U.S. stocks finished last week with modest gains, but those modest gains belie what was a wild week on Wall Street. Stocks surged last Monday, even with oil slumping to a six-year low. Then came news out of China that the central bank there moved to devalue the yuan.
That news sent shockwaves through global financial markets, in particular, through already vulnerable emerging markets. As for exchange-traded funds investors should be closely monitoring this week, there are plenty to choose from. Starting with the embattled energy sector is a fine idea.
It would be easy to highlight obvious funds, including the United States Oil Fund LP (ETF) (NYSE: USO) and the Energy Select Sector SPDR (ETF) (NYSE: XLE), the largest equity-based energy ETF. All USO did last week was lose nearly 4 percent on its way to touching another all-time low on Friday. Give XLE some credit. It managed a weekly gain of almost 3 percent.
The ETF is, however, still down 12.4 percent year-to-date and enters Monday trading at its lowest levels in three years. While investors continue piling into XLE in search of value and a bottom, another energy ETF that merits consideration is the PowerShares Dynamic Energy Explor. (ETF) (NYSE: PXE).
Down 3.6 percent this year, PXE has been less bad than rival energy funds and the primary reason why, an advantage the ETF has already gotten some credit for, is its robust exposure to refiners. Without a dedicated refiners ETF on the market yet, PXE makes for an adequate proxy on the stocks that actually benefit when oil prices are low.
Sticking with the energy theme for a moment, it is worth pointing out that the First Trust ISE Revere Natural Gas (ETF) (NYSE: FCG) was one of the top-performing, non-leveraged ETFs last week with a gain of 6.7 percent, as natural gas prices found some relief.
FCG remains an ETF that should be approached with caution. It is home to several of the worst performing S&P 500 stocks, and one week is not enough to reverse the bear trend in natural gas.
While it may feel as though earnings is winding down (it sort of is), retail earnings kick into high gear this week with plenty of the 104 stocks in the SPDR S&P Retail (ETF) (NYSE: XRT) slated to deliver results. The $1.11 billion XRT is an equal-weight ETF, so none of its holdings on an individual basis chart the fund's course.
However, in concert, apparel retailers are significant drivers of XRT's returns, because that industry is nearly 24 percent of the ETF's weight. XRT is up less than 1 percent this year.
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It is hard to have a conversation about ETFs to watch without gold forcing its way in. Perhaps the SPDR Gold Trust (ETF) (NYSE: GLD) merits its place at the table after jumping 1.7 percent last week, a gain fueled in part by the aforementioned yuan devaluation.
The hedge fund community is displaying split affinity for gold and GLD. For example, John Paulson's Paulson & Co., long the largest GLD shareholder, trimmed its stake in the ETF in the second quarter. On the other hand, Stan Druckenmiller’s family office added a GLD stake worth almost $324 million at the end of the second quarter.
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