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Energy Earnings Deluge to Test Sector’s ETF


The energy sector has pulled ahead of utilities for top honors among S&P 500 sectors this year.

The Energy Select Sector SPDR (XLE) entered Monday with a 14.4% year-to-date, 90 basis points better than the Utilities Select Sector SPDR (XLU) and nearly 230 basis points better than the Health Care Select Sector SPDR (XLV) , the third-best of the nine SPDR ETFs this year.

XLE and it rivals energy ETFs, particularly the traditional cap-weighted offerings, face a week of important tests as the energy sector takes its turn entering the earnings confessional in a big way. The energy earnings party gets started in earnest tomorrow with National Oilwell Varco (NOV) and Anadarko Petroleum (APC), a combined 5.6% of XLE’s weight, reporting.

Anadarko, which has benefited in part from the renewal of an old takeover rumor and the resolution of environmental cleanup claims, ending two years of litigation, is one of this year’s best large-cap energy names with a gain of 39%. [Takeover Rumor Helps This Oil ETF]

Wednesday is another important day for the sector with Phillips 66 (PSX) and Williams Cos. (WMB), also a combined 5.6% of XLE, reporting. Put simply, Thursday is an epic day of energy earnings, led by Dow component Exxon Mobil (XOM), the largest U.S. oil company.

In addition to Exxon, ConocoPhillips (COP), the largest U.S. independent oil company, Occidental Petroleum (OXY) and Apache (APA) also report. Those stocks combine for 24.7% of XLE’s weight.

Dow component Chevron (CVX), the second-largest U.S. oil company, delivers its second-quarter results Friday morning. California-based Chevron is XLE’s second-largest holding at a weight of 13.1%.

Although Exxon and Chevron have failed to impress this year, that has not held back XLE, nor has it prevented investors from pouring over $2.5 billion into the ETF. That is more than has been allocated to any other sector ETF. In the second quarter alone, XLE added $2.4 billion in new assets, nearly double the amount allocated to the Industrial Select Sector SPDR (XLI) . [Gushing Over Energy ETFs]

Among the other energy ETFs that will be put under the earnings microscope this week is the Market Vectors Unconventional Oil & Gas ETF (FRAK) .

Three of FRAK’s top-four holdings, Occidental, Anadarko and Hess (HES), report this week. Those stocks combine for 21.7% of FRAK’s weight. What FRAK gives up in size to other energy ETFs (it has $97.9 million in assets under management), it has made up for in performance gaining almost 19% this year. [These ETFs House the S&P 500's Top Stocks]

Energy Select Sector SPDR