NEW YORK (TheStreet) -- The coal sector is coming under the spotlight with the reporting of key earnings this week.

Investors seeking exposure to the sector may seek coverage through the

Market Vectors Coal ETF

(KOL) - Get Report


However, after


( MEE) reported dismal earnings at the market close Tuesday, investors may question coal as a stable choice.

The company reported a net second-quarter loss of $88.7 million and a loss of $55.1 million for the first half. The net loss for the quarter included associated costs in connection with a deadly mining accident in April.

The company's operations further slowed in the second quarter after a sluggish first quarter. Likewise, KOL saw a similar slowdown in the second quarter, as 2010 has been much more sluggish than 2009 when the fund was a leader in the market rally.

While the

S&P 500

is essentially flat for the year, KOL is down by roughly 5% year to date. By contrast, the S&P 500 gained 20% and KOL more than doubled, up about 120%, for the same time period in 2009.

In the second quarter, KOL stock fell by 23%, whereas the S&P 500 lost 12%. By contrast, the fund and the S&P 500 both grew by about 5% in the first quarter.

The fund's sluggishness can be attributed to concerns of a slowdown or stall in the global economic recovery. Sentiment in the industry is increasingly dependent on the economic outlook of China and other developing economies. In particular, the world is increasingly looking to East Asian demand as a source of support for coal prices.

Earlier this year, China's efforts to damper a potentially overheating economy took the wind out of KOL's sails. Although China's economy is expected to perform well, second-quarter growth for the Chinese economy is already slower than that of the first quarter.

While only 21.9% of KOL's total holdings are in Chinese companies, other companies in the sector will also be affected by the impact the Chinese economy has on coal markets.

Of course, the recovery in the U.S. and elsewhere in the world are also still very important and KOL remains a play on economic recovery in important economies. For instance, fear of European underperformance and poor expectations for the United States could both reflect negatively on KOL.

Investors looking for more direction within the industry will gain new perspective on the coal sector when

Arch Coal

(ACI) - Get Report

, yet another holding of KOL, reports earnings before the market opens on Friday.

However, investors should understand that for now, KOL is be more sensitive to broad economic outlooks as opposed to the earnings of individual companies.

-- Written by Don Dion in Williamstown, Mass.

At the time of publication, Dion Money Management does not own any of the equities mentioned.

Don Dion is president and founder of

Dion Money Management

, 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.