Natural Resource Companies, Commodities Boost ETFs

Includes: BDCS, KBE, XLF
by: Tom Lydon

The major index exchange traded funds (ETFs) ended with gains on Monday, as energy and natural-resource companies rebounded along with commodities after last week’s rout.

Bank stocks were a lagging sector in Monday’s higher market as weakness in Citigroup (NYSE: C) after a reverse stock split dropped a banking exchange traded fund close to a key test. Citi shares were down more than 2% on Monday. The banking giant is the second-largest holding at over 7% of SPDR KBW Bank ETF (NYSEArca: KBE), the largest sector fund by assets with about $1.7 billion.

A new exchange traded note (ETN) issued by UBS tracks business development companies, giving investors more choice in the private-equity category. E-TRACS Linked to the Wells Fargo Business Development Company Index ETN (NYSEArca: BDCS) follows a relatively new index launched by the bank. Top holdings in the tracking index include Ares Capital Corp., American Capital Ltd. and Apollo Investment Corp.

A rally in Rosetta Resources (NasdaqGS: ROSE) on Monday boosted exchange traded funds that invest in energy exploration and production stocks after the company was out with quarterly results. Rosetta after Friday’s closing bell said its first-quarter net income rose from the year-ago period. The quarterly results “spoke to the company’s continued drilling success in the Eagle Ford Shale resulting in the company increasing its production guidance,” said analysts at BMO Capital Markets in a report.

A pullback in Micron Technology (NasdaqGS: MU) shares weighed on exchange traded funds following the semiconductor sector on Monday. Micron shares were falling on high volume in morning action after the stock failed to find support at its 50-day moving average. “Micron’s price action is below this important level, which makes the stock difficult to buy, as there will certainly be resistance as it approaches its 50-day,” said on Monday. [Micron Technology Decline Hits Semiconductor ETFs]

Exchange traded funds indexed to the U.S. financial sector lost ground Monday after Citigroup’s (NYSE: C) 1-for-10 reverse split although some Wall Street analysts are bullish on the stock. Citi shares slipped 2%. The stock is a top holding in sector ETFs such as Financial Select Sector SPDR Fund (NYSEArca: XLF).

Exchange traded funds that invest in Nasdaq stocks will figure prominently this week as tech giant Cisco (NasdaqGS: CSCO) trots out its quarterly numbers. One Wall Street analyst trimmed his price target on the stock ahead of the results on Wednesday. “We believe recent restructuring announcements reflect management awareness of an increasingly competitive environment that mandates focus and enhanced productivity,” said Matthew S. Robinson at Wunderlich Securities in a note Monday.

Gregory A. Clay contributed to this article.