More direct plays on the holiday spending theme include the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY). For its part, XLY is heavily allocated to media names with a 29.5% weight, but high-flying Internet stocks such as Amazon (NasdaqGM: AMZN) and Priceline (NasdaqGM: PCLN) will also have their say in how the ETF acts this earnings season. Amazon and Priceline combine for 10% of XLY’s weight.
Industrial ETFs, a group of funds that have been receiving ample attention and praise in recent weeks, are shaping as strong earnings plays as well.
“We think that the overall sector will post mid-single-digit sales gains, along with modest margin improvement. We see most of the expected sales growth being driven by slightly more favorable economic conditions in both developed and emerging markets. We also expect margins to be aided by the leverage related to top line growth, cost cutting, and benefits of restructuring programs put in place over the past few years,” said Stovall. “We continue to see the most favorable Q4 results taking place in such sub-industries as Building Products, Airlines and Commercial Aerospace.”
The industrial sector was the best performer last year of the sectors represented in the Dow Jones Industrial Average with Boeing (NYSEArca: BA), often a large holding in many major industrial ETFs, contributing the largest points gain to the Dow. In fact, the top three contributors to the Dow’s 2013 upside were industrial stocks — Boeing, 3M (NYSE: MMM) and United Technologies (NYSE: UTX). [Dow Jones Industrial Average Year in Review]
The Industrial Select Sector SPDR (NYSEArca: XLI) was the third-best of the nine sector SPDR ETFs in 2013 with a gain of 40.5% and is now the third-largest U.S. sector ETF by assets.
S&P 500 Year-Over-Year Operating EPS Growth 2013
Chart Courtesy: S&P Capital IQ