ETF Outlook for Tuesday July 8, 2014

ETF Outlook for Tuesday July 8, 2014

The major U.S. indices fell yesterday to kick off the week in the red. The Dow lost 0.26 percent, but was able to hold above the 17,000 level. The high beta stocks underperformed with the NASDAQ losing 0.77 percent as money flowed into the “boring” sectors of the market. The market is set to open lower again today and more light volume selling could be the theme this week.

iShares Dow Jones Transportation Index ETF IYT

The sector lagged the overall market yesterday with a loss of 1.05 percent, led lower by the airline stocks. The selling yesterday is no reason to panic as the ETF closed at a new all-time high to end last week even though the airlines stocks have struggled the last couple of weeks. The airlines make up 15 percent of the ETF with the railroads the sector with the highest weighting at 24 percent. The airlines are looking to open lower again this morning and investors can expect IYT to be on the defensive in early trading.

SPDR S&P Metals and Mining ETF XME

After the bell today Alcoa AA unofficially kicks off earnings season when it reports its numbers for the second quarter. Analysts expect earnings to increase by 42 percent over last year, but revenue to decline by 3 percent. The stock is up over 40 percent in 2014 and may need a good number to keep the momentum going. AA is not a top ten holding in XME, however if the stock is moving it could have an affect on other metals companies that will move the ETF.

Alerian MLP ETF AMLP

The entire group of master limited partnerships (MLPs) have gotten hit the last few days after the jobs number was reported. The theory is that as the economy improves as evidenced by the jobs report, the Fed could raise interest rates sooner rather than later. This would put pressure on investments that already pay high dividends. With risk-free interest rates on the rise it makes MLPs less attractive. As of now it looks like it will be at least another year until the Fed makes any moves and therefore the pullback in AMLP and its peers may be short-term.