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.

All three major indexes – the Dow Jones Industrial Average, the S&P 500 and the Nasdaq – have hit new intraday highs for 2009. The move was sparked by growth in Japan, a rally in energy and a positive report from the retail sector. Federal Reserve Chairman Ben Bernanke also spoke this morning to say that the central bank would monitor the value of the dollar as they keep rates at record lows. (Is it time to stick a fork in the dollar?). The SPDRs (NYSEArca: SPY) are trading up about 1.5% this morning.

October retail sales made a surprise 1.4% gain on the strength of auto sales, reports Martin Crutsinger for the Associated Press. While the report is just what the markets needed after dismal September figures, analysts are still concerned about consumer spending in general. After all, unemployment is still sky-high, incomes are stagnating and credit remains constricted. Consumer Staples Select Sector SPDR (NYSEArca: XLP) is up about 1% this morning.

UPS (NYSE: UPS) is projecting that it will move about 22 million packages this year on its busiest day, Dec. 21. The volume is slightly higher than what it was in 2008. The number will match the previous record forecast, which was set in 2007, reports Mary Jane Credeur for Bloomberg. iShares Dow Jones Transportation Average (NYSEArca: IYT) is up about 2.5% this morning. (For more stories on transportation, visit our category).

]]> http://www.etftrends.com/2009/11/midday-market-update-indexes-hit-intraday-highs.html/feed/ 0 http://www.etftrends.com/2009/11/6-etfs-consider-recovery.html http://www.etftrends.com/2009/11/6-etfs-consider-recovery.html#comments Fri, 13 Nov 2009 21:00:19 +0000 Tom Lydon http://www.etftrends.com/?p=20641 Despite elevated unemployment levels, the economy appears to be in recovery mode which could be beneficial for certain exchange traded funds (ETFs). But which areas are poised to benefit the most?

Two sectors that have performed well over the past year and are poised to continue moving upward in a recovering economy are technology and consumer discretionary, according to Benzinga.com. Additionally, the transportation sector seems to have some appeal because transportation is required to move finished goods.

Technology is prospering because consumers have an insatiable desire for innovation, while the latest technology gives businesses a much-needed competitive advantage. (More on technology).  The sector can be accessed through the iShares Dow Jones U.S. Technology Sector Index Fund (NYSE Arca: IYW), which is up 54.6% year-to-date.

The consumer discretionary sector has been pummeled by recent economic conditions as consumers remain loath to spend. As the recovery continues and confidence is regained, though, it’s wise to keep in mind that the most beaten-down areas offer the greatest potential for growth. (Why donsumer discretionary is hot).  It can be accessed through the Vanguard Consumer Discretionary ETF (VCR), which is up 39.6% year-to-date.

On the same token, since this is expected to be a soft recovery, it’s worth keeping an eye on the consumer staples sector, as well. The unemployment rate is at a 26-year high, which means that there are still millions of people feeling the pinch. When they shop, they’re looking for what they need, not what they want. PowerShares Dynamic Consumer Staples (NYSEArca: PSL) is up 17.5% year-to-date.

The transportation sector has been hit hard and will naturally improve as the economy does; even Warren Buffett seems good value in the sector, based on his recent acquisition of Burlington Northern (NYSE: BNI). (Where transportation goes from here).  It can be accessed through the iShares Dow Jones U.S. Transportation (IYT) which is up 13.4% year-to-date. For more stories on the transportation sector, visit our transportation category.

The shipping sector is another indicator of how the world is recovering. Once global demand resumes, shipping prices should recover and an increase in available ships will be moot. (What challenges are facing the shipping industry?) As consumers begin to spend more and nations struggle to rebuild, this sector will ultimately reflect a shift in tides. Claymore/Delta Global Shipping (NYSEArca: SEA), up 29.1% year-to-date.

Last, but certainly not least, consider emerging markets. While the United States recovery lags, that doesn’t mean there are no opportunities. Emerging markets have outperformed handily this year – iShares MSCI Emerging Markets (NYSEArca: EEM) is up 61.6% year-to-date, vs. the S&P 500, which is up 20.4%.

For full disclosure, Tom Lydon’s clients own shares of EEM.

Kevin Grewal contributed to this article.

The U.S. dollar has hit a 15-month low against a basket of major currencies today on positive economic news from Asia. The feeling that the Fed won’t raise rates anytime soon and the fact that central banks will continue to provide liquidity could continue to pressure the dollar, reports Bradley Davis for The Wall Street Journal. PowerShares DB U.S. Dollar Index Bearish (NYSEArca: UDN) is down slightly this morning.

Treasury Secretary Timothy Geithner said today that he’s encouraged by the efforts Japan and China have made to increase internal demand instead of relying on Americans. It’s a shift, he said, that could contribute to more stable growth. iShares FTSE/Xinhua China (NYSEArca: FXI) is up about 0.25% this morning.

Homebuilder exchange traded funds (ETFs) are trading as high as 4.5% this morning on news that Toll Brothers (NYSE: TOL) new contracts are up 42%. The luxury homebuilder also expects fourth-quarter revenue to top expectations. SPDR S&P Homebuilders (NYSEArca: XHB) is up 3.2% this morning. For more stories about real estate, click here.

UPS (NYSE: UPS), the world’s largest package delivery service, said this morning that it expects volume to grow next year amid economic recovery. The company also said it may raise shipping rates next year, and the size will be announced in December, reports Harry Suhartono for Reuters. iShares Dow Jones Transportation Average (NYSEArca: IYT) is up about 1.5% today; UPS is 8.2%. For more stories on the transportation sector, click here.

Warren Buffett’s company Berkshire Hathaway (NYSE: BRK-A) announced this week that it plans to buy Burlington Northern Santa Fe (NYSE: BNI) for $100 a share, writes Jack Hough for SmartMoney. Buffett named rail car loadings as his favorite economic indicator.

• iShares Dow Jones Transportation Average (NYSEArca: IYT): up 7.2% year-to-date ; BNI is 11.4%

According to records, Berkshire Hathaway sold shares of Moody’s (NYSE: MCO) after the ratings firm signed off on mortgage securities that turned toxic. During the second quarter, Berkshire dumped Constellation Energy (NYSE: CEG) and reduced holdings in ConocoPhillips (NYSE: COP), Home Depot (NYSE: HD) and United Health Group (NYSE: UNH). The money was used to purchase preferred shares of General Electric (NYSE: GE) and Harley Davidson (NYSE: HOG).

• Vanguard Industrials ETF (NYSEArca: VIS): up 12.5% year-to-date; GE is 12.5%

• First Trust Large Cap Value Opp AlphaDEX (NYSEArca: FTA): up 28.5% year-to-date; HOG is 1%

Berkshire also bought two common stocks that are more widely available: Becton Dickinson (NYSE: BDX), distributor of medical supplies,  and Johnson & Johnson (NYSE: JNJ), maker of drugs, consumer products and medical supplies. Value investors should noted that both BDX and JNJ have increased dividends each year for more than three decades. (How healthcare overhaul affects ETFs)

• iShares Dow Jones U.S. Healthcare (NYSEArca: IYH): up 10.3% year-to-date; BDX is 1.2%

• Pharmaceutical HOLDRs (AMEX: PPH): up 3.5% year-to-date; JNJ is 25.2%

Max Chen contributed to this article.

Warren Buffett’s Berkshire Hathaway (NYSE: BRK-B) has agreed to buy Burlington Northern Santa Fe (NYSE: BNI) for $34 billion. Burlington Northern is the country’s second-largest raiload, and it’s also the biggest transporter of food products and coal, making it a harbinger of economic health, says Samantha Bomkamp for the Associated Press. iShares Dow Jones U.S. Transportation Average (NYSEArca: IYT) is up nearly 5% this morning on the news. Year-to-date, it’s up 3.3%.

Factory orders rose 0.9%, thanks to heavier demand in automobiles, heavy machinery and military aircraft. It’s the fifth increase in six months. The jump has economists optimistic of a recovery, but if consumer spending doesn’t pick up, manufacturing will suffer again. PowerShares Global Emerging Markets Infrastructure (NYSEArca: PXR) is down about 1.2% this morning; Caterpillar (NYSE: CAT) is 2.3%. (Yesterday’s report on industrial activity).

The European Union raised its 2010 growth forecast for the 27 nations to 0.7%, reports David Jolly for T he New York Times. By 2011, the EU anticipates growth of 1.5%. Despite the positive forecasts, the EU still feels that some factors will weigh on a recovery, including weak private demand and a struggling job market. (For more stories on Europe, visit our Europe category). iShares MSCI EMU (NYSEArca: EZU) is down nearly 2% this morning.

For full disclosure, Tom Lydon’s clients own shares of EZU.

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.

The Conference Board’s index of leading economic indicators rose 1% in September. This follows a 0.4% gain in August and it’s the sixth straight gain for the index, reports the Associated Press. Economists predict that the economy grew about 3% in the third quarter, but there are questions about whether this is sustainable as unemployment continues to rise and consumers don’t spend.

Earnings continued to pour in, with mixed results:

• Merck (NYSE: MCK) posted a bigger third-quarter profit thanks to slight rise in sales and a gain after selling one of its divisions to clear a merger with Schering-Plough Corp. The sale brought in $2.8 billion.
• AT&T (NYSE: T) reported that its wireless business is thriving, thanks to phenomenal sales of the iPhone. The provider added 2 million subscribers in the third quarter, blasting predictions.

iShares S&P Global Telecommunications (NYSEArca: IXP) is up about 1% this morning; AT&T is 15.3%



• UPS (NYSE: UPS) reported a third-quarter earnings decline of 43% on declining revenue. The shipper’s CEO said there were signs of recovery, but they’re still holding off on calling a turnaround in demand.

iShares Dow Jones Transportation Average (NYSEArca: IYT) is down about 1.5% this morning; UPS is 8.2%

Oil prices took a step back from 2009 highs and dropped below $80 a barrel. A steadier U.S. dollar is having an impact on retreating prices, since oil is priced in greenbacks. (ETFs for when the dollar weakens).

For more stories on oil, visit our oil category.

There are around 760 ETFs on the market, with 140 aimed at domestic industries that range from nine broad categories all the way down to narrow niche themes, writes Bob O’Brien for Barron’s. According to State Street Global Advisors, about $30 billion has been invested into S&P categories in 2009 alone, up $2.5 billion in 10 years. (6 ETFs everyone should know).

Sector-based ETFs provide an appealing investment idea that many investors want: maximum returns with lower risk. Many advisors also see that these ETFs have the potential to produce more stable alpha, or outperformance, than a strategy of sifting through stocks in a sector. (Which is better – picking stocks or ETFs?)

Other favorable characteristics of sector ETFs include reduced volatility, diversification across a specific industry and liquidity, especially in shorting a sector when shorting individual stocks in the sector isn’t an option. (How sector ETFs can enhance your portfolio).

Doug Sandler, chief equity officer at Riverfront Investment Group, says sectors where the median of the performance range varies from the mean performance, or “wide-dispersion” areas, offers stock pickers opportunities to add value. When dispersions are wide, the chance of picking an individual winner is low and that’s where ETFs come into better use.

When choosing sectors, first consider your options. As stated above, there are broad sector ETFs, such as the iShares Dow Jones U.S. Transportation Average (NYSEArca: IYT), and there are narrower sub-sector ETFs, such as the Claymore/NYSE Arca Airline (NYSEArca: FAA). Bear in mind that the narrower you get, the more volatility you could encounter.

Pick your spots by watching the trend lines – the 200-day moving average can signal to you when to be in and when to be out. The ETF Trend Following Playbook has more on this strategy.

For more information on market sectors, visit our sector category.

Max Chen contributed to this article.

The Labor Department reported that workers filing for jobless claims for the first time dipped to 545,000 last week from a revised 557,000 from the previous week.  This was the lowest level of new claims since early July, which indicates that job cuts could be easing.  The report, however, indicated that those who continue to file for claims increased to 6.2 million, reports the Associated Press.

In the real estate arena, the Commerce Department said housing starts increased in August to their highest level in nine months amid a jump in apartment building. Housing starts rose 1.5% to an annual rate of 598,000 units last month, just below the 600,000-unit pace economists had forecast.  The news sent the iShares Dow Jones U.S. Real Estate (NYSEArca: IYR) up 1.4% in morning trading.

Manufacturing continues to outperform as the Federal Reserve Bank of Philadelphia’s general economic index measuring manufacturing in the Philadelphia area rose to 14.1 from 4.2 in August.  The measure showed the first back-to-back monthly growth since the end of 2007.

At the G-20 summit, President Barack Obama and other world leaders are expected to pledge to keep economic stimulus policies and packages in place until all are certain that an economic recovery is actually ocurring.  Additionally, leaders will try to ensure the expansion around the world, especially in emerging markets, is balanced. It’s a goal economists say will require more savings in the United States and greater domestic demand in countries such as China, states Rebecca Christie and Hans Nichols of Bloomberg.

In the earnings game, shipping giant FedEx (NYSE: FDX) said that it sees signs of a global economic improvement as international shipments increased, but also said that its bottom line will remain weak for the remainder of the year.  FedEx said fiscal 2010 first quarter earnings dropped 53% with earnings of $0.58/share.  The news sent the iShares Dow Jones Transportation Average (NYSEArca: IYT) up 0.2% in morning trading.

Overall, all three major U.S. indexes were in positive territory with the Dow Jones Industrial Average adding 0.4%, the S&P 500 jumping 0.3% and the Nasdaq gaining 0.2%.

For more stories on transportation, visit our transportation category.

Kevin Grewal contributed to this article.