Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Cliffs Natural Resources Inc (CLF) & The S&P’s Worst-Performing Sectors in 2013

With gains of more than 9% so far in 2013, the S&P 500 has already posted better returns than it often manages over an entire year. But the past week’s downdraft serves as a valuable reminder that you have to be vigilant to spot signs of weakness in the stock market before they blossom into full-fledged corrections. Specifically, looking at particular sectors of the market that are lagging behind the S&P 500’s overall performance can help you gauge whether industry-specific trends are holding stocks back or whether those poor conditions are likely to spread into other sectors.

Yesterday’s column looked at the best-performing sectors in the S&P so far in 2013. Today, let’s turn to the dark side by identifying the laggards in the S&P this year.

XLB Total Return Price Chart

S&P 500 Sectors Total Return Price data by YCharts.

Materials have posted the weakest performance, just barely eking out a gain on the year, with technology and energy also falling behind the overall return of the S&P 500. For materials, the slowdown in China has sent commodity producers of all kinds for a loop. In particular, with slower construction activity, U.S. Steel and other steel companies have seen their stocks tumble throughout 2013. That in turn has caused a cascade effect, as coal and iron-ore supplier Cliffs Natural Resources Inc (NYSE:CLF) has seen less demand for its vital inputs for the steel-making process. Gold’s big decline last week only hurt matters by sending precious-metals miners down for the count as well.

Technology, on the other hand, has a more mixed showing of both winners and losers. On one hand, slow PC sales have left older tech companies scrambling to update their offerings and join the mobile revolution, and their stock prices have generally suffered even though they currently trade at unusually low earnings multiples. Yet for more innovative, cutting-edge companies, high valuations have persisted, and the most forward-looking tech players have rewarded their shareholders with solid returns.

Finally, on the energy front, 2013 has been a reversal of fortune, with natural gas prices climbing but oil prices slumping. That trend has been good for more gas-concentrated companies Range Resources Corp. (NYSE:RRC) and Ultra Petroleum Corp. (NYSE:UPL) , but for many players that moved away from gas production to stress more lucrative oil, the new environment has them feeling whipsawed. Overall, better global growth will likely be necessary to drive energy prices higher.

Can these sectors bounce back?
Last week’s stock market moves called into question whether the bull market will continue, and a reversal could make past trends relatively meaningless. For now, though, materials and energy appear likely to keep suffering from weak economic activity levels around the world, while technology is more of a wildcard and could bounce back more sharply if consumer and business customers feel more confident about investing in new tech products.

The article The S&P’s Worst-Performing Sectors in 2013 originally appeared on

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends Range Resources and Ultra Petroleum, and it owns shares of and has options positions on Ultra Petroleum.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.