NEW YORK (TheStreet) -- The start of the earnings seasons will have a huge bearing ETFs in such key sectors as metals and mining, leisure and entertainment, financials and technology.
, which accounts for 4% of XME's assets, kicks off earnings season today. Analysts expect 12 cents per share and they have been wide of the mark over the previous four quarters.
A good report would bode well for XME, as the fund endured a brutal May and June, sliding from around $60 in April to $45 by the start of July. In a similar fashion recently to many other ETFs, including
SPDR S&P 500
, XME's 50-day moving average fell below its 200-day moving average, commonly referred to as a "death cross" because it is interpreted as an ominous signal.
However, XME enjoyed a solid rebound last week and is headed towards its 50-day moving average, with its 200-day moving average not far beyond. A good earnings report from Alcoa and a further rebound this week would make the "death cross" signal appear to be more of a fluke than a strong signal of future performance.
PowerShares Dynamic Leisure and Entertainment
report this week and will be important earnings given the recent negative sentiment shift towards retail and consumer sectors.
Both companies have significant overseas operations though, especially Yum's heavy investments in China. These firms could deliver solid numbers and help PEJ, while not lifting the rest of the sector.
Both Yum and Marriot have beaten analyst estimates in the previous four quarters. The two firms each account for about 5% of PEJ's assets.
iShares S&P North American Semiconductor
is the first major technology company to report earnings this week. Analysts are looking for 43 cents per share.
UBS put out a note on Friday that expects the company to meet earnings and revenue estimates, but expressing concern that inventories could rise.
In terms of valuation, Intel shares look cheap, trading for about 10 times next year's expected earnings. The recent sell-off in stocks was partially due to investor concerns over future growth, and Intel's report this week will be closely watched with this theme in mind. Given the recent decline, I expect a positive report could lead to significant gains for the sector during this week.
The euro bounce is unlikely to end this week, but the bank stress tests loom in the distance. They are due on July 23. Over the past month, the euro has enjoyed a rebound in part because investor attention shifted elsewhere -- to retail sales and jobs numbers in the United States, housing in China, and mineral taxes in Australia.
As attention refocuses on the euro, we will see whether investors believe the situation has improved, or whether they were just taking a vacation from selling the euro.
Market Vectors Junion Gold Miners ETF
, a small holding in GDXJ accounting for less than 1% of assets, reports earnings this week.
Gold mining shares have been tracking the price of gold since late April, and while that was originally good news, retreating gold prices have made this bad news over the past two weeks. Still, the fact that the miners are tracking gold prices is good news if the price of gold can hold steady or rebound.
The miners could also perform better than gold if their earnings start rising thanks to the higher gold price. Average gold prices were nearly $1,200 in the previous quarter, almost $100 above the first quarter.
Video: Best Metal for Rest of 2010 >>
First Trust: Dow Jones Internet
reports on Thursday and shares started moving higher on Friday after the company's
Internet license was renewed by China
There was some concern that the company would lose its license over its refusal to follow Chinese regulations, but the company said that its recent moves are legal and the regulators apparently agree.
Analysts expect the company earned $6.54 per share in the second quarter.
Technology has been one of the stronger sectors of late and although it lost about 14% over the past two-plus months, FDN rebounded strongly last week. The No. 1 holding in this ETF, with nearly 10% of assets, is Google. The fund is well diversified in the Internet sector, but Google is going to have long coattails, whichever way it moves this week.
Financial Select Sector SPDR
delivers its second-quarter earnings report on Thursday, while
Bank of America
report on Friday. Almost 25% of XLF's assets are in these stocks.
Investors are coming into this earnings season on a sour note, with financial ETFs such as XLF down 15% or more. Financial reform was recently passed and it's not fully clear how this will ultimately affect the industry. Looking ahead, investors are concerned about the economy in the second half of the year.
Therefore, the third quarter outlook and comments on the financial regulation are big areas to watch. I think investors have priced in a lot of negatives, but a miss or negative outlook from JPM could rattle the market.
I expect positive reports, however, and a good week for the financials. Recall that last July, it was
earnings that touched off a big rally in July and August.
Investors can use
iShares Dow Jones U.S. Financial Services
for greater total exposure to these companies, with 31% of assets in the three banks.
-- Written by Don Dion in Williamstown, Mass.
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At the time of publication, Dion Money Management was long First Trust: Dow Jones Internet, CurrencyShares Euro and
Don Dion is president and founder of
, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.
Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.