By Stoyan Bojinov
Global financial markets experienced significant volatility last week as the tragic earthquake and devastating tsunami that struck Japan continue to ripple throughout the global economy. The G-7 intervened in the foreign exchange markets last Friday in a truly historic fashion, selling Japanese yen to help contribute to the formation of a stable exchange rate following the recent tragic events. Equities recovered nicely on Thursday and Friday of last week, especially given the magnitude of Tuesday and Wednesday’s sell-offs and the clouds still hanging over the market. Meanwhile, Cisco (CSCO) announced that it was going to make its first quarterly dividend payment to shareholders of record as of March 31, with the payout scheduled to be six cents a share. “This dividend complements our leading position, and is an important part of our commitment to bring value to shareholders,” said Chief Financial Officer Frank Calderoni. At the end of the week oil settled back above $100 a barrel, while gold climbed upward as well, pushing past $1,420 an ounce once again.
This week offers a host of economic data on the domestic front, with a lineup of earnings from the tech and energy sectors, while U.S. GDP on Friday will be the main focus. Further volatility in the currency markets will continue to push equities around, and the Bank of England’s Minutes will hopefully shed more light on the progress of the global economic recovery and how the nation plans on keeping inflation in check over the medium term.
Below, we profile three ETFs that are likely to be active in trading over the next five days.
HOLDRS Merrill Lynch Software Holdings (SWH)
Why SWH Will Be in Focus: This ETF holds a concentrated basket of leading software companies. SWH has a total of 13 holdings, with the majority being giant/large cap names. Adobe Systems (ADBE) and Oracle (ORCL) are within the funds' top 10 holdings, and both tech-giants will be reporting earnings this week. Adobe is a leading provider of graphic design software and productivity suites and the company is slated to report earnings this Tuesday, March 22. Sales growth is expected to remain just under 2%, while analysts are expecting earnings per share of 48 cents. Oracle is one of the fund’s top holdings, and it accounts for about 15.5% of the HOLDRS assets. The company’s earnings are due out on Thursday, with analysts expecting growth of 35% and earning per share of 49 cents. SWH has returned 1.5% year to date and short-term upside extends to about $50 if the general market sentiment is positive this week. The recent sell-off might make this an attractive opportunity for investors wishing to establish positions with concentrated technology exposure.
Global X China Energy ETF (CHIE)
Why CHIE Will Be in Focus: Volatility in the energy markets has been overwhelming lately. Investors who are uncertain about the developments in the Middle East, but bullish on rising energy demand, might want to keep an eye on CHIE. This fund tracks the S-BOX China Energy Index, and it is designed to reflect the performance of the energy sector in China. The benchmark is made up of securities of companies which have their main business operations in the energy sector and are domiciled in China or have their main business operations in this country. CNOOC Ltd. (CEO), which accounts for 10% of total holdings, reports earnings on Wednesday, March 23, and could be in for a volatile trading week. CNOOC Limited manages China’s offshore oil and gas exploration and production activities, under Chinese government regulation, and in partnership with international oil and gas firms. Analysts are expecting for earnings per share of $9.67, and CNOOC’s performance will provide valuable insight in gauging just how energy demand in China is developing and the extent to which energy consumption is likely to increase as the recovery advances forward.
iShares Dow Jones U.S. Home Construction Index (ITB)
Why ITB Will Be in Focus: The economic recovery has been progressing rather sluggishly in the job and housing markets. Pending home sales continue to miss expectation and year-over-year sales improvement has been minimal. ITB tracks the Dow Jones U.S. Select Home Construction Index, and Lennar Corporation is the 2nd largest holding within the fund’s total portfolio of 28 Building & Construction companies. Lennar (LEN) accounts for 7.4% of ITB’s holdings and is one of the nation’s leading homebuilders for single-family and multi-level residential homes. The stock is currently trading right under $20, and considering its 52-week high comes in at $21.79 a share, the company will likely need to impress the market when they report earnings on Thursday if it is to avoid a sell-off. Lennar has gained almost 4% since its last upbeat earnings report in early January, while ITB has lost over 3.5% in that same time period. Look for trading volumes of ITB to increase as the fund will likely get some attention from traders and investors after Lennar posts performance results and offers insights about the recovery of the housing industry going forward.
Disclosure: No positions at time of writing.
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