XLB holds the materials sector of the S&P 500: chemicals, metals and mining, paper and packaging, and construction materials. Earnings of the underlying companies move with commodity prices, industrial demand and economic activity, including demand from China. The sector has tended to do well when growth is accelerating and commodity prices are rising, and to lag when growth slows or the US dollar strengthens, since many commodities are priced in dollars. Specialty chemicals companies make up a large part of the fund and generally have steadier earnings than pure commodity producers. Materials is one of the smaller sectors of the S&P 500, so XLB is smaller than most other Select Sector SPDR funds.
