark interest rates.