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3 Sector ETFs For This Week's Earnings Parade

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3 Sector ETFs For This Week's Earnings Parade

For traders that like earnings reports, this is a mammoth week with nearly 680 companies slated to report quarterly results and to say some marquee companies are reporting is an understatement.

On Tuesday alone, four members of the Dow Jones Industrial Average deliver earnings updates followed by seven more over the duration of the week, including all four of the largest U.S. companies by market value: Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), Amazon.com (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOG).

That quartet represents just a sampling of the earnings-driven events traders will be treated to this week. With some sectors likely to disappoint and others offering the potential for pleasant surprises, the following exchange traded funds could be worth considering over the next five days.

Consumer Discretionary Select Sector SPDR (XLY)

Starbucks (NASDAQ: SBUX) gets the ball rolling on Tuesday for consumer cyclical earnings reports this week, but the reality is Thursday could be the day that makes or breaks the Consumer Discretionary Select Sector SPDR's (NYSE: XLY) near-term fortunes.

On that day, Dow component McDonald's (NYSE: MCD) reports before the bell followed by Amazon after the close. With its restaurants down to just takeout and delivery because of the coronavirus, it's widely expected McDonald's won't be an earnings winner.

That shifts the burden to Amazon to carry the day for XLY, which is relevant because the stock commands almost 26% of the ETF's roster. Amazon hasn't prevented the largest consumer discretionary ETF from sinking 10.5% this year, but that's still 158 basis points better than the S&P 500.

Industrial Select Sector SPDR (XLI)

Due in large part to weakness in Boeing (NYSE: BA), the Industrial Select Sector SPDR (NYSE: XLI) is off more than 24% year-to-date. That stock's dramatic decline means it accounts for just 4% of XLI's roster.

However, add of the earnings reports from this ETF's top 10 components this week – including Boeing on Wednesday – and the percentage is close to 19%. Dow components 3M (NYSE: MMM) and Caterpillar (NYSE: CAT) along with UPS (NYSE: UPS) get the XLI earnings party started on Tuesday.

That said, XLI could be taken for a spin on Monday following reports that Boeing is scrapping its $4.2 billion takeover of Brazil's Embraer.

Technology Select Sector SPDR (XLK)

With Microsoft and Apple combining for 41.56% of the Technology Select Sector SPDR's (NYSE: XLK) weight, it's safe to say the largest tech ETF faces an important two-day stretch on Wednesday and Thursday.

However, there may not be much in the way of surprises because both companies already pulled 2020 guidance because of the coronavirus. What could move XLK over the coming days would be commentary on 5G iPhones from Apple and any positive updates from Microsoft, if available, on the Azure cloud business and its efforts to unseat more nimble competitors in the virtual meeting arena.

Visa (NYSE: V), another XLK top 10 holding, joins Apple in reporting after the bell Thursday.

 

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