Best Sector ETFs For October

October is the month in which some of the most memorable declines for U.S. stocks have taken place, but the tenth month of the year is more kind to equities than many investors are led to believe. Historical data indicate that over the past 20 years, the S&P 500 averages an October gain of 2.1 percent, tying the month April as the best month of the year for the S&P 500.

Strength in October is a potentially important catalyst for the November through April time frame, which is the best six-month period for stocks. As is the case with the other 11 months of the year, there are some sectors that shine bright in October, while there are some that do not do much worth writing home about.

Seasonality And Sectors

Among the sector SPDR exchange-traded funds, the Technology SPDR (ETF) XLK is “Mr. October.” XLK, the largest technology ETF by assets, has averaged an October gain of about 3.5 percent since 1999, the first full year of trading for the sector SPDRs, according to CXO Advisory data.

Related Link: What Is This Year's "October Surprise?"

Assuming XLK lives up to its historical averages in October, that would help the technology ETF build on an already impressive 12.5 percent year-to-date gain. So far this year, XLK is outpacing Apple Inc. AAPL, its largest holding, by over 400 basis points.

Another Winning Sector

Probably in anticipation of the holiday shopping season, the Consumer Discretionary SPDR (ETF) XLY is usually the second-best sector SPDR ETF in October, averaging a gain of almost 3 percent, according to CXO data.

Should XLY live up to its October reputation, that probably means Amazon.com, Inc. AMZN is moving higher as well. Amazon is 13.8 percent of XLY's weight, or more than double the weight assigned to the ETF's second-largest holding.

It's Not All Treats For October

As for the sector SPDRs to avoid in October, it is worth noting that none average negative returns in the tenth month of the year, but CXO data suggest the Utilities SPDR (ETF) XLU and the Energy Select Sector SPDR (ETF) XLE are the two worst performers of the group in October.

For its part, XLU is down more than 3 percent this week and more than 5 percent in the third quarter. If bond markets start pricing in higher odds of a fourth-quarter interest rate hike from the Federal Reserve, October could be rough for XLU, the largest utilities ETF.

Full ratings data available on Benzinga Pro.