The Energy Select Sector SPDR Fund (NYSE: XLE) experienced a decline of 1.59% during early trading on Tuesday, despite Brent crude oil trading above $100 per barrel. This performance made XLE the worst-performing sector ETF within the S&P 500, contrasting with the Technology Select Sector SPDR Fund (NYSE: XLK), which gained approximately 1%.
The divergence is attributed to a decline in oil prices, which fell nearly 2% to around $103 a barrel. Kpler data cited by Reuters indicates that September exports from major Middle Eastern producers reached 12.8 million barrels per day, the highest level since February. This recovery in exports, including the resumption of shipments through Saudi Arabia's East-West pipeline, has reduced the immediate supply-disruption premium embedded in crude prices.
Market analysts suggest that investors are looking beyond the current price level to assess the durability of oil prices. Additionally, the decline in XLE may reflect profit-taking following a surge in energy stocks the previous day. The fund is heavily concentrated, with Exxon Mobil Holdings Corp (NYSE: XOM) and Chevron Corp (NYSE: CVX) accounting for approximately 32% of its holdings.
Conversely, the Technology Select Sector SPDR Fund (XLK) is holding up due to the performance of Nvidia Corp (NASDAQ: NVDA). The chipmaker’s $150 billion buyback authorization has supported its shares even as rising Treasury yields pressure the broader market. Higher financing costs have been flagged as a risk for AI-linked companies, but strong cash generation and earnings expectations are currently providing a counterweight.
