U.S. stock ETFs were set to open higher Wednesday following a five-day losing streak on weak U.S. jobs data and lingering European debt concerns. Alcoa (NYSE: AA) kicked off the earnings season for Dow components, while sector ETFs could see action as companies announce first-quarter results.
SPDR Dow Jones Industrial Average (NYSEArca: DIA) is down 3.5% the past five days.
The economy may be past its breakout stage of fast-paced earnings growth, and investors are taking a more reserved approach going into new earnings season. Nevertheless, ETF investors may utilize sector funds to capture earnings plays.
Alcoa shares were up 5% in Wednesday’s premarket trading on better-than-expected earnings. The aluminum producer is widely watched as a barometer for economic activity, writes Don Dion for TheStreet.
If you feel more comfortable with a broad play on the overall sector, the SPDR S&P Metals & Mining ETF (NYSEArca: XME) provides a diversified exposure to mining stocks, with a 3% allocation to Alcoa, he notes.
Alcoa has a smaller position in the Dow ETF because the venerable index weights companies by share price. Alcoa is the second-smallest holding at only 0.6% of the portfolio after Bank of America (NYSE: BAC).
Google (NasdaqGS: GOOG) is also releasing its earnings this week. The First Trust Dow Jones Internet Index Fund (NYSEArca: FDN) tracks large internet-based companies, including a 10% allocation to Google, according to Dion.
Additionally, financial giants, JPMorgan (NYSE: JPM) and Wells Fargo (NYSE: WFC), will announce results this week. Financial Select Sector SPDR (NYSEArca: XLF) weights almost 20% of its holdings to the two banks. However, if this seems too top-heavy, the SPDR S&P Bank ETF (NYSEArca: KBE) follows an equal-weight methodology, with each of its holdings accounting for about 3% of the overall weighting.
Looking ahead, China economic slowdowns, troubles in peripheral Eurozone states like Spain and even lower U.S. jobs data are tempering the growth outlook. [Equity ETF Performance Slides After Big First Quarter]
For more information on sector funds, visit our sector ETFs category.
Max Chen contributed to this article.