Tuesday’s ETF To Watch: Energy Select Sector SPDR (XLE)

by on January 31, 2012 | ETFs Mentioned:

This week got off to a rocky start as Greece and Germany remained at odds regarding the fiscal future of the currency bloc. Many investors fear that without a significant aid package, Greece will endure a widespread default which has the potential to sink markets around the world. Despite the issues persisting overseas, the focus of the week will still be heavily centered around the U.S. economy, as we close out earnings season and report unemployment figures on Friday. With a number of bellwether firms slated to announce earnings in the next few days, markets may soon shrug off Greek fears and focus on the domestic economy instead [see also The Ten Commandments of Commodity Investing].

Today will see the most recent earnings statement from Exxon Mobil Corporation (XOM). Exxon had long been the largest company in the world by market capitalization, but after Apple’s (AAPL) stunning earnings announcement, XOM fell just behind the tech giant to now hold second place. Even still, a market cap of $407 billion is nothing to be ashamed of, especially given the ADV topping 18 million as well as a solid dividend yield of 2.2%. With the price of crude vaulting back and forth in recent weeks, this report will be especially key to see how an industry giant has withstood volatile pricing [see Energy Bull ETFdb Portfolio].

Analysts estimate the firm will bring in EPS of $1.95 with revenues just under $120 billion, not bad for three month’s work. Of their last four announcements, XOM has missed the Street’s estimates just once and it hopes to keep it that way today. Exxon has also been in focus due to the tensions surrounding Iran and their crude oil production. Many are concerned how big oil companies will hold up if Iran decides to block off the Strait of Hormuz, a small body of water through which nearly 40% of the world’s oil passes [see also Iran Tensions And Crude Oil: What It Means For Your Portfolio].

In light of this major release, today’s ETF to watch will be the Energy Select Sector SPDR (XLE). The fund is one of the most popular ETFs on the market, with over $8 billion in assets, XLE has been offering exposure to the U.S. energy sector for more than a decade. Top holdings include Chevron, Apache, and the highest ranked security, Exxon Mobil, which accounts for more than 19% of total assets. With such a significant weight in XLE, today’s earnings report make this fund crucial to watch as it will likely move in whatever direction XOM takes it [see also ETF Insider: Bears Are Lurking Around The Corner].

Disclosure: No positions at time of writing.