5 ETFs to watch this week

Strong quarterly results from JPMorgan and Citigroup could help the SPDR KBW Banks ETF. For Google exposure, consider First Trust Dow Jones Internet Fund.

By TheStreet Staff Jul 11, 2011 10:56AM

Image: Stock investor (© Tom Grill/Corbis)By Don Dion, TheStreet

 

Here are five exchange-traded funds to watch this week.

 

1.    SPDR KBW Banks ETF (KBE)

 

Earnings season kicks off this week with aluminum giant Alcoa (AA) scheduled to announce its quarterly performance and outlook after the bell. A number of companies will follow suit, providing investors with insight into the state of the U.S. and global economic recoveries.

 

Financials will be of particular interest among earnings watchers during the latter half of the week when JPMorgan (JPM) and Citigroup (C) step up to the plate. These two rank as the first- and second-largest KBE components and together account for 15% of its index.

 

Since peaking in mid-February, shares of KBE have stuck to a steady downward path. Strong earnings showings from JPM and C could help to slow the fund's retreat but I urge investors to continue to exercise caution here.

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

 

Google (GOOG) will be sure to draw crowds on Thursday when the company announces its quarterly earnings performance and outlook. ETF investors looking for heavy exposure to the firm should turn to FDN. GOOG accounts for 10% of this fund's assets, making it its number one holding.

 

Last week, First Trust managed to generate a lot of buzz across the investing industry following the launch of its newest subsector ETF, the First Trust ISE Cloud Computing Index Fund (SKYY). The first product of its kind, SKYY is designed to track a basket of companies involved in the cloud computing industry. Although it has only been available since last Wednesday, SKYY has exploded in popularity; the fund's average daily volume already stands at over 500,000.

As investors return from vacation and prepare for the week ahead, SKYY will likely be a fund to keep an eye on.

 

3.    PowerShares India Portfolio (PIN)

 

Infosys' (INFY) earnings report, which is scheduled to be released on Tuesday, will heavily influence the performance of large-cap focused India ETFs. PIN, which sets aside more than 10% of its assets to the firm, will likely be the biggest mover on the news.

It has been a rough year for India-focused ETFs as a medley of factors including the bloody riots in the Middle East and Northern Africa, inflation concerns, corruption fears and the market's general shakiness weigh heavily on investor interest in emerging markets. Although PIN has witnessed a welcomed run up in recent weeks, it remains well off of levels seen at the start of 2011.

 

A positive report from INFY could provide this ETF with a boost. However, I would urge conservative investors to hold off on jumping in until a more stable upward trend develops.

 

4.    SPDR S&P Retail ETF (XRT)

 

This week's economic calendar is loaded with consumer-related reports. During the latter half of the week, investors can expect that XRT will be on the move as retail sales and CPI numbers are released.

 

Last week, investors were treated to some strong same-store sales numbers from top retailers. Leading the pack was Limited (LTD), which saw sales jump 12% from a year earlier. This handedly beat out analysts’ expectations which called for a 3.8% increase.

 

XRT has been on a tear over the past few weeks despite ongoing concerns about the global economic recovery. The consumer is proving to be a resilient corner of the market and may be worth keeping an eye on as we move ahead.

 

5.    iPath Long Enhanced S&P 500 VIX Mid-Term Futures ETN (VZZ)

 

On numerous occasions, I have warned conservative long-term investors to steer clear of volatile VIX-tracking exchange traded products. Although for some, the chance to target volatility directly can be alluring, as we have seen over the past few years, it is difficult to capture upside on a long-term basis.

 

For example, although the market's witnessed a shakeup during May and much of June, products like the iPath S&P 500 VIX Short Term Futures ETN (VXX) failed to capitalize. In fact, the fund is currently trading around all-time lows.

The relentless downward action has taken its toll on one ETN. On July 11, VZZ will be redeemed following its dip below $10 on July 1. Interestingly, however, the ETF industry will not be without a VZZ-like fund.

 

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