Equity markets finished mixed last week as the Dow managed to outperform both of its more broadly-allocated counterparts thanks to robust earnings reports from GE and IBM. Meanwhile, financials helped to push the S&P 500 down by about 0.8% on the week while the Nasdaq sank almost two percent thanks to ongoing worries across the technology sector, but especially with key component Apple, which saw its beloved CEO Steve Jobs take another leave of absence to deal with health problems. Commodities also posted a rough week as gold saw its value tumble by close to $40/oz. from its mid week high, and oil continued its slide after posting solid gains in the previous weeks. Meanwhile, in emerging markets, concerns over China and a possible rate hike continued to plague a number of sectors as many are growing increasingly concerned that this key engine of economic growth is likely to do its best to slow down its economy and crush inflation in the process.
This week, investors will have a tidal wave of earnings reports to digest as well as a number of key central bank meetings, including the Federal Reserve. Additionally, investors are likely to focus in on a number of key data releases as well, including durable good orders, U.S. GDP, and consumer confidence reports. As a result, U.S. equity markets could be in for yet another rocky week, so investors should proceed with caution. Given this backdrop, we profile three funds that could be in for an especially active week thanks to key earnings reports in some of their most important component holdings:
iShares Dow Jones U.S. Aerospace & Defense Fund
Why ITA Will Be in Focus: This fund sees seven of its top ten components report earnings this week, suggesting that ITA and the defense industry at large could be in for a volatile period. Of particular concern to investors is likely to be the reports from United Technologies
UTX is scheduled to report earnings of $1.29 a share on revenues of $14.75 billion while BA has an estimated EPS of $1.11 on revenues of $16.97 billion. Of particular concern to investors should be BA's guidance on its much-delayed, but possibly game-changing, 787 Dreamliner aircraft [also see The Next Frontier for Aerospace and Defense ETFs]. Any news regarding this important part of BA;s product lineup could help to move the stock significantly in the after-earnings period. In addition to these key DJIA components, investors should also note that the following components report earnings this week:
- General Dynamics (6.1%) reports on Wednesday
- Lockheed Martin (5.7%) reports on Thursday
- Precision Castparts (5.6%)reports on Thursday
- Raytheon (5.3%) reports on Monday
- Level Three Communications (3.8%) reports on Thursday
iShares MSCI Germany Index Fund
Why EWG Will Be in Focus: Thanks to a robust German IFO business climate reading, as well as a moderating debt situation in Europe, many are predicting the Germany economy to continue its leading role in Europe. The most popular fund tracking the German market, EWG, looks to be in focus this week as its top component, the industrial giant Siemens
The company makes up roughly 10.5% of the fund and the conglomerate will be especially in focus given the optimism over the German business climate and the robust earnings report from fellow industrial behemoth GE, so the earnings report by SI should put these trends to the test, to say the least. The German company has already said that it will likely beat out net profit figures from last year while also posting higher sales as well.
Investors should also focus in on the company's various units which are "benefiting from a robust performance from operations closely linked to the economic cycle, such as its Osram lighting unit," said Archibald Preuschat and Harm Luttikhedde in the WSJ. "While growth in its short-cycle business is expected to flatten in the second half of the fiscal year, spending on big-ticket products like high-speed trains has also shown further signs of improvement, underscoring the broad-based economic rebound from the slump of 2009." No matter what happens with the earnings report later in the week, look for EWG to be a big mover given the high stakes of this announcement and the dependence of the German economy on high-quality exports to power its impressive growth [see Five ETFs for a Tumbling Euro].
Merrill Lynch Biotech HOLDR
Why BBH Will Be in Focus: The top component in BBH, and one of the leading biotech companies, Amgen
Additionally, another key component of BBH, Gilead Sciences
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Disclosure: Eric is long ITA and EWG.
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Apple, Gilead Sciences, and Precision Castparts are Motley Fool Stock Advisor recommendations. The Fool has written puts on Apple. The Fool owns shares of Apple, General Dynamics, International Business Machines, Lockheed Martin, and Raytheon.
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