The Industrial Select Sector SPDR Fund (NYSE: XLI) just posted its worst month since September 2022.
The ETF, launched in 1998 from State Street Global Advisors, fell roughly 10% in March as the war in Iran sent crude oil surging past $100 a barrel and gutted margins across airlines, manufacturers, and capital goods companies.
Monthly drops of this magnitude have occurred only 11 times in XLI’s 27-year history. The more interesting finding is what happened next.
Why Oil Prices Are Kryptonite For Industrials
Industrial companies are among the most energy-intensive businesses in the S&P 500. They burn diesel to move freight, jet fuel to fly passengers, and natural gas to run factories.
When oil rises by nearly 50% in a month, their cost structures blow up — but the prices they charge customers adjust with a lag, if at all.
That’s exactly what happened in March.
The Iran war closed the Strait of Hormuz, Brent crude surged above $110, and the margin compression hit industrials from every angle. Airlines that had abandoned fuel hedging got obliterated.
Manufacturers saw input costs spike. Equipment companies watched their customers freeze capital spending.
The Hardest-Hit Stocks In XLI – March 2026
The damage has been steepest in the most oil-sensitive corners of the sector.
Airlines, which treat jet fuel as their single largest variable cost, led the decline. Building products and HVAC companies — usually seen as steady compounders — were caught in the crossfire as rising rates and energy costs simultaneously threaten housing activity.
Southwest Airlines Co. (NYSE:LUV) fell 25.5% in March — the worst performer in the S&P 500 industrials index. Axon Enterprise Inc. (NASDAQ:AXON), a high-multiple growth name, dropped 23.1%. Builders FirstSource Inc. (NYSE:BLDR), a housing-linked play, lost 22.5%.
| Company | MTD Return |
|---|---|
| Southwest Airlines Co. | −25.47% |
| Axon Enterprise Inc. | −23.13% |
| Builders FirstSource Inc. | −22.50% |
| Lennox International Inc. (NYSE:LII) | −20.09% |
| Stanley Black & Decker Inc. (NYSE:SWK) | −19.05% |
| GE Aerospace (NYSE:GE) | −17.84% |
| Otis Worldwide Corp. (NYSE:OTIS) | −17.53% |
| United Airlines Holdings Inc. (NASDAQ:UAL) | −17.38% |
| Masco Corp. (NYSE:MAS) | −17.30% |
| A. O. Smith Corp. (NYSE:AOS) | −17.06% |
What History Says After Double-Digit XLI Monthly Drops
XLI has dropped 10% or more in a single month only 11 times since 2000.
The forward returns tell a surprisingly consistent story.
On average, XLI gained 0.9% in the following month, 5.7% over three months and 16.5% over 12 months. Nearly three-quarters of the time, the sector was higher just one month later.
The “baseline” row shows the unconditional average return — what XLI returned over any random 1-month, 3-month, 6-month or 12-month period, regardless of what happened before.
Think of it as the XLI’s “normal” rate of return with no special window attached.
The “excess over baseline” row is the difference: the post-crash return minus the baseline.
It isolates whether buying after a double-digit drop delivered anything above and beyond what you would have earned picking any random month to invest.
At the one-month horizon, the excess return is negligible — just 0.13 percentage points.
But at 12 months, the gap widens to 8.06 percentage points.
That means buying after a >10% monthly selloff has historically delivered roughly double the return of a random entry point over the following year.
| Date | Drop | 1-Mo Fwd | 3-Mo Fwd | 6-Mo Fwd | 12-Mo Fwd |
|---|---|---|---|---|---|
| Sep 2001 | −15.01% | +1.77% | +17.03% | +15.08% | −17.53% |
| Sep 2002 | −11.87% | +4.92% | +5.48% | −1.08% | +19.31% |
| Jun 2008 | −12.44% | +0.79% | −9.44% | −31.14% | −35.43% |
| Sep 2008 | −12.55% | −18.25% | −23.96% | −40.16% | −14.48% |
| Oct 2008 | −18.25% | −8.22% | −18.15% | −13.58% | +0.44% |
| Jan 2009 | −12.00% | −17.03% | +5.58% | +15.87% | +32.85% |
| Feb 2009 | −17.03% | +7.78% | +31.52% | +46.32% | +68.65% |
| Oct 2018 | −10.87% | +3.81% | +2.70% | +11.63% | +12.35% |
| Dec 2018 | −11.21% | +11.43% | +16.49% | +20.20% | +26.49% |
| Mar 2020 | −19.25% | +8.81% | +16.42% | +30.45% | +66.84% |
| Sep 2022 | −10.86% | +13.89% | +18.55% | +22.14% | +22.38% |
| AVG | +0.88% | +5.66% | +6.88% | +16.53% | |
| WIN % | 72.7% | 72.7% | 63.6% | 72.7% | |
| BASELINE | +0.75% | +2.19% | +4.32% | +8.47% | |
| EXCESS OVER BASELINE | +0.13% | +3.46% | +2.56% | +8.06% | |
The 2008 Warning
The table carries one unmistakable warning: Three of the 11 episodes cluster in the 2008–2009 crisis — June, September and October 2008. Buying after the June 2008 drop produced a 35% loss over 12 months.
Buying after September 2008 produced a 14% loss.
The distinction is whether the double-digit selloff was the climax or just the opening act.
In 2008, the financial system was breaking. Each drop was followed by another, worse drop.
In every other instance — 2001, 2002, 2018, 2020, 2022 — the selloff was the event, not the start of a cascade. And the 12-month returns ranged from +12.4% to +66.8%.
Is March 2026 A Cascade — Or A One-off?
The bull case: industrial earnings are being hit by an oil shock, not a credit crisis. Corporate balance sheets are healthy. The labor market, while softening, is not collapsing — unemployment is 4.4%, not spiraling.
Delta Air Lines Inc. (NYSE:DAL) and United Airlines both reaffirmed first-quarter profit guidance in mid-March despite higher fuel costs, suggesting demand is absorbing at least some of the price increase.
The bear case: if oil stays above $100 for another quarter, margin compression compounds. Airlines that can’t fully pass through fuel costs will cut capacity.
Homebuilders facing higher mortgage rates and input costs will defer starts. The consumer — already dealing with $4-gallon gas costs — starts pulling back on discretionary spending.
The forward returns in the data favor the dip buyer when industrial stocks sell off sharply. It also says don’t expect to feel good about it for a few months — the edge is real, but it only shows up if you hold long enough.
But the 2008 cluster is a reminder that the signal works best when the selloff is driven by a temporary shock — not a structural unraveling of the economy.
Photo: © Rob Schumacher – Imagn Images
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