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With S&P At Record, Transport ETFs Stand Out

Cinthia Murphy


With the S'P 500 Index closing at a record today on the final day of the first quarter, taking out the previous high reached on the eve of the market meltdown that launched the Great Recession, it’s worth looking at the different pockets and funds in the equities markets that are behind the move.

The index rose 10 percent in the first quarter and has rallied for five straight months, extending a four-year rally, closing on Thursday 6.34 points, or 0.41 percent, higher at 1569.19.

Behind that move, the SPDR S'P Transportation ETF (XTN) and the iShares Dow Jones Transportation Average Index Fund (IYT) are among the top 10 best-performing ETFs year-to-date, posting returns that have outperformed broader U.S. equities averages.

XTN has gained 22 percent so far this year, while IYT is up 18 percent since Jan. 1, according to data compiled by IndexUniverse. By comparison, the broad S'P 500 Index has rallied as noted by some 10 percent in the same period, while the Dow Jones industrial average has gained some 11.25 percent year-to-date.

Strength in transports, particularly in the Dow, could be construed as a positive indicator of the strength of the overall equities rally—one that pushed the U.S. equities markets into or near record-high territory in recent weeks—if Dow theorists have their way.

The Dow Jones transports average—the segment of the market that tracks the performance of transportation stocks such as railroads and FedEx—has rallied more than 15.36 percent year-to-date, a rise that puts the indicator up some 11 percent from its previous record high closing of 5,618.25 hit in July 2011.

Meanwhile, the Dow Jones industrial average’s latest record-high closing of 14,539.14, reached just last week, amounts to a 3.3 percent gain from its long-standing previous 2007 record level.

In the end, both segments of the market often move in tandem, and according to the decades-old Dow theory of stock price movement—coined more than a century ago based on the works of Charles Dow—a bull market in industrials will not last unless transportation is rallying too.

The theory, which is a form of technical analysis many have looked to in the past for indication of market direction, is that for the market to be truly strong, goods need to be fabricated, but the transportation of those manufactured goods need to be alive and well.



The S'P 500 Perspective

The story behind the rallying S'P 500 universe isn’t all that different, though it did close at a new record on Thursday

The S'P reached its all-time record today, eclipsing the 1,565.15 closing high set in October 2007—with year-to-date 2013 gains of around 10 percent—the S'P 500 Transportation is up about 13 percent year-to-date, according to data compiled by S'P Dow Jones Indices.

Other S'P 500 sectors outperforming the broader index include financials, which are up 10.92 percent year-to-date; health care, with gains of 15.225 percent; and consumer discretionary and staples, up 11.8 percent and 17.5 percent, respectively.

On the flip side, the S'P 500 materials sectors has been the laggard, with gains of 4.17 percent so far in 2013, followed by information technology with gains of 4.21 percent year-to-date.

The SPDR Select Sector ETF Trust, which slices the S'P 500 into nine industry sectors, reflects some of these disparities at an ETF level.

The funds’ year-to-date performances, as well as how much they represent in the overall S'P 500 mix, are as follows:

  • Consumer Staples Select Sector SPDR Fund (XLP), representing 11 percent of the broad S'P 500 mix, and including names in food, drug retailing, household and personal products such as Procter ' Gamble, Coca-Cola and Walmart, is up 133.95 percent year-to-date.
  • Health Care Select Sector SPDR Fund (XLV), representing 12.3 percent of the total S'P 500 mix, is up 15.37 percent year-to-date.
  • Consumer Discretionary Select Sector SPDR Fund (XLY), representing 11.6 percent of the total S'P 500 mix, including names in media, auto, hotels and retail such as Comcast, Home Depot, Amazon.com and McDonald’s, is up 11.72 percent year-to-date.
  • Financial Select Sector SPDR Fund (XLF), representing 16 percent of the total S'P 500 mix, is up 11.1 percent year-to-date.
  • Energy Select Sector SPDR Fund (XLE), representing 11 percent of the mix, is up 11.05 percent year-to-date.
  • Utilities Select Sector SPDR Fund (XLU), representing 3.45 percent of the total S'P 500 mix, up 11.97 percent.
  • Industrial Select Sector SPDR Fund (XLI), representing 10 percent of the total mix, is up 10.18 percent.
  • Technology Select Sector SPDR Fund (XLK), representing 21 percent of the total S'P 500 mix and comprising both information technology and telecommunications names such as Apple, Microsoft, Intel, Visa and eBay, is up 4.92 percent year-to-date.
  • Materials Select Sector SPDR Fund (XLB), representing 3.45 percent of the total mix, and including chemical, construction materials, metals and mining, and paper product names such as Monsanto, Dow Chemical and Freeport McMoRan Copper ' Gold, is up 4.37 percent.


For comparison, the SPDR S'P 500 ETF (SPY)—the largest ETF in the world, with some $125 billion in assets—has rallied approximately 10 percent since the beginning of the year.


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