Some may argue that it should already be priced into the
market, but the fact is analysts expect earnings from S&P 500
constituents to have declined 2.3 percent during the third
quarter from a year earlier. With earnings reports from Alcoa
) and Yum Brands (NYSE:
) coming Tuesday afternoon, and the possibility of more profit
warnings looming, investors have reasons to be jittery.
In another cautionary tale, recent market weakness, albeit
slight, is visible across multiple sectors. That implies
investors may have precious few sectors with which to find
shelter from a potential market storm. And that means there are
plenty of ETFs that will be under scrutiny as earnings season
rolls along. Keep a watchful eye on the following funds:
Direxion Daily Financial Bull 3X Shares (NYSE:
Triple-leveraged ETFs are not everyone's cup of tea. Nor should
these funds be, but FAS is instructive on multiple levels. Bank
stocks have enjoyed excellent runs this year, but the group's
marquee names still reside below pre-crisis highs.
That could mean more upside lies ahead for long-term
investors, but in the near-term, FAS and its bearish cousin, the
Direxion Daily Financial Bear 3X Shares (NYSE:
), will be tells regarding how much risk investors are willing to
take on with financials. J.P. Morgan Chase (NYSE:
) and Wells Fargo (NYSE:
) get the party started later this week.
If FAS falls below support at $110, FAZ could make a run to
its 50-day moving average and take out psychological resistance
Market Vectors Semiconductor ETF (NYSE:
usually the rough month for semiconductor stocks.
That it was, but October is not going much better. Intel
) touched a new 52-week earlier today. Texas Instruments (NASDAQ:
) is within earshot of a new low. Those two combine for almost 27
percent of SMH's weight. Intel alone is almost 20.6 percent of
SMH's weight on its own.
A bad report from the world's largest semiconductor maker is
bad news for SMH. The ETF must hold support at $30 or risk
Health Care Select SPDR (NYSE:
Abbott Labs (NYSE:
), Eli Lilly (NYSE:
), Merck (NYSE:
) and Pfizer (NYSE:
) share something in common. All are sitting at or quite close to
new 52-week highs. Those four names combine for about 30 percent
of XLV's weight.
There is something else to note about XLV. The ETF trades
about 14 times the expected earnings of its 54 components. That
is barely more expensive the SPDR S&P 500 (NYSE:
) and a decent bit cheaper than the Consumer Staples Select
Sector SPDR (NYSE:
The near-term risks to XLV include traders viewing
pharmaceuticals names as overbought or investors punishing
Johnson & Johnson (NYSE:
) in the wake of Goldman Sachs lowering its rating on the stock
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