Latest news, trends and ideas for investing with exchange traded funds | ETF Commentary

The outlook for biotech stocks got a boost from Standard & Poor’s Equity Research team which recently upgraded its outlook for the industry to positive from neutral.

S&P recently upgraded Gilead Sciences (GILD), Celgene (CELG), and Vertex (VRTX).  Three ETFs that hold at least one of these stocks include iShares Dow Jones U.S. Healthcare (IYH), Health Care Select Sector SPDR (XLV), and Vanguard Health Care (VHT).

Continue Reading

The WSJ’s John Spence writes that the popular exchange traded funds that focus on financial stocks will be put to the test by this week’s earnings announcements.

The $7 billion Financial Select Sector SPDR Fund (XLF) is expected to be particularly sensitive to the earnings news of large banks due to the fund’s concentrated exposure to Wall Street.

Top holdings for XLF include JP Morgan Chase (11.6%), Bank of America (10.9%) and Wells Fargo (9.7%).  JP Morgan reported earnings last Friday while Bank of America and Wells Fargo are scheduled to report earnings today before the market opens.

Other financial ETFs mentioned in the Spence piece include the Direxion Daily Financial Bear 3x Shares (FAZ) and SPDR KBW Bank ETF (KBE).

Continue Reading

Warren Buffet’s acquisition of Burlington Northern Santa Fe is helping a few funds that have allocated large chunks of the portfolio towards the railroad.

With 11.2% of its assets in Burlington, the iShares Dow Jones Transportation Average (IYT) was a big winner after the acquisition announcement — up 5.3% in one day compared to 0.2% for the S&P 500.

Continue Reading

An earnings surprise and buyout rumors lifted biotech stocks and ETFs higher last week.

In the article Profit Surprise Leads Biotechs Higher, Investors’ Business Daily’s Trang Ho reports that Myriad Genetics (MYGN) reported higher than expected earnings while Human Genome Sciences (HGSI) was at the center of a rumored buyout by partner GlaxoSmithKline (GSK).

ETF investors can gain exposure to the biotech industry through the First Trust NYSE Arca Biotechnology Index Fund (FBT). Other biotech ETFs include the SPDR S&P Biotech ETF (XBI), Nasdaq Biotechnology Index Fund (IBB), and the PowerShares Global Biotech Portfolio (PBTQ).

Continue Reading

Technical analysts are bullish due to the breadth of the recent rally according to the WSJ’s Geoffrey Rogow.

Continue Reading

With a new administration coming to Washington, a debate has emerged over which class of ETFs will benefit from all of the promised new spending – butter or guns?

SmartMoney’s Paulette Miniter argues for guns in the article Military Contractors May Thrive Under Obama.

Her case? The aerospace and defense sector has actually done better during Democratic administrations, according to a recent Merrill Lynch report. In addition, national security stocks are a good hedge against losses in the broader market in a recession. For example, the sector has beat the S&P 500 index by an average 17% in the past two recessions.

Miniter highlights two ways to gain exposure to the Defense sector with ETFs – the iShares Dow Jones US Aerospace & Defense Fund (ITA) and the PowerShares Aerospace & Defense Portfolio (PPA).

Continue Reading

SmartMoney’s Rob Wherry takes a look at the impact of today’s announcement by federal officials of plans to kickstart consumer markets including auto, education and housing.

In the article, New Bailout Plan Can’t Lift ETFs, Wherry notes that home builder ETFs performed better than the overall market which was up less than 1%.

The iShares Dow Jones U.S. Home Construction Index Fund (ITB) was up 11% and SPDR S&P Homebuilders (XHB) was up 8% on the news.

We have seen this movie before. Homebuilders rallied in September before falling dramatically in October and November. See the article Homebuilders Climb Out of the Basement for more.

Continue Reading

Smart Money’s Rob Wherry is reporting that while oil was dropping below $50 per barrel, natural gas moved higher yesterday on an anticipated rise in demand due to cold weather.

As a result, the United States Natural Gas ETF (UNG) was up 3%. For more on natural gas, see Investing in Natural Gas with ETFs.

The rapid drop in oil prices is hurting solar stocks and solar ETFs. Wherry points out that the Claymore/MAC Global Solar Energy (TAN) and the Market Vectors Solar Energy (KWT) ETFs lost 12.8% and 11%, respectively in yesterday’s trading.

Continue Reading

John Spence is reporting on MarketWatch that Financial ETFs were routed as Citigroup plunged more than 20% in today’s trading.

Citi is a large component of State Street’s Financial Select Sector SPDR Fund (XLF) which was down over 10% today. ETF investors who took a short position in ProShares UltraShort Financials (SKF) were up over 21% today.

Continue Reading

The Wall Street Journal is reporting that Citigroup is firing 10,000 people this week and has ordered executives to cut compensation costs by 25%. With a global work force of 352,000, 25% would mean another 60,000 jobs. Citi has already eliminated 23,000 jobs in the past 4 quarters.

Citigroup’s stock has been a death spiral for the past year, falling below $10 this week for the first time since the mid 1990s.

Several ETFs have large exposure to Citigroup. The ETF most at risk is the FTSE RAFI Financials Sector Portfolio (PRFF) which had 7.6% of the fund in Citi as of November 13. The fund is a fundamentally weighted portfolio of the largest financial services firms and is rebalanced annually.

Also at risk is the Dow Jones Financial Services Index Fund (IYG) which has a 5.6% concentration in Citi as of November 13. The fund’s index is cap weighted and rebalanced quarterly.

Henry Blodget and Aaron Task of TechTicker are reporting that, in addition to the job losses, cost cutting has gotten to the point where there are no towels in the restrooms at Citi’s headquarters.

Continue Reading