ETF Outlook for Wednesday April 23, 2014 (MGC, IYZ, TAN, BBH, GILD, T)

Vanguard Mega Cap 300 Index ETF MGC

Yesterday the technicians at Bank of America Merrill Lynch made an argument that the leadership in the market is moving from the small cap stocks to the mega cap asset class. The smaller companies led the most recent rally/uptend that began in 2012 and now they are starting to lag as the largest stocks by market cap in the market are holding up much better. MGC is one of the ETFs that concentrates on the largest stocks in the U.S. The ETF is composed of 300 stocks that currently trade at a P/E ratio of 18.3 according to the Vanguard website. MGC is down 0.4 percent from its all-time high while the iShares S&P Small Cap 600 Index ETF IJR is down 2.7 percent from its high.

iShares U.S. Telecommunications ETF IYZ

The largest holding in the ETF, AT&T T, reported earnings after the bell last night and that beat estimates by a penny and revenue that was in-line with expectations. The stock was lower by over 1 percent after hours, but could change dramatically today before the opening bell and throughout the session. Expect IYZ to follow the lead of T considering it makes up 9 percent of the portfolio and that the top holdings tend to trade in tandem many days.

Guggenheim Solar ETF TAN

One of the best performers yesterday were the solar stocks after hedge fund manager David Einhorn disclosed that he added to his position in SunEdison SUNE that he started to accumulate in the fourth quarter of last year. Helping boost the sector were Goldman Sachs upgrades to SunPower SPWR and SolarCity SCTY, which the company called their best two solar ideas. Finally, Canadian Solar CSIQ announced a deal with a Japanese company that boosted that stock. All four stocks mentioned are top ten holdings in the ETF and can be attributed with the 5.3 percent gain in the ETF yesterday.

Market Vectors Biotech ETF BBH

The ETF moved higher yesterday by 2.6 percent on the back of merger news out of the pharmaceutical sector. Today the catalyst could be a solid earnings from the ETF’s number one holding, Gilead Sciences GILD. The stock closed yesterday up 1.8 percent and was up another 4 percent after hours based on a positive earnings report. With GILD making up 12 percent of the portfolio it could be another nice day for BBH and its peers.