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Sector ETFs for April: Energy, Materials, Consumers

NEW YORK (TheStreet) -- Europe's debt woes continue to steal headlines. However, as March made clear, China is increasingly becoming the dominant international elephant in the room. As the nation struggles to maintain growth and defend against a potential hard landing, certain cyclical corners of the marketplace have been greeted with substantial headwinds. The most notable victims have been the energy and materials sectors.

Given that oil prices remain buoyed over the psychologically important $100-per-barrel level, investors would think that energy companies would be sitting pretty as we embark on the second quarter of 2012. This has not been the case. Rather, as China pares back its growth projections, these producers have taken a sharp shot across the bow.

As I mentioned in this week's, "5 ETFs to Watch This Week," the Energy Select Sector SPDR (XLE) has suffered some particularly notable losses over the past month, and is currently leading the Select Sector SPDR family in terms of losses. On a year-to-date basis, XLE's over-7% decline is trumped only by the Utilities Select Sector SPDR (XLU), which is off by nearly 14% during this period.



10 Dow Dogs That Are Barking for Gains Like energy, materials producers have hit a wall in recent weeks as China slowdown fears have cast a fog over industrial commodities. During the month of March, the Materials Select Sector SPDR (XLB) was another standout laggard, dipping nearly 3%.

With the energy and materials sectors dealing with daunting China-inspired headwinds, I am hesitant on funds like XLE and XLB, in the near term. This does not mean that risk should be written off entirely, however.

Historically, April is one of the strongest months for the U.S. stock market and investors can take steps to prepare for potential upside action using a handful of other options. Consumer-related funds, for instance, may offer a compelling opportunity.



7 Companies That Keep on Growing Last week's batch of consumer data came in mixed, with income growth showing little change and consumer spending jumping by the most in seven months. Given the rocky action we witnessed during the latter half of the month, commentators seemed to have homed in on the first statistic, although the latter point was particularly encouraging.

With energy prices on the rise, questions have lingered throughout the opening months of 2012 regarding the resilience of the domestic consumer. This piece of data has helped to confirm that shoppers are still willing to open their wallets.

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