Three ETFs To Watch This Week: EWZ, SMH, IYG

by on July 12, 2010 | ETFs Mentioned:

After a rough start to the holiday-shortened week, equity markets surged on Wednesday as most major indexes jumped by close to 3% on the day. This large jump came after ETF issuer and financial giant State Street said that it was likely to top analysts’ expectations for second-quarter earnings. This news sent shares of State Street up by close to 10% on the day and helped to boost financials and other beaten down sectors as investors grew more optimistic. However, markets couldn’t keep the momentum, as markets stayed flat for the rest of the week.

This week, earnings season gets underway, and all eyes will be on a handful of American companies to see how corporate profits have been impacted by the current economic situation. These reports look to take center stage with bellwethers such as Google, Intel, JP Morgan and GE all reporting this week. These reports are likely to overshadow the few central bank meetings and other data releases scheduled for this week, suggesting that the market could be in for another volatile few days. Below, we profile three ETFs that look to be in focus over the next several days as earnings season gets underway [for more ETF ideas, sign up for our free ETF newsletter]:

iShares Dow Jones U.S. Financial Services Index Fund (IYG)

Why IYG Could Be In Focus: The American financial industry looks to be in focus due to a variety of earnings reports on some of the largest and most well-known financial firms. On tap for Thursday is JP Morgan Chase; on Friday Bank of America and Citigroup are scheduled to report. Revenues are expected to decline slightly for JP Morgan but profits are predicted to more than double to 72 cents from 28 cents at the same time last year. Citigroup is expected to post earnings of just over 5 cents a share. For Bank of America, the consensus is 20 cents a share, which would be down sharply from 28 cents last quarter. These three companies look to greatly impact the return of IYG in the later half of the week since the three combine to make up just over 30% of the total assets in the fund [see Why The Reform Bill Boosted Financial ETFs].

Merrill Lynch Semiconductor HOLDR (SMH)

Why SMH Could Be In Focus: Chip giant Intel is scheduled to release its quarterly earnings report tomorrow after the market closes. The company is expected to handily beat last year’s numbers by posting revenues of $10.25 billion and earnings of 43 cents a share, compared to revenues of just over $8 billion last year and a loss of 7 cents a share. The company is the top holding for SMH at 23.5% of the fund’s total assets, suggesting that a big from Intel will affect SMH’s day as well. The chip giant’s guidance is also likely to set the tone for the quarter for the rest of the semiconductor industry [also see ETFs To Play A U.S. Export Boom].

iShares MSCI Brazil Index Fund (EWZ)

Why EWZ Could Be In Focus: To close out the week, the largest company in Latin America by both market capitalization and revenue, Petrobras, is scheduled to report earnings. The company is scheduled to report roughly $1 a share in earnings on its ADRs on Friday. While the company has found massive reserves off of the coast of Brazil, it has been unable to take full due to trouble issuing shares as well as a possible increase in government ownership of the company in exchange for rights to produce more barrels of oil. Currently, the Brazilian government owns roughly a third of the shares but retains 55% of the voting rights, ensuring that the government will be able to dominate the company’s decisions well into the future. These issues look to be in focus during the earnings report and any information from the top management regarding these trends could have a huge impact on EWZ. The different classes of Petrobras’ stock combine to make up 20% of the fund’s total holdings, a level that just edges out Vale (17.7%) for the top spot in EWZ [also see Brazil Consumer ETF (BRAQ) Debuts].

Last Week’s ETFs To Watch:

EWL: The data that came out of Switzerland was relatively positive as the unemployment rate fell by 0.1% and the consumer price index only increased by 0.5%, sharply lower than the consensus of a 0.9% increase. Additionally, retail sales were sharply higher, indicating that the Swiss may be starting to spend again on discretionary goods. This data had a positive impact on EWL which surged higher by close to 3.3% on the week [also read Looking for Consumers? Try Millionaire Heavy Countries].

EWC: Although housing starts and the new housing price index came in at slightly underwhelming numbers, these figures were more than made up for by robust job creation in the Canadian economy. The country reported a net change in employment almost five times higher than estimates, which helped to send the unemployment rate down below 8% in the country. EWC soared higher and finished the week up by close to 5% [also read Do You Need A Canada ETF?].

FXA: Australia also had a number of key data releases this past week that helped to set the tone for the country going forward. Although the Reserve Bank kept rates steady at 4.5%, it did signal that it may tighten further later this year to ward off inflation. The country also reported strong job growth (three times higher than estimates), which helped to push the unemployment rate down ten basis points to 5.1% and push up FXA close to 3% on the week.

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Disclosure: No positions at time of writing.