This week's ETFs to watch
Look to these investments this week for strength as stocks continue to outperform.
Stocks just keep on chugging higher. Buoyed by a surprisingly strong February jobs report, The S&P 500 ($INX) and the Dow Jones Industrial Average ($INDU) each gained about half a percent last Friday.
For the week, the S&P 500 added 2.2% and is now just 1% below its all-time high. The Dow made a succession of new record intraday highs last week.
The S&P 500 has finished higher in nine of the past 10 weeks. While last week was heavy on economic data catalysts, the same cannot be said of this week. Retail sales on Wednesday and the consumer price index data, due out Friday, will be among the marquee reports. However, a lack of earnings and economic-related catalysts could mean some resting time for the bulls.
Or it could mean investors that are fearful of missing out on the rally start arriving to the party. In either case, the following will be among the ETFs traders will want to keep an eye on in the week ahead.
Financial Select Sector SPDR (XLF)
The Financial Select Sector SPDR or any of its equivalents are worthy of a place on this week's list after racing higher last week due to some encouraging stress test results. However, this week brings results of the more important bank stress tests, the Comprehensive Capital Analysis and Review.
The Comprehensive Capital Analysis and Review is where the Federal Reserve can approve or deny banks' capital plans such as dividends and share repurchases (read on Benzinga). If the news on this front is positive, particularly for the likes of Bank of America (BAC) and Citigroup (C), expect the XLF and related ETFs to race to new highs. Leveraged alternative: ProShares Ultra Financials (UYG).
First Trust NYSE Arca Biotech Index Fund (FBT)
While there are no expected Food and Drug Adminstration headlines due out this week that could impact the FBT and its holdings, it should be noted this ETF and its rivals have been racing to new all-time highs in recent days. That does not mean investors have missed out on the biotechnology rally. In fact, the back half of March is loaded with potential catalysts for the sector (read on BioPharm Catalyst).
In the meantime, strong uptrends in holdings such as Celgene (CELG) and Gilead Sciences (GILD) should continue to support FBT. As should the biotechnology sector's relatively low correlation to the S&P 500 in the event of a pullback. If the FBT does pullback, something that does not look imminent, investors can consider adding to existing positions in the $51-$52 area.
iShares MSCI Emerging Markets Index Fund (EEM)
EEM, the second-largest emerging markets ETF by assets under management, has been somewhat of a laggard this year, but the fund is starting to show some signs of life.
Not only did EEM rise nearly 2% last week, but its chart is improving and options traders are showing a bullish bias with the ETF, according to The Wall Street Journal.
The near-term keys for EEM include continued bullishness in Brazilian stocks and any potential for a rebound in Chinese and Indian shares. Also consider the PowerShares DWA Emerging Markets Technical Leaders ETF (PIE) as an alternative or complement to EEM.
For more on ETFs, click here.
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These ETFs are benchmarked to extremely out-of-favor foreign markets that most investors would quickly pass over. Whoever said being a contrarian was easy?
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