5 Materials Stocks To Buy On February Rebound

After falling through most of 2015 and starting off badly this year, the materials sector has staged a comeback. The Materials Select Sector SPDR (XLB – ETF report) gained 7.8% over February after a 10.7% fall in January. Fueled by a strong rally in oil prices and relatively encouraging economic data, stocks from the sector have been surging. Meanwhile, a variety of factors have helped gold to regain its sheen, making it the sector’s best choice.

These factors continue to power the broader markets and are likely to drive materials going forward. This is why investors with a growth-oriented approach can ignore the materials sector at their own peril. Given current market conditions, adding these stocks to your portfolio would make for a good option.

Encouraging Domestic Economic Data

Despite causing heartburn for investors since the start of the year, the state of the U.S. economy is not as bad as it seems. Personal consumption during January was the fastest experienced over the last eight months. Income moved up for the tenth consecutive time and by the highest since Jun 2015. Additionally, durable orders increased 4.9% in January to $237.5 billion, the biggest gains in the past 10 months.

Construction spending increased by 1.5% over last month to its highest level in nine years. The second estimate of fourth quarter GDP was revised upward to a gain of 1%. Further, the Atlanta Fed’s GDPNow real-time tracking estimate indicates that GDP for the current quarter will increase by 2.1%.  

Oil Prices Recover

Encouraging comments from key oil producing nations pushed oil prices upward during the latter half of January. Oil prices staged a rebound during the third week after Iran’s oil minister indicated that Iran is ready to support Saudi Arabia and Russia’s move to hold crude production in line.

Oil cemented its gains during the fourth week following a positive outlook from the International Energy Agency (IEA) and encouraging comments from the OPEC secretary general. Data on the sector was also encouraging which provided the sector with a tailwind. Currently, oil prices have recovered more than 30% from the 13-year low they hit on Feb 11, leading to gains for the broader markets and materials stocks.