After rallying impressively since the election, the markets may finally be starting to show signs of fatigue. For the first time since November, the S&P 500 has closed below its 50 day moving average. Volatility has begun to move back up, albeit modestly, and geopolitical events could begin putting real downward pressure on stocks. The S&P 500 currently sits around 3% below its all time high, also a level it hasn’t seen since November. A 3% pullback isn’t anything out of the ordinary but it’s easy to see it extending further if tensions remain high in North Korea or if companies start missing 1st quarter earnings estimates.
Speaking of earnings, the Q1 season goes into full gear this week with well over 250 companies reporting. S&P 500 companies are expected to deliver 10% year-over-year earnings growth this quarter, the strong quarterly forecast in the past few years. Given that much of the market’s rally has been built around multiple expansion, the next move up in stocks will likely need to be driven by earnings growth. One of every quarter’s most watched earnings reports, Netflix (NFLX), drops after the close on Monday and gets followed up later in the week by Bank of America (BAC), Goldman Sachs (GS), Johnson & Johnson (JNJ), IBM (IBM), Morgan Stanley (MS), eBay (EBAY), Qualcomm (QCOM), Visa (V) and General Electric (GE).
With all of that in mind, here are four ETFs that I think could be on the move this week.
Technology Select Sector SPDR ETF (XLK)
Given the large slate of reports coming this week, you could target any number of areas to keep an eye on. I went with the financials last week with Citigroup (C), Wells Fargo (WFC) and JPMorgan Chase reporting. You could make the argument that financials should be on watch again this week with big banks such as Goldman Sachs and Bank of America, brokerages such as E-Trade (ETFC) and TD Ameritrade (AMTD) and asset managers such as BlackRock (BLK) delivering reports this week.
