Equity markets are coming off one of the wildest weeks in recent memory, as a plethora of issues combined to cause anxiety and sink the Dow more than 1,500 points on the week. Continued troubles in Greece pushed European equity markets lower, as protests of the harsh austerity measures passed by the government in order to obtain a 110 billion euro bailout rattled investors. On Thursday, an apparent trading error or computer glitch caused markets to plummet and pushed the Dow lower by 762 points in just 23 minutes (see Ten Shocking Charts From The “Flash Crash”). This week will be an important one, with investors hoping that markets can reclaim some of the ground lost instead of extending the freefall. Below, we profile three ETFs in particular that could see an active week:
Merrill Lynch Internet Architecture HOLDR (IAH)
Why IAH Could Be On The Move: Cisco, one of the largest components of IAH, reports earnings after the bell on Wednesday. The technology giant makes up 12.6% of the fund and is expected to post earnings of 39 cents for the quarter. Technology stocks in particular suffered over the past week, so a strong report from Cisco, one of the few technology Dow components, will go along way in alleviating investors fears regarding a continued slide in the sector. For more information on the unique properties of HOLDRs, see Five Facts About HOLDRs Every ETF Investor Must Know.
Rydex CurrencyShares British Pound Sterling Trust (FXB)
Why Could Be On The Move: The British pound is likely to be in focus for two reasons. First, the Bank of England is scheduled to meet on May 10th in order to give its rate decision. Currently the rate is 50 basis points and is widely expected to hold the ready steady. However, according to some traders, “the stickiness in consumer prices may lead the governing board to drop its dovish rhetoric as the economic recovery gathers pace.” Should this happen, look for the pound to get a much needed boost.
Secondly, the pound also looks to be in focus as the winning Conservative party looks to build a coalition with the Liberal Democrats. If Cameron, or even Brown, is able to build a successful, strong coalition, it could help to boost the British currency. However, if it appears that a majority can not be reached, it could push the British to call for another election later this year, much like the last time the country faced a hung parliament. Such uncertainty could further sink the the pound (also make sure to read Britons Vote: UK ETF Loses).
Merrill Lynch Market Oil Service HOLDR (OIH)
Why OIH Could Be On The Move: Oil service firms are likely to be in focus when two key committees meet to discuss the recent oil spill crisis. The Senate Energy and Natural Resources Committee is scheduled to hold a hearing Tuesday on the nation’s offshore drilling policies. The hearing will feature testimony from Interior Secretary Ken Salazar on the Obama administration’s proposal to expand offshore drilling and on the explosion of an oil rig in the Gulf of Mexico. This meeting could influence the nation’s energy policy going forward; a decision to ban new offshore drilling operations in light of the disaster could erase gains that firms in OIH saw directly after the initial lifting of the ban.
On Wednesday, the House Energy and Commerce Committee will hear from executives from two of the top three components of OIH; Transocean, which makes up 16.2% of the fund, and Halliburton. which comprises 10.7% of the fund. Look for the oil service firms to be in heavy focus on any news that comes out of D.C. For more information on this topic read Oil Service ETF Sinks On Oil Spill Disaster.
XRT: This retail ETF lost close to 9% in a volatile trading week which featured conflicting data reports. While the fund slumped during the early part of the week, the decline accelerated on Thursday and a jobs report on Friday did nothing to stem losses despite the fact that close to 300,000 jobs were added to the economy. Investors focused in on the fact that the unemployment rate shot up to 9.9% despite the increase in jobs, suggesting that many consumers may not be willing to open up their wallets just yet, especially given the recent turbulence on Wall Street (see more information on XRT’s fact sheet).
PPH: This HOLDR was not swayed to the upside on Tuesday despite better than expected earnings reports from two of the three largest components of the fund (Pfizer and Merck). Both of these pharmaceutical giants posted better-than-expected first quarter results. Merck’s revenues more than doubled to $11.42 billion while Pfizer posted a modest gain in revenues, beating out analyst estimates by roughly $130 million on revenues of $16.75 billion. Then, much like the rest of the market, PPH sank sharply on Thursday and finished Friday lower to post a loss of 4% on the week (see more on PPH’s returns).
EWU: Like many European equities, EWU finished the week sharply lower, posting a loss of roughly 12% on the week. This sharp decline was largely due to a rough trading day on Thursday which saw the Greek situation rock European markets (see the EWU Techincals page for more information on the fund’s current trend).
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Disclosure: No positions at time of writing.