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.

Activity in the shipping sector can send strong, indisputable signals about the state of the global economy. What’s the message it’s sending now? The signals seem to be mixed:

• Dry Ships (Nasdaq: DRYS) reported earnings on Monday, handily beating Wall Street’s estimates. The company said that increases in spot charter rates and higher revenues from drilling rigs helped the bottom line.

• The Baltic Dry Index last year shot up to a record high before collapsing. This year, the index has recovered, while still hovering below its 10-year average. Shipping prices also have remained flat, and could become more depressed as a new influx of ships come due for construction.

• Shipping demand is generally considered to be related to commodity demand, although commodities lately have struck out on their own, reports Mark Gongloff for The Wall Street Journal. (The shipping sector changes course).

Once global demand resumes, shipping prices should recover and an increase in available ships will be moot. (What challenges are facing the shipping industry?) Monitor the trend lines as this sector finds a firm footing. As consumers begin to spend more and nations struggle to rebuild, this sector will ultimately reflect a shift in tides. Read about trend following here.

For more stories about shipping visit our shipping category.

• Claymore/Delta global Shipping (NYSEArca: SEA): up 29.7% year-to-date



• PowerShares Global Progressive Transport (NYSEArca: PTRP): up 46.9% year-to-date

Specialty-sector ETFs, or “thematic” ETFs, have become a hit with investors, covering more than 40 unique themes in the market with more than $10 billion in assets under management, according to IndexUniverse.

While some consider thematic ETFs “gimmicky” and believe these forms of ETFs are only popular when the media is hyping the sector, they have their advantages and an investor should be aware that such options are available.

Specialty ETFs can help round out a portfolio and allow investors to take advantage of different segments of the market. To spot opportunities, watch the trend lines.

Alternative energy. Skyrocketing energy prices have brought more investor interest to all sorts of energy investments. The largest alternative energy ETF is PowerShares WilderHill Clean Energy Portfolio (NYSE Arca: PBW), currently up 23.4% year-to-date, with $743 million in assets under management. PBW is more focused on U.S.-listed companies.

Coal. The cheapest energy source of BTUs. Ever-increasing oil prices are encouraging the development of the coal. The largest coal ETF is Market Vectors Coal ETF (NYSE Arca: KOL), currently up 1.3.4% with $277 million in assets. KOL primarily includes mid-cap miners, weighted 49% in U.S. companies, 23% in China and 15% in Indonesia.

Nuclear. Once operational, nuclear power is seen as the cheapest kind of energy, but the industry is still grappling with the issue of nuclear waste. The largest nuclear ETF is Market Vectors Nuclear Energy ETF (NYSE Arca: NLR),  currently up 21.7% year-to-date, with $166 million in assets. NLR has a 40% allocation to uranium miners, with other weightings in power generation and plant construction firms.

Commodities. ETFs are an easy way for a commodity trader to access this area of the market. The largest hard asset commodity ETF is Market Vectors Agribusiness ETF (NYSEArca: MOO), currently up 40% year-to-date, with $1.5 billion in assets. Other areas include water resources, steel, timber and broad-based commodities.

Infrastructure. Infrastructure covers companies involved in construction and repair of roads and bridges, building and maintaining power grids, telecommunication networks and sewage systems. Worldwide stimulus funds have been steadily injecting more money into the sector. The largest infrastructure ETF is iShares S&P Global Infrastructure Index Fund (NYSE Arca: IGF), currently up 12.9% year-to-date, with $267 million in assets.

Transportation. There’s no denying the economic impact of transport systems. The Claymore/Delta Global Shipping ETF (NYSE Arca: SEA) is currently up 25.9% year-to-date, with more than $70 million in assets. SEA is a good indicator for economic activity and commodities demand.

Green. The green sector provides environmentally-friendly technology for an evolving society. The largest green ETF is PowerShares Cleantech Portfolio (NYSE Arca: PZD), currently up 29.8% year-to-date, with $145 million in assets. PZD tracks the performance of companies whose products improve productivity while reducing consumption of natural resources.

Other. Or “miscellaneous” category that includes gaming, luxury items and Chinese real estate to name a few. The largest ETF in this area would have to be Market Vectors Gaming ETF (NYSE Arca: BJK), currently up 46.7% year-to-date, with $108 million in assets. BJK tracks global gaming companies.

Max Chen contributed to this article.

Things have been tough for shipping companies as corporations around the globe have implemented lean measures, including trimming inventories and cutting order loads, to cope with the global economic crisis.  Most recently, Danish shipping giant Maersk Line, reported a loss in the first half of the year of nearly $1 billion because of a reduction in freight rates and lower transport volumes.

According to Analia Murias of FIS Worldnews, shipping companies have been partnering with ship owners to inject capital and/or sell dispensable assets as well as renegotiating contracts with shipyards to cope with the downfall.

Things are improving for shipping companies as the overall health of the global economy improves and businesses start to replenish inventories that have been depleted.  Experts in the industry, however, such as the head of Maersk, believe that the recovery will be slower than in other sectors and industries.

• Claymore/Delta Global Shipping Index (NYSE Arca: SEA): up 23.6% year-to-date.

For more stories on shipping, visit our shipping category.

Kevin Grewal contributed to this article.

Comments from Federal Reserve Chairman Ben Bernanke and encouraging real estate reports indicating that the prospects of a near-term economic recovery in the United States are good, which made investors happy. This recent bout of optimism, in addition to good economic news from the eurozone, sent world stocks to a 10-month high.

Additionally, crude oil rallied toward $75/barrel, also reaching a 10-month high.  Growing signs of a global economic recovery and rising tensions in Nigeria promoted support in black gold and sent the United States Oil Fund (USO) up 0.9% in intraday trading.

Industrial orders in the 16-nation eurozone rose 3.1% in June from the quarter before, indicating that manufacturing on the continent may be emerging from the recession.  A key gauge of the industry’s future growth – new orders – rose in both Germany and France, underscoring improvements in the region.

In shipping news, the Baltic Dry Index, which is already down 26% for the month, is expected to take a further decline, as China puts the brakes on commodity purchases, report Art Patnaude and Neena Rai for The Wall Street Journal.  The index is a barometer for shipping costs for commodities and is seen as a key indicator for global economic growth and production.  This most recent drop in the index is the sharpest decline since October, when uncertainty sent the index down 72%.

In an attempt to bolster innovation and jump ahead of the curve, cell phone maker Nokia (NOK) announced that it is making an entry into the PC market with the unveiling of its mini-laptop computer.  The Netbook computer will utilize Windows software and will be a fully-functional computer with high-speed mobile Internet access capability.

Overall, all three major U.S. indexes were up in morning trading with the S&P 500 leading the pack, up 0.9%, followed by the Dow Jones Industrial Average adding 0.8% and the Nasdaq gaining nearly 0.7%.

For more stories on crude oil, visit our oil category.

Kevin Grewal contributed to this article.

During the first six months of the year, the shipping industry shrank by almost 16%, the first accounted stunt in growth for the industry, report Alexander Jung, Thomas Schulz and Wieland Wagner for Spiegel Online. The number of containers being shipped by America is down 19.2%, Europe is down 17.8% and Asia is down 14.8%,  reports Speigel Online.

Among other worrisome statistics:

• The giant ships are sailing half-empty or left docked in harbors.
• Billions are still being spent on ports with diminished traffic.
• Bankruptcy looms over leading shipping line operators, shipping banks and charter shipping companies.
• New orders for ships currently represent 50% more than the worldwide container capacity; this excess capacity could depress shipping prices. In an attempt to reduce loading capacity, companies are decommissioning ships. Chairman of the Maritime and Port Authority of Singapore Lucien Wong calculates that 450 container ships, or 10% of the global fleet, are now idle worldwide.

All the problems stem from the drastic declines in consumption in the West and production in the East. Companies currently get around $500 to ship a container from Asia to Europe, or $300 less than break-even. Compared to a year ago, companies were collecting more than $1,500 per container.

There are some shipping companies that have remained financially strong, however, and they’re accused of fueling a price war to gain a large piece of the market. While none of the major companies are turning a profit right now, ones with backing from strong corporations or governments are in a better position.

• Claymore/Delta Global Shipping (SEA): up 22.8% year-to-date

For more information on shipping, visit our shipping category.

Max Chen contributed to this article.

From the waters off Asia to Europe, about 10% of the world’s merchant trade ships remain anchored because of the fallout of global trade. The Baltic Dry Index, a composite measure of the cost of shipping bulk cargoes such as iron ore and coal, has been hit hard by the recession. It has fallen 90% between October of last year and June, reports The Economist.

There is also a backlog of new ships, which equals two-thirds the capacity existing, and many are due for order off shipways over the next four years. This could exceed the need of the market anywhere from 50%-70%.

On the other hand, some manufacturers are noticing an increase in orders, reports Guy Campanile for CBS News. As more countries recover and begin to order raw materials, then ship the finished goods, the sector could begin to see renewed growth.

• Claymore/Delta Global Shipping (SEA): up 22% year-to-date

For more stories about shipping, visit our shipping category.

Tom Petruno of The Los Angeles Times states that in order to support the rally in the Dow, one must confirm a rally in railroads, airlines and truckers.  Additionally, the focus on transportation is relatively “old school” and is indicative of a belief that investors think shipping of goods is increasing and an economic recovery is in the offing.

Although this is good theory, last week’s earnings report from shipping giant UPS Inc. (UPS) indicated otherwise.  UPS reported a decline in profit of 49% driven primarily by a decline in shipping of daily package volume and lower fuel surcharges.

Relatively speaking, the sector has performed well so far this year. The  iShares Dow Jones Transportation Average (IYT) which is up 1.7% year-to-date, 14% over the last three months and resides above its 200-day moving average.

The Claymore/Delta Global Shipping (SEA) has fared even better, up 22.5% year-to-date.

For more stories on transportation, visit out transportation category.

Kevin Grewal contributed to this article.

The Claymore/Delta Global Shipping (SEA) reflects the Delta Global Shipping Index, which measures the performance of maritime shipping industry firms in global developed markets, writes Done Dion for TheStreet. The ETF’s portfolio has dry bulk goods and the leasing and/or operating of tanker ships, container ships, specialty chemical ships and liquefied gas or dry bulk goods transport ships.

SEA has 30 holdings with an expense ratio of 0.65%. The fund has a 58.7% allocation in industrials and 41.3% allocation in energy. The components within the fund are based on market capitalization and liquidity.

Investors are coming back into shipping, realizing that countries such as China are demanding materials en masse. More recently, the shipping industry is being driven by steel demand and higher demand from China and emerging markets will likely raise rates on dry bulk shipping.

When talking about the shipping industry, the most important ratio is “bottoms,” or number of ships, to demand for transported goods. If there are more products than bottoms then the rates are high; if there are more bottoms than cargo, then rates are low.

• Claymore/Delta Global Shipping (SEA): up 17% year-to-date

For more information on shipping, visit our shipping category.

Max Chen contributed to this article.

Since 2000, the Middle East has seen growth above 5% and has become the second richest part of the emerging world, according to ETF Grind. But Mideast economies were slower to recover in the beginning of 2009 and there were concerns over the ability of the region to pay down debt accumulated in the good years.

Over the long-term period, there are several ETFs that an interested investor could keep an eye on:

• iShares MSCI Turkey Invest Mkt Index (TUR): up 30.9% year-to-date. Turkey’s economy isn’t tied too heavily to oil. It remains dependent on exports to the EU. The country’s industrial sector can profit from its close proximity to oil producers.
• Market Vectors Agribusiness ETF (MOO): up 36.6% year-to-date. Economic develpment and population growth would make the Middle East would effect global food demand more than elsewhere since the region has little arable land. Middle Eastern countries are already securing land for a steady food supply and will need the necessary equipment and supplies.
• PowerShares Global Water (PIO): up 10.8% year-to-date. Needless to say, the region has a scarcity of freshwater. The Middle East has the biggest market for desalinization plants and expensive water engineering projects. PIO holds 29 global water resource firms.
• Market Vectors Gulf States ETF (MES): up 15.4% year-to-date. MES covers Middle Eastern countries that border the Persian Gulf. It is weighted toward finance, real estate and services. Its expense ratio is 1.00, but it is a pure play on oil related economies.
• iShares MSCI Israel Cap Invest Mkt Index (EIS): up 33.5% year-to-date. Israel has reputable pharmaceutical and tech sectors.
• Claymore/Robb Report Global Luxury (ROB): up 13.3% year-to-date. When crude oil rises again, Middle Eastern royals will be swiping their super platinum cards in purchasing luxury goods.
• PowerShares MENA Frontier Countries (PMNA): up 15.9% year-to-date. PMNA is similar to GULF but excludes gulf nations of Qatar, Bahrain, and Oman. It also has a higher expense ratio. It is broadly diversified with Morocco and Egyptian firms. The fund mainly invests in large and mid caps.
• Claymore/Delta Global Shipping (SEA): up 31.8% year-to-date. Recovery in oil prices and Middle East production could translate into strong earnings for global shippers. Crude oil makes up aruond 1/6 of global trade.
• WisdomTree Middle East Dividend (GULF): up 8.4% year-to-date. GULF has a broad market Middle East and North Africa exposure. It has a wider selection of holdings than PMNA or MES, a lower expense ratio, and is dividend weighted rather than capitalization weighted. But the funds competition, GULF is a little low on volume.
• iShares Dow Jones U.S. Oil Equipment Index (IEZ): up 39.7% year-to-date. Major equipment and service companies included in this fund have business in the Middle East. IEZ has outperformed crude oil ETFs and indexes of major integrated oil companies year-to-date.

As always, watch the trend lines to see what actually materializes.

For more stories on the Middle East, visit our Middle East category.

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

Max Chen contributed to this article.