Materials Fall as Large Producers and Metals Weigh on XLB

On Tuesday, September 1, large producers pulled the Materials sector lower as only 26.9% of its stocks advanced. The cap-weighted sector fell -1.4%, lagging the equal-weighted move of -0.9% because the heaviest names did the bulk of the selling. The Materials Select Sector SPDR Fund, an exchange-traded fund that trades under the ticker XLB, dropped -1.1% to close at $52.09 as heavy selling in Freeport-McMoran Copper & Gold Inc (-4.3%) overwhelmed gains in CF Industries Holdings Inc (+4.3%) and Corteva Inc (+3.7%). The selloff followed macro pressure across the market, as climbing bond yields and rising energy costs dampened risk appetite.

The Catalyst A strengthening dollar alongside higher Treasury yields weighed on commodity prices, putting sharp downward pressure on copper and broader base metals. Broader markets also faced inflation worries sparked by surging crude prices.

Inside the Sector The split between resource extractors and agricultural suppliers defined the session. While mining shares retreated, fertilizer and seed producers found support, led by CF Industries Holdings Inc (+4.3%) and Corteva Inc (+3.7%), though our sources show no reported driver for their individual gains. However, with only 26.9% of the sector's names gaining on a day when 4 of the 11 sectors rose, the broader group could not resist the downdraft. Even with the decline on Tuesday, September 1, XLB remains up +2.1% over the past month.

Fund Profile and Quality EasyAlpha grades the stocks in the sector against their industry peers, and 47.1% of the fund's graded weight sits in companies graded A or B. Historically, companies graded A or B have stronger fundamentals and carry a lower risk of large drawdowns than those graded D or E.