The U.S. index of Leading Economic Indicators (LEI) rose 0.3% in October, marking the seventh consecutive monthly gain, while the Philly Fed regional survey of business activity rose to 16.7 in November, a bit better than expected, reports Bob Willis for Bloomberg. Claims for jobless benefits remained at a 10-month low.

Semiconductor stocks are leading technology stocks lower after a downgrade on 10 semiconductor stocks, including Intel (NASDAQ: INTC) – which is down nearly 5.5% after the Bank of America/Merrill Lynch downgrade, reported Tenzin Pema for Reuters. Merrill said the supply of chips is growing faster than the demand, putting earnings at risk. So far in today’s trading, the Semiconductor HOLDRS (NYSE: SMH) is down about 4% and the SPDR S&P Semiconductor ETF (NYSE: XSD) is also down about 4%. (For more stories on the semiconductor industry, please see our semiconductor category).

A computer glitch this morning at the Atlanta airport, the busiest in the nation, caused cascading flight delays across the nation, reported Brian Knowlton of The New York Times. Air traffic controllers were forced to program flight plans manually. So far in today’s trading, the iShares Dow Jones Transportation Average Index Fund (NYSE: IYT) is down nore than 2% and  the Claymore/NYSE Arca Airline ETF (NYSE: FAA) is down more than 3%. (For more news on the airline industry, please see our airline category).

On the corporate front, there was more downbeat employment news. AOL, which is being spun off from Time Warner (NYSE: TWX), is asking their employee base of about 6,900 for 2,500 volunteers to be laid off, reports Nat Worden of the Dow Jones Newswires. If the voluntary program is unsuccessful, there will be involuntary layoffs announced by AOL. (For more stories on the media industry, see our media category).

Tony D’Altorio contributed to this article.

Accordint to Mark Gongloff of The Wall Street Journal, the transportation sector as a whole has gained 84% since the March 9 market low, outpacing the Dow Jones Industrial Average.  The transportation sector is of much importance because it’s a good indicator of the overall health of the economy. (How to use sector ETFs).

Six of the 20 companies that make up the Dow Jones Transportation Average reported earnings last week, though, and it wasn’t all great news:

• Burlington Northern Santa Fe (NYSE: BNI) reported a 30% drop in third-quarter profit, and it doesn’t expect an improvement in the fourth quarter
• Union Pacific’s (NYSE: UNP) earnings declined 26% in the third quarter as freight volume fell
• CSX (NYSE: CSX) reported a 23% drop in profit, as well, but that beat Wall Street’s expectations

The transportation sector includes airlines, railways and package carriers, all sectors used to transport goods and industrial materials from one place to the next.  With this in mind, it is only logical to think that as the overall economy improves, more orders will be shipped and industrial production will increase and the transportation sector should ultimately follow suit. (Will the rail stimulus help?)

For more stories on the transportation sector, visit our transportation category.

• iShares Dow Jones Transportation Index Fund (NYSEArca: IYT): up 9.8% year-to-date

Kevin Grewal contributed to this article.

Airline Industry. Total airline traffic is still declining, but at a slower rate than it was. Additionally, the drop in freight traffic is declining at a slower rate. Some analysts expect the industry to start taking off in 2010.

• Claymore/NYSE Arca Airline ETF (NYSE: FAA): up 51% in the third quarter

Brazil. Moody’s Investor Services is eyeing Brazil for a possible upgrade to investment-grade. Moody’s would join both Fitch and Standard & Poor’s in giving Brazil an investment-grade rating. A better rating will improved investor sentiment and a boost in the financial sector.

• Market Vectors Brazil Small-Cap ETF (NYSEArca: BRF): up 44.7% in the third  quarter

Commercial Real Estate. The real estate sector has been thoroughly beaten, but some analysts out there feel that the sector has seen the worst, and 2010 could mark a period of improvement. Some pension funds are also beginning to jump into the sector.

• iShares FTSE NAREIT Industrial/Office Complex (NYSEArca: FIO): up 39.9% in the third quarter

Mid-Caps. Mid-cap stocks and companies have done well as the broader market has recovered: in the last six months, they’re up about 45%. Only small-caps have been performing better – small-caps historically outperform the markets after a recovery.

• Rydex S&P Midcap 400 Pure Value (NYSEArca: RFV): up 39% in the third quarter

Insurance Industry. Fed by optimism about the prospect of improving conditions at the insurer, some insurance companies can bounce back higher from prior-year losses while others may see true growth. Property and causality insurers have been spared by a calm hurricane season so far, and most insurers benefited from a recovering financial market.

• SPDR KBW Insurance (NYSEArca: KIE): up 36.7% in the third quarter

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

Max Chen contributed to this article.

According to Sui-Lee Wee and Pete Harrison of Reuters, total airline traffic is still declining, but at a slower rate than it was.  For example, in Europe passenger traffic fell 2.9% and planes were on average 84.8% full, an increase from the same time period a year ago.

Additionally, freight traffic fell 13.4% compared with July 2008, an improvement on the average 22.4% decrease during the preceding six months.

Things are improving for the sector and some analysts even expect airlines to show growth in 2010, but keep in  mind that the industry is influenced by more than just passenger and freight travel numbers. As we saw in 2008, fuel costs are another huge factor and if oil continues to gain in price, it could weigh on the industry.

• Claymore/NYSE Arca Airline ETF (NYSE: FAA): up 23.3% since its inception

• iShares Dow Jones Transportation Average Index Fund (NYSE: IYT): up 8.8% year-to-date

For more stories on the airlines, visit our airline category.

Kevin Grewal contributed to this article.

Most investors will be looking at whether or not the airlines beat Wall Street’s expectations and what plans they have to cut costs and increase revenues for the remainder of the year.  These are great indicators of just how healthy these companies will be, but Matthew Craft of Forbes says that is all about how much cash these companies have on their balance sheets.

Of the four major airlines, Southwest (LUV) is the only one expected to show a profit.  It’s the largest component in the airline ETF, which could help the ETF along some. As for the other three, they carry heavy debt loads and speculative-grade credit ratings.

Although the industry still remains fragile and uncertain, some airlines performed a bit better than expected.  Excluding one-time hedging gains, United Airlines (UAUA) reported a quarterly loss of $2.23/share, lower than analysts’ expected.  Southwest beat analysts’ expectations as well, reporting earnings of $0.08/share, however saw revenue drop by 8.8%.  Continental Airlines (CAL) reported saw a decline in revenue by 23% and posted a loss $1.36/share.

Weak demand and volatile fuel prices have forced all major carriers to trim expenses by slashing jobs and reducing the number of flights.

• Claymore/NYSE Arca Airline ETF (FAA): up 3.2% year-to-date; LUV 15.4%; Continental 14.5%

For more stories on airlines, visit our airlines category.

Kevin Grewal contributed to this article.

It was a busy day for earnings reports and the following affected the markets:

• Bank of New York Mellon (BK) reported a first quarter earnings report that fell short of expectations, sending profits down 57% and forcing the bank to slash dividends to raise capital. The custodial bank reported earnings of $0.53/share as compared to analysts’ expectations of $0.63/share.
• Construction giant Caterpillar (CAT) posted better-than-expected earnings, but stated the future doesn’t look as promising and reduced its forecast. The company reported a loss of $0.19/share as compared to analysts’ expectations of income of $0.04/share.  For 2009, CAT expects to earn $1.25/share down from its earlier forecast of $2.50/share.
• Merck (MRK) reported a drop in earnings because of a decline in sales of its drugs and income from its partnership on cholesterol medicines.  The company earned $0.74/share as compared to analysts’ expectations of $0.78 share and cut its 2009 revenue forecast.
• US Bancorp (USB) was able to beat analyst’s expectations despite losses tied to loans and securities.  The bank reported first-quarter earnings of $0.24/share as compared to expectations of $0.20/share
• Chemical giant DuPont (DD) reported earnings of $0.54/share beating analyst expectations of $0.53/share but painted a bleak future for the remaining of 2009.
• Coca Cola (KO) was able to meet analysts’ expectations by reporting earnings of $0.65/share.  As for the future, the company is confident it will meet its goals because it’s focusing on its core values and keeping costs down.
• Airline giant Delta (DAL) reported a loss of $0.19/share for the first quarter of 2009.  This loss includes the costs incurred with its merger with Northwest Airlines; if these costs are excluded, the airline actually would have posted income of $0.84/share.

On a positive note, Treasury Secretary Timothy Geithner told a congressional panel that most U.S. banks have more capital than needed.  Additionally, he stated that there are signs of thawing in credit markets and some indication that confidence is beginning to return. Geithner suggested that the TARP program has enough money for further bank rescues, reports Rebecca Christie of Bloomberg.

This news sent the financials in positive territory.  The Financial Select SPDR (XLF) was up about 3% in intraday trading.

Geithner’s news seems to have overshadowed the negativity fired off by a report by the International Monetary Fund.  The IMF said that worldwide financial institutions could potentially suffer more than $4 trillion in losses, with the United States accounting for $2.7 trillion of it.  Additionally, the IMF says that the financial system remains under severe stress as the economic crisis broadens and takes its toll on consumers and businesses, states Martin Crutsinger of the Associated Press.

The Dow Jones Industrial Average was up about 1%, the S&P 500 gained nearly 1.2% and the Nasdaq jumped about 1.6%.

Kevin Grewal contributed to this article.

U.S. stocks and exchange traded funds (ETFs) oscillated between positive and negative territory this morning on better-than-expected earnings reports by JP Morgan Chase (JPM) and an unexpected drop in jobless claims.

JP Morgan beat analysts’ expectations, reporting earnings of $0.40/share as compared to the $0.32/share forecasted.  Additionally, the firm posted record fixed-income trading revenue and siad that it can repay U.S. rescue funds. This report, in combination with last week’s earnings release by Wells Fargo (WFC), suggests that there could be a little life left in the financial sector.

Unfortunately, the financials are still not completely in the clear.  JPMorgan says that it still expects loan defaults to increase, losses to increase in credit cards, home equity loans, mortgages and commercial real estate loans and the activity in fixed-income to taper off, states Madlen Read of the Associated Press.  These issues, in combination with over-leveraged financing, has kept many investors skeptical of the overall health of the sector, sending the Financial Select SPDR (XLF), down about 1.8% in intraday trading.

Yet another blow has been dealt to the housing industry, killing any hope of stability for now.  New U.S. housing starts fell more then expected in March by 10.8% to a seasonally adjusted annual rate of 510,000 units, reports the Associated Press.

To add fuel to the fire, new building permits declined by 9%. Completion of building projects rose by 3.5%, however. Additionally, foreclosure filings rose 24% in the first quarter from a year earlier, putting a further damper on home pricing.  A combination of the aforementioned news took its toll on the homebuilders, sending the SPDR S&P Homebuilders (XHB) down about 1.6% in intraday trading, despite being up 0.8% year to date.

On a positive note, new jobless claims fell more than expected for the second straight week.  The Labor Department reported that initial unemployment claims dropped to a seasonally adjusted 610,000 from a revised 663,000 the previous week.  This was significantly below analysts expectations of 655,000 and the lowest level since late January,states Christopher S Rugaber of the Associated Press. Generally, initial jobless claims reflect the pace of layoffs of companies and are considered a timely indicator of the state of the economy.  With this in mind, things are starting to look a little better.

Keep in mind that we aren’t in the clear, though.  The total number of Americans receiving unemployment benefits has surpassed the 6 million mark, for the first time ever and most analysts believe the labor market will remain weak for the remaining of the year on fears that employers are reluctant to hire until a full economic recovery is under way.

Some more big news that hit the markets were the following earnings reports:

• Nokia (NOK) beat analysts’ expectations by posting a smaller loss than expected on profits of $161 million.
• Southwest Airlines (LUV) posted an enormous loss on falling traffic and plans to trim its workforce.  The airline posted a loss of $0.12/share, much larger than the $0.01/share analysts forecasted.  The majority of this loss was a result of their fuel hedges.
• Media giant Gannett Co. (GSI), the publisher of USA Today, beat analysts’ expectations by posting profits of $0.34/share.  Analysts expected profits of $1.44 billion, or $0.24/share

The Federal Reserve released its latest “Beige Book” yesterday, which contained a little bit of economic optimism.  The data this time around showed declining demand for appliances, furniture and other goods, reports V. Dion Haynes for The LA Times. Overall, the report said, economic activity declined further or remained weak. The report is released eight times per year.

The Dow Jones Industrial Average was in the red, down about 0.65%, the S&P 500 was up about 0.12% and the Nasdaq climbed about 0.72% in morning trading.

Kevin Grewal contributed to this article.

This is unusual because, in general, the majority of airline passengers are business travelers and not recreational travelers.  Additionally, when slack numbers arise they are usually a result of consumer travelers cutting back and not a decline in business travelers.  However, at a time where unemployment rates are increasing at alarming rates and businesses are trying to implement lean measures to cut costs, the business traveler is starting to become obsolete.

Consumer demand is still relatively low, but many are starting to splurge a little and spend a portion of their discretionary income on travel.  Additionally, airlines have been slashing costs to entice travelers.  These are great measures to attempt to fire a spark in a much battered industry; however, ultimately it will be load rates and an overall recovery in the economy that will make or break the airlines, states Kai Ryssdal of Marketplace.

For those of you who have traveled recently, it may seem like the occupancy rates on planes are extremely high. This may be correct, however, many airlines have cut the number of flights that they are offering, resulting in a decline in the overall number of passengers traveling.  In the meantime, all the airlines can hope for is to keep what flights they are offering full.

On the positive side, fuel costs have declined dramatically from last year helping out the bottom line.

American Airlines (AMR) reported first-quarter losses that were lower than Wall Street expected, reports Ted Reed for TheStreet. Over the next week or two, other major airlines will release their earnings. The major airlines are expected to report losses in the billions of dollars and posting revenues lower than those seen after the Sept. 11 terrorist attacks in 2001.

An ETF that will be affected is the Claymore/NYSE Arca Airline ETF (FAA), which is up 23% over the last month.

Kevin Grewal contributed to this article.

Despite slashed airfares, world airlines are set to lose $4.7 billion in 2009, taking revenue lower than after the Sept. 11 terrorist attacks in 2001. The International Air Transport Association blames the dire economic conditions around the globe for the weakness, and the demand has lowered faster than originally anticipated, reports Frank Jordans for Associated Press.

Revenues are expected to fall by $62 billion, or 12%, to $467 billion, the association said. Actions to conserve cash are going to impact the delivery of Boeings’ (BA) Airbus planes and take double the losses throughout the industry.

The Asia-Pacific region has been hit the hardest and those carriers are actually dodging the pain of misjudged oil hedging contracts that left other carriers exposed when prices fell last year. No doubt this small crisis within the transportation sector will re-shape and re-size the industry, explains Caroline Brothers for The New York Times.

• Claymore/NYSE Arca Airline (FAA): down 3.4% for one month; up 2.7% in one week

In an ailing economy and a time when consumer confidence is at an all time low, airline companies are slashing prices to attract and entice customers.  How will this affect the industry and the exchange traded funds (ETFs) that track the sector?

Airlines are seeing fewer and fewer travelers and have to do something to fill their seats.  In fact, Continental Airlines (CAL) recently reported that the percentage of occupied seats has decreased to 72.5%, from 76% a year earlier and Delta (DAL) is planning to further cut its capacity for 2009 by anywhere from 6% to 8%, states Mike Esterl of The Wall Street Journal.

To drum up demand, the airlines have slashed their prices by up to 40% from their peak last June. Round-trip airfare from San Francisco to New York can be found as low as $250 per ticket, trips from New York City to Amsterdam have fallen below $400, and from Chicago to Sydney they go for less than $1,000. British Airways has even gone so far to offer round-trip airfare from New York and other major cities across the pond to London for under $500 and is offering buyers of discounted tickets two free nights at hotels across Europe.

With huge declines in crude oil prices, the airlines were hoping that in 2009, they could make up for some their losses suffered in 2008 by maintaining price levels. Because of skittish consumers, though, this plan doesn’t seem to promising. Fortunately for the industry, there are some consumers who are jumping at the opportunity to travel and visit those cities or countries that they have always wanted to.

An ETF that might feel the wrath of lower prices is the Claymore/NYSE Arca Airline ETF (FAA), down 32.6% over the last month; CAL is 12.3% and DAL is 5.6%