A 3X Industrial ETF for Earnings Excitement
This article was originally published on ETFTrends.com.
Not to be lost in the commotion surrounding this week's spate of third-quarter earnings reports from the financial services and healthcare sectors is the industrial sector.
With earnings season for industrial stocks kicking off in earnest this week, the Direxion Daily Industrials Bull 3X Shares (DUSL) is an idea to consider for risk-tolerant, short-term traders. DUSL tries to deliver triple the daily returns of the S&P Industrial Select Sector Index.
The ongoing uncertainty over the Trump administration’s trade policy threatens to slow corporate spending and drive up costs, which could weigh heavily on the industrial sector, with the tariff-sensitive S&P 500 industrial sectors continuing to underperform the broader market.
A Source Of Strength
While the broader industrial sector is lagging broader equity benchmarks this year, the aerospace and defense group remains a source of strength for the sector. DUSL's underlying index allocates over 28% of its weight to aerospace and defense stocks, by far the benchmark's largest industry exposure.
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Aerospace and defense stocks are part of the broader industrial sector and have been important drivers of the sector’s performance over the past year. In fact, aerospace and defense names have been industrial leaders.
Although the aerospace and defense industry is perceived as being beholden to Uncle Sam’s whims, the allure of late-cycle sectors, including industrials, in a rising rate environment remains in place. Industrials perform well when interest rates rise because rising rates can go hand-in-hand with economic growth. Increased infrastructure spending is also seen as a catalyst for industrial stocks and ETFs.
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For DUSL, the near-term theme is clear: it's all about earnings. This week, 16.58% of the S&P Industrial Select Sector Index reports third-quarter earnings and next week, that number jumps to over 58%, according to Direxion data.
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