ETF Outlook for Friday, March 21, 2014
SPDR Financial ETF (NYSE:XLF)
Late yesterday the results for the annual stress test for big U.S. banks were released and 29 out of 30 have enough capital to weather a severe jolt from the economy. The only bank to fail was Zions Bancorp (NYSE:ZION).
Some of the big name banks were at the bottom of the list, however they all passed. XLF is a basket of some of the largest names in the sector and yesterday it closed up 1.6 percent at the best closing level since 2008. The volume Thursday on the breakout rally was the highest in six weeks, which is a bullish signal for the chart. Support for XLF is at the $21.75 area.
iShares U.S. Consumer Goods ETF (NYSE:IYK)
After the bell yesterday Nike (NYSE:NKE) reported better than anticipated earnings and the stock jumped nearly two percent on the news. The move was enough to push the stock to a new all-time high. Even though the news was stock specific, it could be a boost to entire consumer goods sector. IYK calls NKE its eighth largest holding with a three percent position.
The largest holding in the ETF is Proctor & Gamble (NYSE:PG), which has been struggling lately. The SPDR Consumer Discretionary ETF (NYSE:XLY) also has 3 percent of its portfolio in NKE, but it is the tenth largest holding in the allocation. Both ETFs could be on the move today based on the earnings report.
iShares U.S. Telecommunications ETF (NYSE:IYZ)
A sector that has been overlooked by most investors for the last decade has been the telecom stocks. As investors shy away from the sector it has been steadily moving higher since bottoming in 2008. A 1.6 percent rally yesterday has the stock at the best level since late 2007 looking strong once again.
The 2.5 percent dividend yield is attractive in a low-rate environment and is another factor for investors to consider the ETF. The three largest holdings are AT&T (NYSE:T),Verizon Communications (NYSE:VZ)and Crown Castle Intl (NYSE:CCI). The three stocks account for 30 percent of the portfolio.
Global X SuperIncome Preferred ETF (NYSE:SPFF)
A basket of 50 of the highest yielding preferred stocks in the U.S. and Canada is breaking out of a consolidation pattern that has been forming for months. The little-known ETF has been a solid performer the last few months even though it has moved sideways due to a monthly dividend payment.
The 12-month dividend yield is 7.4 percent, nearly three times the interest rate on the 10-year Treasury bond. Investors looking to generate above-average income without taking big risk have flocked to this ETF and the recent breakout will only generate more eyes on it.
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