ETF Trends
ETF Trends

Weak sales and a reduced full-year outlook from home-improvement company Lowe’s (NYSE: LOW) on Monday set a negative tone to start the week for exchange traded funds tracking the retail and building sectors.

Lowe’s before the opening bell said its first-quarter earnings fell from the year-ago period and scaled back its full-year profit forecast. The stock fell Monday morning.

Analysts were worried about the company’s top line and Deutsche Bank noted the quarterly earnings miss appeared to be entirely on the sales line.

“A soft quarter was expected given some weaker supplier and industry data points,” Deutsche Bank analysts wrote in a recap of Lowe’s results. “However, this is probably a bit softer than expected … So expect the stock to be down, particularly in a soft tape. But we think the damage will not be too severe given the weak expectations coming into the quarter.”

Lowe’s is a large holding in Retail HOLDRS (AMEX: RTH), PowerShares Dynamic Building & Construction (NYSEArca: PKB), iShares Dow Jones US Home Construction (NYSEArca: ITB) and SPDR S&P Homebuilders (NYSEArca: XHB). [Can Lowe’s, Home Depot Improve Housing ETFs?]

Lowe’s weak quarter primarily reflected bad weather, Jefferies analysts added. “The shares did not reflect this prior to the release, but if they trade down 5% or more we would be buyers on the notion that enthusiasm could build once better weather sets in,” they said in a note. “May weather has been cooler and wetter year-over-year and while second-quarter guidance is consistent with Street estimates, it does not appear that management is building in much of a rebound yet.

Home-improvement rival Home Depot (NYSE: HD) is expected to announce quarterly results on Tuesday. The consensus estimate is profit of 49 cents a share.

The opinions and forecasts expressed herein are solely those of John Spence, 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.