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The Best S&P Sectors for Q1

Financials and tech surge; energy and utilities lag


The first-quarter market boom was indeed impressive, with the S&P 500 Index surging 12% during the initial three months of 2012. The broad-based buying we witnessed in the market was especially strong in the financial, technology and consumer discretionary sectors, with each of these three S&P sectors leading the bullish charge.

The table below is a look at Bloomberg’s data showing the nine exchange-traded funds (ETFs) representing each respective sector:

Sector Ticker Q1 Performance
Financials XLF +21.88%
Technology XLK +18.89%
Consumer Discretionary XLY +15.91%
Industrials XLI +11.38%
Materials XLB +10.78%
Health Care XLV +8.97%
Consumer Staples XLP +5.45%
Energy XLE +4.18%
Utilities XLU -1.70%

As you can see, financials were the biggest winners in Q1, with the Financial Select Sector SPDR (NYSE:XLF) capturing top honors. This measure of bank stocks spiked 21.88% in the quarter as it rode gains in top components Wells Fargo (NYSE:WFC), JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Bank of America (NYSE:BAC). Bank stocks surged after the Federal Reserve announced that most banks had passed the latest “stress test” with flying colors.

In second place was technology stocks, with the Technology Select Sector SPDR (NYSE:XLK) surging 18.89% in the first three months of 2012. This high-profile sector has many of the most desirable growth stocks, including Apple (NASDAQ:AAPL), IBM (NYSE:IBM) and Intel (NASDAQ:INTC). The appetite for stocks in the segment helped XLK enjoy one of its best quarters in years.

The gains in the Consumer Discretionary Select Sector SPDR (NYSE:XLY) also were strong in Q1, as people spent a lot of money with stalwarts in the sector such as McDonald’s (NYSE:MCD), Comcast (NASDAQ:CMCSA) and (NASDAQ:AMZN).

Interestingly, energy stocks posted only modest gains despite a big rise in the price of crude oil and gasoline. In fact, the Energy Select Sector SPDR (NYSE:XLE), an ETF that holds the largest companies in the energy space, rose just 4.18% in Q1. That performance was bested nearly threefold by the S&P 500, and it put XLE near the bottom of the performance table. Top holdings in this fund include energy giants Exxon Mobil (NYSE:XOM) and Chevron Corp (NYSE:CVX), and both were basically flat for the quarter. The large weighting of these stocks in XLE contributed to the mediocre sector showing.

The worst-performing group so far in 2012 has been utilities. The Utilities Select Sector SPDR (NYSE:XLU) was down 1.7%, and was the only S&P sector with a loss in Q1. Stocks in this space such as Dominion Resources (NYSE:D) and Exelon Corp (NYSE:EXC) sold off in the quarter, as money migrated from stable, low-beta sectors like utilities to financials and tech.

The sector performance through Q1 clearly shows that the risk trade is on, and if that risk-trade mentality continues dominating the market in Q2, we could be looking at very similar rankings three months from now.

As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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