With Dow component Alcoa (NYSE:
) reporting earnings after the bell on Monday, another earnings
season has officially arrived. Following a glum June jobs report,
traders and investors might be looking to corporate earnings report
to lift stocks and spur a summertime rally, but the statistics
indicate the rosiest of scenarios are off the table.
As of July 6, 85 S&P 500 constituents warned their results
would not meet Wall Street expectations. The quarter's expected
earnings growth of 5.8 percent is entirely due to Apple (NASDAQ:
) and Bank of America (NYSE:
), according to Reuters.
Bank of America's contribution comes courtesy of one-time gains.
The NBA market is back: Nothing but Apple. Even with Apple being
the primary driver of S&P 500 earnings once again, a plethora
of other companies and sectors will be under intense scrutiny this
earnings season. Here are some of the ETF plays that could standout
for both good and bad reasons in the coming weeks.
iShares Dow Jones U.S. Technology Sector Index Fund (NYSE:
) The iShares Dow Jones U.S. Technology Sector Index Fund has
steadily gained notoriety for one simple reason: It is the ETF with
allocation to Apple
. Beyond the 23.8 percent weight to Apple, IYW will be in focus
this earnings season.
Micorsoft (NASDAQ: ), the world's largest software company and
9.5 percent of IYW's weight, has already warned on its upcoming
profit report, but dark clouds for IYW may not end there. Last
BMO Capital cut its 2012 revenue estimates
on IBM (NYSE: ) and EMC (NYSE: ) among others. IBM and EMC combine
for 11 percent of IYW's weight.
Arguably, Apple will have to do all of the heavy lifting for IYW
this earnings season.
Market Vectors Oil Services ETF (NYSE: ) Oil services earnings
do not kick into high gear until July 20 when Schlumberger (NYSE:
), the world's largest provider of oilfield services, reports its
second-quarter results. It is worth noting OIH (or a rival fund)
makes frequent appearances on these ETFs for earnings season
Helmerich & Payne (NYSE: ) and Pioneer Drilling (NYSE: )
issued weaker outlooks last week. Halliburton
) (in early June) said rising .
Add to that, amid surging output and falling prices for natural
gas liquids, exploration and production companies are expected to
pare their capital budgets, which spells bad news for service
Materials Select Sector SPDR (NYSE: ) Despite the highly
cyclical nature of its constituency, the Materials Select Sector
SPDR has held up well in recent weeks. A gain of one percent in the
past month for an ETF like this is nothing to scoff at given the
spate of weak economic data the market has had to digest.
Many of XLB's holdings should be benefiting from lower energy
prices, but with the outlook for the global economy tepid at best,
this ETF and others like it are being held hostage by macroeconomic
If companies such as DuPont (NYSE: ), Dow Chemical (NYSE: ) and
Freeport-McMoRan (NYSE: ) can provide investors with positive
earnings surprises, then the risk-on trade could easily be renewed.
Problem is, that is a tough bet to make.
First Trust Consumer Discretionary AlphaDEX Fund (NYSE: ) More
so than the rival Consumer Discretionary Select Sector SPDR (NYSE:
), the First Trust Consumer Discretionary AlphaDEX has fallen
victim to weak economic data. FXD is down more 1.1 percent in the
past month while XLY is up a third of a percent over the same
Home to 125 stocks, FXD allocates no more than 1.45 percent to
any individual holding. How the ETF weights its component is not a
problem. In fact, FXD's methodology would be a selling point in a
The ETF's downside potential is derived from an almost 26
percent allocation to specialty retail names, an almost 12 percent
to hotel and restaurant stocks and a nearly nine percent weight to
the auto industry (manufacturers and suppliers). That leaves FXD
extremely vulnerable to slack economic data.
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