October’s rally was supported by surprising earnings-beats from across a few sectors. The exchange traded funds that track broader market segments and individual sectors enjoyed last month more than any other in recent memory but that may all get zapped away with a few troubled sectors set to release earnings this week.
1. Energy
Energy actually enjoyed a solid month last month but those expecting those gains to sustain or continue may be in for a rude awakening. West Texas Intermediate crude-oil is already down from its Friday mark and threatening to fall under the $46 a barrel mark on the New York Mercantile Exchange. Brent Crude dipped under $49 Monday as OPEC production looks to be on hold, according to Bloomberg.
The biggest weight however, according to MarketWatch, will most likely be the earnings coming in this week. The chart below, published by Market Watch using FactSet data, shows the big energy players set to announce this week.
One of the most popular energy-sector ETFs, Energy-Sector Select SDPR (NYSEarca: XLE), holds positions in Pioneer Natural Resources (3.46%), Marathon Oil (1.09%), Spectra Energy (1.92%), Noble Energy (1.55%), Apache (1.53%), Cimarex Energy (0.83%), ONEOK (0.53%), Chesapeake Energy (0.37%), Diamond Offshore Drilling (0.16%).
XLE’s profile actually look similar to ETFs we’ll look at further in this article. All of which have been rebounding back towards their long trend lines over the past month.
Other ETF’s tracking the sector include iShares U.S. Energy ETF (NYSEarca: IYE) and Vanguard’s Energy VIPERs (NYSEarca: VDE).
2. Materials
Materials is another sector that may be hit this week by poor earnings, but from a different headwind. Emerging market exposure and commodity prices have continued to drag on the sector which is expected to be reflected when they report. Reports have pinned profit drops of 16% on average for major players in the industry.
iShares Global Materials ETF (NYSEarca: MXI), Materials Select Sector SPDR (NYSEarca: XLB), and Vanguard’s Materials ETF (NYSEarca: VAW) are all along major players who could be hit. A look at VAW’s chart shows the earnings come in the middle of an extended rally which has pushed it above its 50MA.
3. Industrials
Industrials, the final sector who is expected to dip on earnings this week, is the one least hit but sharing the same troubles as materials. A pullback of 3% is expected due to the emerging market and commodity price concerns.
ETFs that track the sector broadly include the Industrial Select Sector SPDR (NYSEarca: XLI), Vanguard’s Industrials ETF (VIS), and iShares U.S. Industrials ETF (NYSEarca: IYJ).
IYJ’s profile actually shows promising trends as it recently crossed its 200MA. With the pullback expected to be more muted in Industrials there seems to actually be buy signals for investors interested in exposure to the sector as its broader picture has been positive.
