Homebuilders, Energy Lead Market Higher; Semis Lag

Last week we saw a sharp downside bias with the SPDR Homebuilders (XHB) the weakest ETF. This week we find a bounce back led by the XHB:

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My piece last week showed that more than 90% of the ETFs on my list were lower with the largest losses generally in the 4% to 6% range. Today's data shows the mirror image of that, 90% of the funds are higher with the largest gains running in the range of 4% to 5%. It doesn't appear we have completely made up that ground that we lost but we have least have signs that buyers are willing to step in.

In broad strokes it would seem that the heaviest money flows were directed towards commodities, energy, materials and utilities. Oil hit record prices this week and the US Oil Fund (USO) also moved higher. (If you aren't familiar with the structure of the USO, you can find information here.)

The PowerShares WilderHill Clean Energy (PBW) and iShares Silver Trust (SLV) rallied along side the SPDR-Materials (XLB) and iShares DJ U.S. Utilities (IDU) funds.

The SPDR Homebuilders, this week's strongest group, lost more than 8% last week and here we find a rebound of nearly 6%. In other words, the XHB looks to be gaining back roughly three-quarters of what it recently lost. Given that the ETF is coming off its all-time low, a bounce is definitely needed.

While most groups did gain ground, there were a few laggards, mainly from the technology area. Semiconductors in particular were hit this week as the Semiconductor HOLDRS (SMH) and iShares GS Semiconductor (IGW) both posted losses near 6%. This area of the market was hit with a couple of high profile disappointments in the form of earnings from Broadcom (BRCM) and Texas Instruments (TXN). Both of those stocks lost considerable ground this week, weighing on the ETFs both as components and as catalysts that sent other semi stocks lower.

All in all, we have the bounce back that was noted above. This comes amid a couple of high profile events for the market next week. Wednesday brings us the FOMC decision on interest rates while Friday offers the monthly employment report.

Index performance year to date:

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Chart: Google Finance

Comments

[Will Rahal]

I have posted the Semiconductor Index vs. Core Capital Equipment Orders expressed as percentage of Durable Goods Orders. There seems to be an impending drop coming.
Since the Financial sector generates 25% of IT revenues, this is not surprising. See
wrahal.blogspot.com