Intel, JP Morgan Boost Tech, Financials ETFs

Many analysts are building up the coming weeks as one of the most important earnings seasons in recent memory, a report card on the strength and sustainability of the economic recovery in the U.S. So far, the grades have been stellar.

Intel (INTC) revenue and profits declined from a year ago, but the chip maker managed to beat Wall Street’s expectations, indicating that the bettered chip industry may be on the brink of a comeback. In the financial sector, J.P. Morgan (JPM) reported much better-than-expected results on the back of strength in its investment banking unit. Despite continued loan losses, J.P. Morgan saw “broad-based growth” in several of its businesses according to chairman and CEO Jamie Dimon. The upbeat results gave hope to investors expecting most major financial institutions to post earnings declines.

While Intel and JP Morgan represent only small portions of most technology and financial ETFs, their good news should send most sector based funds higher on Wednesday, as the upside surprise from these firms is deemed not to be company-specific, but rather due to an improving economic environment and more favorable business climate.

J.P. Morgan’s stellar results are good news for broad-based financials ETFs, including the iShares Dow Jones U.S. Financial Services Index Fund (IYG), Vanguard Financials ETF (VFH), and Financial Select Sector SPDR Fund (XLF). These funds are dominated by holdings in mega-banks like J.P. Morgan, Bank of America (BAC), Wells Fargo (WFC), Goldman Sachs (GS), and Citi (C), many of which are scheduled to issue earnings reports in coming weeks.

Intel’s unexpected results have had a more wide-reaching impact. In addition to boosting U.S. technology funds such as XLK and IYW (as well as more targeted tech ETFs like the PowerShares Dynamic Semiconductors Portfolio (PSI)), expectations for a recovering tech sector gave a boost to tech-heavy Asian economies, including Australia and South Korea.

Disclosure: No positions at time of writing.

Comments

[absolute re...:]

Very good article Michael. Should be interesting to see where IBM and Google come in tomorrow. I like your recap of events and insight on the market. I follow you and 5 or 6 others who I find helpful. There is so much to learn on this site it has almost been overwhelming. Another I like that gives help to those of us who can't figure out all the data out there is this one seekingalpha.com/artic... . Keep up the great work.

Oct 14 01:58 PM