5 ETFs to watch this week

Japan's earthquake and tsunami and the crisis in the Middle East and North Africa will weigh heavily on several funds.

By TheStreet Staff Mar 14, 2011 11:06AM

By Don Dion, TheStreet


Here are five exchanged-traded funds to keep an eye on in the days ahead.


1. iShares MSCI Japan Index Fund (EWJ)


Japan will be closely watched as the nation takes initial steps to rebuild after Friday's devastating earthquake and tsunami.


The Japanese marketplace had proven to be an attractive destination in recent months as internationally-minded investors opt for exposure to developed economies. According to the February flow report released by the National Stock Exchange, EWJ saw the second largest inflows among the entire ETF universe.


In the coming days, EWJ will be volatile. However, as political and economic tensions continue weighing on the emerging world, this fund may be one to keep on the radar.


2. PowerShares DB U.S. Dollar Index Bullish Fund (UUP)


The dollar displayed strength last week, bouncing off long-term lows as investors sought protection against the headwinds facing various regions of the globe. Although the UUP still remains well off of its 2011 highs, this upward action has allowed the greenback to recover a bit of the ground lost during the opening weeks of the year.

There are a number of factors weighing on investors' minds as we head into this week. UUP has been unloved, but it will be interesting to see if this recent bout of turmoil will thrust the U.S. dollar further into the spotlight.


3. SPDR S&P Homebuilder ETF (XHB)


Homebuilders will be in play in the coming week as investors turn their attention to housing data which is scheduled to be released on Wednesday.


Although the domestic bull market is now embarking on its third year, the residential real estate market has remained a concern. Supply issues continue to weigh heavily on the industry causing funds such as XHB and the iShares Dow Jones US Home Construction Index Fund (ITB) to perform in a volatile manner.


While these funds may be exciting to watch in the near future, investors should continue to use caution. Those anxious for real estate exposure would be better off looking into the REIT-focused iShares Cohen & Steers Realty Majors Index Fund (ICF). Aside from being a more stable product, this fund offers a substantial distribution, which will be welcomed in the event of an economic shakeup.


4. iShares Dow Jones Transportation Average Index Fund (IYT)


Transportation and general economic bellwether FedEx (FDX) will be closely monitored this week leading up to Thursday when the firm is slated to report its quarterly earnings performance.


FedEx is IYT's second largest holding, currently representing close to 10% of the fund's total index.

IYT remains an attractive option for bullish investors looking to tap into the ongoing recovery. However, it will be important to keep an eye on commodities when venturing into this region of the marketplace. Rising costs threaten to strangle performance and may lead to shaky action down the road.


5. United States Oil Fund (USO)


Oil prices stumbled last week despite the ongoing tensions sweeping the Middle East and North Africa. Crude continues to be closely monitored as the markets determine the impact rising energy prices will have on the ongoing economic recovery.


In the coming week, protests in major oil producing regions of the globe are expected to continue and investors will be sure to have their focus set on the commodities picture. USO will be interesting to watch but conservative investors looking to track oil should turn to equity-based funds such as iShares Dow Jones US Oil Equipment Services Index Fund (IEZ) or the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).


The PowerShares MENA Frontier Countries Portfolio (PMNA) tracks the markets of various nations in this region, including Kuwait, Qatar, the UAE, and Egypt. Though I urge against trying your luck with this fund, it will certainly be interesting to watch in the days ahead.


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