5 ETFs to watch this week

As Amazon, eBay and Netflix prepare to report earnings, Internet stock funds will try to build on last week's tech rally. Gold, energy and aerospace are other sectors to keep an eye on.

By TheStreet Staff Apr 25, 2011 10:32AM

By Don Dion, TheStreet

 

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

 

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

 

So far, earnings season has proven largely positive for the technology sector after firms including Intel (INTC), Apple (AAPL), and IBM (IBM) all reported stellar performance over the past three months.

 

For FDN, however, the first few weeks of earnings season have been a mixed bag. Yahoo (YHOO) and Juniper Networks (JNPR) reported promising numbers last week. Meanwhile, however, index leader Google (GOOG) has struggled to regain ground after releasing a troublesome report.

 

FDN will be back in the spotlight this week as a number of major components announce their quarterly earnings, including Amazon (AMZN), eBay (EBAY), Akamai (AKAM) and Netflix (NFLX) are slated to report throughout the week.

 

2. iShares Dow Jones U.S. Aerospace & Defense Index Fund (ITA)

 

After seeing strong earnings from United Technologies (UTX), it will be interesting to see if fellow components of the aerospace and defense industries can follow through.

Half of ITA's top 10 holdings will announce their quarterly performance this week. Together Boeing (BA), Lockheed Martin (LMT), Northrop Grumman (NOC), Raytheon (RTN) and General Dynamics (GD) account for close to a third of the fund's total portfolio.

 

Although earnings may provide ITA with a nice bounce in the near term, this is a sector I would approach with caution. As Washington remains focused on our looming debt issues, defense spending will likely face pressure.

 

The Industrial Select Sector SPDR (XLI) may prove to be a more stable way for long term minded investors to gain access to this industry. By casting a wide net over industrial firms, XLI's index includes UTX, and Boeing within its top 10 holdings.

 

3. Energy Select Sector SPDR (XLE)

 

Included within this week's busy earnings calendar are a number of international energy majors such as Exxon Mobil (XOM), Chevron (CVX) and ConocoPhillips (COP). Other energy notables such as Occidental Petroleum (OXY) and Apache (APA) are listed as well. All five of these firms can be found among XLE's top ten components and together comprise nearly 45% of its total portfolio.

 

These companies will follow fellow top XLE components Halliburton (HAL) and Schlumberger (SLB), which announced their own quarterly performances last Monday and Thursday respectively.

 

Energy has become a wildly attractive region of the markets as investors attempt to target rising oil prices. Although XLE combines exposure to a number of the industry's most well known firms, the fund's top heavy nature may prove concerning. Other funds such as the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) provide a more diversified take on this slice of the markets.

 

4. iShares Dow Jones U.S. Select Dividend Index Fund (DVY)

 

Earnings season is in full swing and companies across the market spectrum are slated to report their quarterly performance numbers in the coming days.

 

In examining the schedule, it was interesting to see the concentration of dividend leaders on the list. Kimberly Clark (KMB), Lorillard (LO), VFCorp (VFC), DTE Energy (DTE), Chevron, Entergy (ETR), Nextera (NEE), Eastman Kodak (EK) and Caterpillar (CAT) are all firms listed among DVY's top 20 holdings. In total, these companies account for close to 20% of the fund's total portfolio.

I have long stood by DVY as an attractive way conservative investors can track the ongoing economic recovery. The consistent yield has aided investors on a number of occasions when turmoil has cropped up. Looking ahead, there are plenty of hurdles in store for the global marketplace. A dividend focused fund such as DVY may be something investors will want to keep on their radars.

 

5. iShares Gold Trust (IAU)

 

Precious metals continue to power higher and late last week gold broke through another brand new all time high, locking in levels above $1,500 per ounce. Silver has stuck to its own dramatic upward ascension as well. Most recently the industrial metal flirted with $45 per ounce.

 

Although many have shown interest in gold in light of its dramatic run up, I continue to view the metal as a long term way to protect against market weakness. By setting aside a small percentage of your portfolio for IAU investors can defend against turmoil down the road.

 

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