ETF Update: Metals and Mining, Transportation ETF

Steel Prices Rise and Metals Gain to Solidify Related ETFs

May turned out to be a good month for the metals and mining ETF.

SPDR S&P Metals and Mining (XME) was the third-best ETF for the month, returning 14.9%,  according to Lipper.

One thing in particular may have had something to do with its success: two-thirds of the fund is in basic materials while the rest is made up of energy. One of the top holdings, United States Steel (X) makes up 5.5% of the ETF and was up 12.2% in May, reports Jesse Emspak for Investor's Business Daily. High commodity prices continue to drive metal prices skyward.

Steel has announced price hikes as well, particularly the hot rolled steel sheet, up to $1020 a ton in May, from $850 in April. Ouch! It's the benchmark product for cars and appliances.

Companhia Vale Del Rio Doce (RIO) and Rio Tinto (RTP) are both pushing up their prices as well. They are top holdings in the iShares MSCI Brazil Index (EWZ) - RIO has 9.3% of assets and RTP holds 11.4%.

They are also represented in the Market Vectors Steel ETF (SLX) - RIO at 13.6% and RTP at 13.7%.

• SPDR S&P Metals and Mining (XME), up 30.2% year-to-date
• iShares MSCI Brazil Index (EWZ), up 17.5% year-to-date
• Market Vectors Steel ETF (SLX), up 26.5% year-to-date

Airline Industry Turbulence Hasn't Hit Transportation ETF

With all the airlines' woes, you'd think the transportation ETF would be in the tank. But you'd be wrong.

Last week, the iShares Dow Jones US Transportation Average (IYT) closed at a record high. Trucking and rail has been picking up the slack for the fund, but the new heights attained by the fund can actually be attributed to the airlines this time around, thanks to an analyst upgrade. Gary Chase, an analyst for Lehman Brothers, bumped the sector to "positive," saying that the upside potential outweighed risks, reports Thomson Financial. IYT is up 15.9% year-to-date.

Daniel Michaels for the Wall Street Journal reports that the industry's troubles haven't gone global - yet. Despite cutbacks domestically, global carriers say their traffic is still strong. But the real test is yet to come as the summer travel season deepens. The uncertainty is largely because most people bought their tickets and made vacation plans months ago, and the more critical juncture will be at the end of summer.

The airline industry here is being hit by a number of factors, including the obvious problems of a weakening economy, higher oil prices and a weak dollar. The carriers here also fly some of the world's oldest, most unreliable and least fuel-efficient jetliners. Carriers in other countries have long since upgraded, which has reduced their maintenance and fuel costs.

Well, as long as someone somewhere is getting a cheap flight...

For full disclosure, some of Tom Lydon's clients own shares of IYT.

Comments

[User 117305:]

RTP is not a top holding in EWZ.

2008 Jun 10 06:36 PM

[User 144216:]

RTP is not even Brazilian!

2008 Jun 11 12:42 PM

[smokey888:]

Wonder if he met PETR3 (energy) (I mean after-all, it's got a R in it, it's got a T in it and it has a P in it) and it's RTP backwords minus the E and since it's holdings are 11.81%, it's close. And in the words of the great Chiney, "so". I just noticed something else, he could have met RIO @ 8.9% (materials), RIO is very close to RTP ..... just drop that p a bit and mess w/ that "I" a bit and hey, there ya go -- an honest error. Probably has a ghost writer, whose fired now and has now become a Mutual Fund salesman. Now here's the kicker: (RTP) ($441.95 per share)

"Rio Tinto plc engages in mining and processing mineral resources. The company's products include aluminum, copper, diamond, coal, uranium, gold, borax, nickel, zinc, lead, silver, borate, potash, alumina, gypsum, molybdenum, sulphuric acid, titanium dioxide, salt, talc, and iron ore. It also engages in the production and sale of cathode blocks, anodes, aluminium fluoride, and calcined coke; and the provision of engineering services and sale of smelting equipment, as well as the sale of electricity where generation is surplus to production needs. The company operates worldwide with a primary focus in Australia and North America. Rio Tinto plc was founded in 1873 and is headquartered in London, the United Kingdom."

2008 Jun 11 11:28 PM