In my column last week we saw that oil services had bounced back from weakness and this week we see the group has continued with mild gains, writes Nick Perry, who covers ETFs for Schaeffer's Investment Research. The strongest groups of the week are a mix of technology and real estate.
Internet stocks take the lead after a positive reaction to Amazon.com's (AMZN) earnings report caused the shares to gap higher on Wednesday. This has made for a wild ride in the HHH as it follows a negative reaction to Yahoo's (YHOO) earnings and a positive reaction to eBay's (EBAY) results. Google (GOOG), of course, had a high profile negative reaction to their number but it is not a member of the HHH.
On the downside we see very mild weakness with software the only group to lose one percent on the week. And while that one percent loss is far from significant, I do think it is worth noting that the group has failed to gain traction despite Microsoft's (MSFT) earnings last week and this week's analysts meeting.
For a longer-term perspective, the bullets below show the year-to-date returns for the ETFs listed above.
Year-to-Date Returns for This Week's Top Performing Sector Exchange Traded Funds:
• Internet HOLDRS (HHH) -14.6%
• iShares C&S Realty Majors (ICF) +13.3%
• Wilshire REIT Fund (RWR) +13.0%
• Telecom HOLDRS (TTH) -3.8%
• iShares Telecom (IYZ) -0.5%
• iShares Real Estate (IYR) +10.3%
• Wireless HOLDRS (WMH) +0.8%
• iShares Networking (IGN) -1.5%
• Oil Service HOLDRS (OIH) +33.4%
• Utilities Sector SPDR (XLU) +16.1%
Year-to-Date Returns for This Week's Bottom Performing Sector Exchange Traded Funds:
• iShares Financial Sector (IYF) -0.5%
• iShares Technology (IYW) +0.3%
• iShares Treas Bond (TLT) +5.4%
• iShares Basic Materials (IYM) -1.6%
• Financial Sector SPDR (XLF) -1.6%
• Regional Bank HOLDRS (RKH) -3.1%
• iShares Nasdaq Biotech (IBB) +0.6%
• iShares Software Index (IGV) -5.4%
• iShares Financial Svcs (IYG) -3.4%
• Software HOLDRS (SWH) -10.2%
Here we see that internet stocks are still showing a moderate loss on the year. In fact, that is the worst year-to-date performance of the ETFs I track, with software taking the number two slot. Meanwhile, oil services remains one of the best performing groups.
Real-estate-related groups were up this week and these ETFs have very respectable year-to-date returns. The real estate/housing sector has been a hot topic of debate in the Trading Floor Blog as opinions run very high. And while concerns seem to have a very logical basis, I think it is important to note that momentum still seems to be to the upside. One of the lesson's I learned (the hard way) from the tech run-up in the late-1990s was that momentum can run much further than what seems reasonable so you need to respect the damage it can do to you if you are on the wrong side.
Nick Perry (regressionchannels@sir-inc.com)
