ETF Outlook for Tuesday July 15, 2014
The U.S. markets opened the week higher, closing with solid gains after trading with a very narrow range for the entire session. Gold suffered its worst one-day performance of the year as investors shifted out of the yellow metal and back into equities.
The early morning indication was for a weaker market open after Europe was in the red. However, a handful of solid earnings announcements from the financials and healthcare have the buyers back at the table.
iShares U.S. Pharmaceutical ETF (NYSE: IHE)
The ETF’s largest holding, Johnson & Johnson (NYSE: JNJ), beat earnings this morning on both the top and bottom line. The stock is up slightly in early morning trading, and if the momentum carries through after the opening bell it should have a direct effect on the sector and IHE.
The ETF started the week off on a positive note as one of the market leaders with a gain of 1.2 percent on Monday. The rally comes after a healthy pullback to the 50-day moving average. The chart now indicates a new leg higher.
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iShares U.S. Broker-Dealers ETF (NYSE: IAI)
Even after a 1.0 percent gain yesterday the ETF is lagging the market as concerns of a trading slowdown have hampered the sector. This morning it should continue its winning ways after the top holding, Goldman Sachs (NYSE: GS), blew earnings estimates out of the water. The stock is now trading up about 1.5 percent, but once the opening bell rings it should continue to catch a bid.
The good news for IAI is that it has been able to create a series of higher highs and higher lows the last few months, and if this trend continues it could send the ETF to the low $40’s.
SPDR Consumer Staples ETF (NYSE: XLP)
A pullback in late June from an all-time high had some investors concerned the rally in the consumer staples was over. In reality the retreat was just a healthy 2.5 percent pullback to the 50-day moving average before the rally continued. The ETF is now just a few cents below a new all-time high as the longer-term uptrend remains intact.
Consolidation news in the tobacco industry and news of more to come has the sector all over the board and could have an effect on XLP today. The sector makes up 15.4 percent of the ETF’s portfolio.
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