Three ETFs To Watch This Week: GDX, HHH, IBB

by on October 24, 2011 | ETFs Mentioned:

The past week was, again, extremely choppy as European rumors took center stage, leaving investors fixated on events coming out of Germany and France. While some progress was definitely made in the negotiations, this week’s summit could play a key role in determining the long term future of the currency bloc. Beyond these events, investors also cheered the results of earnings season as a number of key companies gave their quarterly updates. For the most part, these reports were positive, especially in the banking and transports sector, although a rare earnings miss from Apple helped to drag down tech over the past five trading sessions. Nevertheless, broad markets rose over the past five days while bonds and other safe havens such as gold continued to slump, posting modest losses in the time period. However, it should be noted that this could quickly reverse if European trading remains choppy and investors continue to see a lack of definitive action in the sovereign debt crisis currently plaguing the currency bloc. 

This week, investors will continue to digest a multitude of earnings reports with a number of key firms from a variety of industries giving their updates. Among the most important corporations reporting this week are; XOM, UPS, CAT, AMZN and MRK just to name a few. Beyond these earnings reports, there are also a few government data releases that investors need to be aware of including several central bank meetings. On the data front, investors will likely hone in on CPI reports from Australia and New Zealand while Durable Goods orders from the U.S. are likely to move markets as well. In terms of central banks, Canada, Sweden, New Zealand, and Japan all have give their decisions on interest rates, suggesting that it could be another volatile week. This could especially be the case given the ongoing turmoil in Europe; look for some sort of resolution to the crisis this week (hopefully) which, depending on how it goes, could take the spotlight heading into this weekend. With this backdrop, investors should look for the following three ETFs to be in for an active week:

Merrill Lynch Internet HOLDR (HHH)

Why HHH Will Be In Focus: Tech companies appear to be slowly falling out of favor with investors as a number of companies in the past few days have failed to live up to lofty expectations. HPQ, AAPL, and IBM have all lost at least three percent in the past week, highlighting how sentiment may be shifting for the important sector. In order to confirm or deny this trend, many investors will likely look to Amazon (AMZN) and their earnings report later this week. The company is projected to have EPS of 25 cents on revenues of $10.93 billion, which if realized, will mean that the firm has grown sales by close to 44.6% when compared to the year ago period. Should the actual match the predictions, investors could see a huge bump in a number of tech firms and especially in HHH. This popular HOLDR allocates a whopping 51% of its total assets to the firm, suggesting that whatever happens with AMZN will also happen with HHH as well [also see ETF Shakeup: HOLDRS Headed For Extinction]. 

Market Vectors Gold Miners ETF (GDX)   

Why GDX Will Be In Focus: Although gold is up significantly when compared to the year ago period, the precious metal has slipped quite a bit in the past month, falling by about 8.3%. Thanks to this slide, GDX has declined by nearly 16.1% in the same time period, suggesting that the miners are indeed a leveraged play on the underlying metal. Due to this large flux in gold prices, investors are likely to play close attention to two of the biggest firms in the space, Barrick Gold and Goldcorp, which are both giving their earnings reports later this week. Combined, the two companies make up nearly 30% of total assets in GDX so any change in sentiment in these two are likely to have a huge impact on the other components of the fund and the movement of GDX on the week [read These Aren't Your Grandfather's Gold ETFs]. 

Nasdaq Biotechnology Index Fund (IBB)

Why IBB Will Be In Focus: Although broad health care companies have been pretty much flat in recent weeks, as most investors consider them a safe haven in these uncertain times, biotech firms have not been quite as fortunate, slumping more than the S&P 500 over the past three month period. However, biotech companies can provide investors with high levels of growth which is something that many other firms in the health care space that focus on the developed world cannot do. In light of this, many will look to Amgen (AMGN) the world’s largest biotech company by revenues, to shed further light on the industry and hopefully confirm that it is still a growth corner of the market [see charts of IBB here].

Investors are looking for the company to report earnings of about $1.29/share on revenues of $3.87 billion, figures that don’t exactly compare favorably to the year ago period. In that quarter, AMGN saw an 11% drop in earnings to $1.28 a share on revenues of $3.82 billion. Thanks to this key report, investors should look for IBB to be in focus as the iShares fund puts just over 8% of its total assets in the company. Should AMGN post solid figures and forecast a decent outlook for the rest of the year, it could buoy the rest of the sector and lead to a solid week for biotech ETFs [see Which Biotech ETF Is Best For You?]. 

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Disclosure: No positions at time of writing.