These ETF Sectors Won Earnings Season

These ETF Sectors Won Earnings Season

Much-maligned utilities and consumer staples stocks gained.

Reviewed by: Staff
Edited by: James Rubin

Investing isn’t a contest, or at least it shouldn’t be. However, earnings season has become so much more volatile and unpredictable in terms of how the actual quarterly announcements from companies relate to how their stock prices react. 

So as part of an advisor or investor’s ongoing market monitoring, it is worth taking a glance each quarter at how the 11 S&P 500 sectors do relative to each other.

While earnings announcements occur nearly every trading day, when mega-bank JP Morgan posts its results, the starter’s gun for the earnings track meet is generally thought to begin. 

That last occurred on April 12, and so I reviewed returns of each sector “spider” ETF from that date through Tuesday’s close. Utilities were the winner, up 8.3%, as indicated by the Utilities Select Sector SPDR ETF (XLU)

Those four words strung together as such (“utilities were the winner”) might be new to some investors, since it has been a long time since that small but high-yielding sector of the U.S. stock market led during an earnings season in which the stock market didn’t collapse. 

The SPDR S&P 500 Trust (SPY) gained 1.2% during this time frame, and the Invesco S&P 500 Equal Weight ETF (RSP) advanced 1.6%, so it was not a bad earnings period from that standpoint.

Low Energy Earnings for This ETF 

The energy sector, as represented by the Energy Select Sector SPDR ETF (XLE), was the laggard, down 3%. That reflects at least a modestly positive reception for corporate earnings this quarter. In all, nine of the 11 sectors were positive, though many by slim margins above zero return.

This naturally disguises the massive range of individual stock reactions to earnings, whether it was 10-20% higher between one night’s close and the next morning’s opening, or the same percentage change with a minus sign preceding it. That’s what earnings season has become: Five-week periods, where advisors and investors who own individual stocks have to put crash helmets on at 4 p.m. (ET), Monday-Thursday.

But that is why ETFs are so valuable in any investor’s tool set. They provide diversification, but we can also identify specific holdings each day (unlike with mutual funds), so we know what we own and can assess where the opportunities and risks are.

Consumer staples gained 4.6%, finishing second in the sector derby this time around. That performance by the Consumer Staples Select Sector ETF (XLP), combined with the sharp gains by XLU, recall some murky market periods, where such defense sectors outperformed.

However, it is just a month’s time, and besides, it is earnings season we are talking about. Watch, analyze, but don’t over-emphasize it. 

There’s another one coming in July!

Rob Isbitts was an investment advisor for 27 years before selling his practice to focus on ETF research and education. He is based in Weston, Florida. Contact him at  [email protected] and follow him on LinkedIn.