Stock ETFs Higher as Energy Leads, Consumer Staples Bleed

May 25th at 5:35pm by Tom Lydon

Stock exchange traded funds rose Wednesday as Halliburton (NYSE: HAL) paced the energy sector but consumer staples ETFs declined on weakness in Costco (NasdaqGS: COST) and Kraft (NYSE: KFT).

Energy ETFs were Wednesday’s top-performing sector thanks to a rally in crude prices back above $101 a barrel and strength in Halliburton and other energy stocks. Energy Select Sector SPDR Fund (NYSEArca: XLE) was up nearly 2% while Halliburton jumped more than 4% after an upgrade at Morgan Stanley. The energy ETF is up about 10% year to date. U.S. Oil Fund (NYSEArca: USO) followed crude prices higher with a roughly 2% advance Wednesday. [Energy ETFs Rally on Oil, Halliburton]

Retail ETFs were in the red Wednesday along with Costco (NasdaqGS: COST) after the warehouse club operator reported quarterly net income that fell short of analyst estimates after a charge. Costco shares “have had a good run of late and are enjoying a healthy multiple, so we could see a modest pullback and we would be buyers,” Jefferies analysts said. Other Wall Street analysts expressed concern over profit margins that could be pressured by rising inflation. Retail HOLDRS (AMEX: RTH) and Consumer Staples Select Sector SPDR Fund (NYSEArca: XLP), which both hold Costco, were fractionally lower Wednesday. [Retail, Consumer Staples ETFs Down After Costco Miss]

A spreading fungal infestation over Latin America’s cocoa crops could potentially decimate global supply and push cocoa prices, along with related exchange traded notes, higher. The iPath DJ-UBS Cocoa Subindex ETN (NYSEArca: NIB) is down 5% year-to-date. The iPath Pure Beta Cocoa ETN (NYSEArca: CHOC) is a recent addition to iPath’s ETN lineup. Frosty pod rot, a fungal infection that destroys cocoa pods, is making its way across Latin America, reports Jean Guerrero for The Wall Street Journal. Experts attribute the rising spread of frosty pod rot to abnormal temperatures and rainfall. [Watch Cocoa ETN as Fungus Threatens Crops]

Homebuilder ETFs were higher Wednesday after sector bellwether Toll Brothers (NYSE: TOL) reported a smaller loss and said orders rose 7% in the latest quarter, lifting hopes for the key spring selling season. n other housing data, the Federal Housing Finance Agency on Wednesday said U.S. house prices fell 2.5% in the first quarter. It was the largest quarterly decline since the fourth quarter of 2008, according to the report. SPDR S&P Homebuilders ETF (NYSEArca: XHB) and iShares Dow Jones US Home Construction (NYSEArca: ITB) were both up more than 1%. [Housing ETFs Build Gains on Toll Brothers]

iShares, BlackRocks ETF business, recently launched two globally-orientated Treasury inflation-protected securities (TIPS) funds, which will compete directly with the SPDR DB International Government Inflation-Protected Bond ETF (NYSEArca: WIP). The two new funds will provide ETF investors with exposure to international sovereign debt while trying to mitigate the potential damages caused by rising inflation. The iShares International Inflation-Linked Bond Fund (NYSEArca: ITIP) tries to reflect the performance of the BofA Merrill Lynch Global ex-US Diversified Inflation-Linked Index. The iShares Global Inflation-Linked Bond Fund (NYSEArca: GTIP) tries to reflect the performance of the BofA Merrill Lynch Global Diversified Inflation-Linked Index. [iShares Launches Two Foreign TIPS ETFs]

Gregory A. Clay contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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