ETFs to watch this week

Earnings reports from General Electric and JP Morgan will have an important impact on exchange-traded funds that track the industrial and financial sectors.

By TheStreet Staff Oct 11, 2010 12:04PM

thestreetBy Don Dion, TheStreet


Some key earnings reports due this week will play a pivotal role in the performance of exchange-traded funds tracking the industrial and financial sectors. Here are five ETFs that are likely to have an active week.


1. Industrial Select Sector SPDR Fund (XLI)


Earnings season began on a strong note, thanks to last Thursday's analyst-beating report from aluminum giant Alcoa (AA).


Looking ahead to the next few weeks, a number of household names are slated to present their own quarterly performance. On Friday, General Electric (GE) will step up to the plate. Representing more than 10% of XLI's assets, GE's numbers will have a notable impact on this fund's performance.


Recently, GE has taken steps to regain its footing after nearly crumbling amid the global economic slowdown. Last week, the company announced a $3 billion deal to acquire Dresser Inc. Additionally, it bought $1.6 billion in retail credit card assets from Citigroup (C).



While a number of notable financial players such as Citigroup, Zions Bancorp (ZION), Bank of America (BAC) and Bank of New York Mellon (BK) will release their respective quarterly earnings numbers over the next two weeks, JPMorgan (JPM) will kick things off Wednesday. Investors looking for strong exposure to the financial industry should look to KBE.

KBE provides investors with a unique play on the financial industry. While companies such as Citi and JPM command the largest chunks of KBE's portfolio, the fund also sets aside a good portion of its index to smaller regional banks. By diversifying against stable Wall Street giants and more volatile regional banks, this fund is well suited to benefit in times of market strength. 


3. First Trust Dow Jones Internet Index Fund (FDN)


Boasting heavy exposure to companies such as Google (GOOG), Amazon (AMZN), Netflix (NFLX), Salesforce (CRM), and Priceline (PCLN), FDN's index is a who's who of popular names hailing from the technology field.


On Thursday, top holding Google is scheduled to report its quarterly earnings report to the public.


Although a number of FDN's top holdings got knocked this week, I still see good things for this fund looking forward. Throughout 2010, FDN has performed well as consumers become increasingly reliant on smartphones, e-readers and iPads to stay connected to the world around them.

As we head toward the holiday season, I don't see the popularity of the Internet receding. Rather, consumers will likely turn to FDN index constituents such as Amazon and eBay (EBAY) to get their shopping done.


4. iShares Gold Trust (IAU)


Fears and concerns regarding the state of the global economic recovery have caused gold and other precious metals to dominate financial headlines for another week.


Although prices saw a slight dip in the second half of last week, it was not before gold prices tapped against the $1,350 per ounce level. Looking to this week, I don't foresee the media and consumer frenzy surrounding the yellow metal to dissipate.


IAU has become particularly interesting recently with the release of the September data from the National Stock Exchange. In recent weeks and months, BlackRock (BLK), the name behind this fund, has taken dramatic steps to bump up its popularity.


This has included reducing its expense ratio and splitting shares. This month, the fruits of these labors shone through. IAU managed to gather more assets in September than its larger competitor SPDR Gold Shares (GLD).


It will be exciting to watch the showdown between these two funds as we head into the next few weeks.


5. iShares MSCI Malaysia Index Fund (EWM)


iShares Malaysia and other Southeast Asia-focused ETFs such as iShares MSCI Thailand Investable Market Index Fund (THD) and Market Vectors Indonesia ETF (IDX) have seen impressive strength recently, powering higher in our short-term momentum rankings.


The performance from these nations highlights the ongoing trend of investors seeking exposure to emerging markets in Asia and South America in hopes of shielding against economic turmoil plaguing regions of the developed world.


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