This past week wasn’t nearly as kind to investors as stocks moved modestly higher to start the week only to fall sharply in Friday trading, cancelling out all of the gains from earlier in the period. Much of this turmoil stemmed from geopolitical issues, namely oil’s continued rise and the budget battle in the halls of Congress. Prices for crude surged to well over $112/bbl. in Friday trading sending investors fleeing from equities across the board. Thanks to oil’s continued rise and the budget controversy, more investors piled into precious metals, namely gold and silver, as a way to protect some of their assets in the past week. Gold hit a fresh all-time record of over $1,460/oz. while silver continued its remarkable run, finishing the week ahead of the $40/oz. level for the first time in decades. This commodity strength put heavy pressure on equities and was one of the main reasons for the weakness heading into today’s session.
This week kicks off earnings season with aluminum giant Alcoa (AA) reporting after the bell later today. In addition to Q1 earnings, investors should look to the commodity markets for direction this week as prices continue to remain sky high for a variety of products ranging from grains to oil and gold. Should these commodities continue to gain, it could stall any recovery and send equities sharply lower, crushing consumer confidence. However, strong earnings reports from some of the nations largest banks could help to lighten the mood, potentially setting up a tug-of-war between gains and losses throughout the week. In light of the start of earnings season, investors should look for the following three ETFs to be in focus throughout the week [for more ETF insights, sign up for our free ETF newsletter]:
Financial Select Sector SPDR (XLF)
Why XLF Will Be In Focus: As the U.S. economic situation continues to improve marginally, the focus is likely to shift back to some of the nation’s largest banks to see if they are picking up steam as well. Two of the country’s largest and most important financial institutions, JP Morgan Chase (JPM) and Bank Of America (BAC) both report earnings this week, helping to give investors further insight into these two organizations and how they have held up over the past three months. JPM in particular looks to set the tone for the financial sector this week as the company is the largest firm in the financial sector of the S&P 500 and it is one of the first to report earnings coming in on Wednesday before the bell. If the company is able to post robust results and set a solid tone for Q2, look for the broad financial sector to rise along with XLF. If, however, JP Morgan forecasts weakness thanks to the possibility of higher interest rates or elevated oil, look for XLF to sink sharply on the week as JP Morgan is generally considered to be one of the stronger companies in the sector [see The Ten Commandments Of ETF Investing].
iPath MSCI India Index ETN (INP)
Why INP Will Be In Focus: As interest in emerging markets has surged over the past few weeks, one of the primary beneficiaries has been the market of India. This emerging country, as represented by INP, has soared by close to 9.6% over the last four weeks alone, leaving many investors feeling very bullish over the short-term prospects in the world’s most populous democracy. However, this could all change with a key earnings report due out of the country this week. One of the nation’s largest companies, Infosys Technologies, is set to post its fourth quarter’s earnings and looks to follow up last quarter’s solid results which showed 14% growth in net profits. The company’s stock has struggled significantly since then and the company makes up over 10% of the fund’s total assets so a strong quarterly report or an optimistic outlook could help to boost INP during this week’s session [see Three ETFs George Soros Might Like].
Global X Silver Miners ETF (SIL)
Why SIL Will Be In Focus: While many investors have focused in on gold to achieve their precious metals exposure, silver has been the real star as of late, outpacing the gains of its yellow cousin. In fact, the miners of this important industrial and ornamental commodity have seen their share prices soar with SIL gaining 9.6% in just the past week alone, an impressive gain for the fund that is now up 61% over the past half year period and close to 110% in the last 52 weeks. With impressive gains like that and with silver at levels not seen since the 80′s, investors are bound to take notice of this fund. However, with such a quick run-up there is also the very real possibility of a sharp pullback and since SIL is a leveraged play on silver, it could suffer more than most if commodity prices pull back this week. Investors should look for SIL to remain volatile during this week of trading and keep a close eye on the fluctuations of the underlying metal for clues on how the Global X fund will react during these next few sessions [see Precious Metal ETFs: Physical vs. Equity Exposure].
Disclosure: No positions at time of writing