Alcoa Earnings Could Move Metals ETF
ETF Outlook for Tuesday July 8, 2014
The major U.S. indices fell Monday to kick off the week in the red. The Dow lost 0.26 percent, but was able to hold above the 17,000 level. The high beta stocks underperformed, with the NASDAQ losing 0.77 percent as money flowed into the “boring” sectors of the market.
The market opened lower again Tuesday and more light volume selling could be the theme this week.
iShares Dow Jones Transportation Index ETF (NYSE: IYT)
The sector lagged the overall market Monday with a loss of 1.05 percent, led lower by the airline stocks. The selling Monday is no reason to panic as the ETF closed at a new all-time high to end last week, even though the airlines stocks have struggled the last couple of weeks. The airlines make up 15 percent of the ETF while the railroad sector has its highest weighting at 24 percent. Investors can expect the ETF to be on the defensive in early trading.
SPDR S&P Metals and Mining ETF (NYSE: XME)
After Tuesday's closing bell, Alcoa (NYSE: AA) unofficially kicks off earnings season when it reports its numbers for the second quarter. Analysts expect earnings to increase by 42 percent over last year, but revenue to decline by three percent. The stock is up nearly 40 percent in 2014 and may need a good number to keep the momentum going.
Alcoa is not a top 10 holding in XME, however if the stock is moving it could have an affect on other metals companies that will move the ETF.
Alerian MLP ETF (NYSE: AMLP)
The entire group of master limited partnerships (MLPs) have seen a hit the last few days after the jobs number was reported. The theory is that as the economy improves as evidenced by the jobs report, the Fed could raise interest rates sooner rather than later. This would put pressure on investments that already pay high dividends. With risk-free interest rates on the rise it makes MLPs less attractive.
As of now, it looks like it will be at least another year until the Fed makes any moves; therefore, the pullback in AMLP and its peers may be short-term.
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