While a short trading week will mean lower liquidity and higher volatility for ETF investors, there are still plenty of funds to watch while surfing the Web for last-minute gift ideas.
Retail data, housing starts, orders for durable goods and a GDP revision will help to keep this short week interesting. Here are five ETFs to follow:
First Trust Dow Jones Internet Index
Shoppers are waiting until the last minute, suggests a recent survey from the National Retail Foundation. After the second week of December, consumers admitted to having just 46.7 per cent of their holiday shopping done - the lowest level of completion since 2004. Approximately 20 per cent of shoppers noted that they hadn't even started yet.
Weekly measures of retail activity are important during the holiday season, so Tuesday's retail data will be an important indication of consumer health. Since so many shoppers have admitted putting off purchases to the last minute, data for the week ended Dec. 19 should reflect a last-minute spending binge.
More than ever, shoppers are using the Internet to search for holiday bargains. As the days to Christmas tick closer, FDN's components will see increased activity. Consumers will flock to top FDN holdings like Amazon and eBay for gifts and hopefully checking Priceline and Expedia for plane tickets home.
FDN, which targets companies that generate at least 50 per cent their annual sales/revenue from the Internet, could benefit from procrastinating consumers.
SPDR Gold Shares
Gold ETFs have been a popular safehaven for investors as the price of this precious metal trends upwards. There has been another pattern for funds like GLD, however, as the price of the ETFs have waxed and waned with some regularity over the past few months. After spiking in mid-December, GLD has sold off. Interestingly, GLD also sold off at the end of September, October and November.
With rates hovering near zero and uncertainty plaguing the marketplace, ETFs like GLD continue to look like an attractive investment into 2010.
If gold's monthly cycle continues, this week may be the best moment to pick up shares of GLD before investors ring in the New Year.
iShares Dow Jones U.S. Consumer Goods Sector Index Fund
On Wednesday, when the final December reading of the Reuters/University of Michigan Consumer Index is absorbed by the marketplace, the news could have an impact on consumer goods ETFs like IYK, the SPDR Consumer Staples Select Sector SPDR Fund and Vanguard Consumer Staples ETF. All three of these funds are top heavy - loaded with large cap firms like Wal-Mart, Coca-Cola and Philip Morris International. While the sentiment of American consumers will certainly impact these U.S. based companies, components of these consumer ETFs generate a lot of their revenue abroad.
A number of factors will be weighing on these consumer goods ETFs this week. In addition to the final reading of the Consumer Sentiment Index, a volatile dollar could impact the companies that make up these ETF funds.
It will be interesting to see how a fluctuating dollar and an expected positive outlook for Consumer Sentiment impact consumer goods ETFs.
iShares Dow Jones US Home Construction
Housing starts have been rebounding, and ITB has been bouncing back ahead of a raft of housing data out this week. During the three month period ending Dec. 17, ITB dropped 13.57 per cent. During the one week period ending Dec. 17, however, ITB rose 3.92 per cent. If new and existing home sales continue to firm up, ITB could erase even more of its three-month losses in the week ahead.
Even though the tax credit for homebuyers has been extended, many deals are currently in the works. Data this month will likely still reflect the urgency that many homebuyers felt before the extension.
Over the next six months, the housing market as a whole, along with ITB will continue to face challenges like unemployment. This week however, if housing data is positive, ITB could jump in the short term.
iShares Dow Jones Transportation Average
IYT stands to benefit from data for durable goods, set to be released on Thursday. While orders for civilian aircraft will likely be lower, the increased sale of motor vehicles, and the subsequent effort to replenish those inventories, could help to boost the companies that comprise IYT. Airlines make up just 7 per cent of this motor vehicle-heavy ETF, which is up nearly 20 per cent year to date.
Much of the recent gains can be attributed to Warren Buffett's acquisition of IYT's top component, Burlington Northern Santa Fe. The $44-billion deal has attracted investor interest railroads, which make up more than 30 per cent of IYT.
Since many of Wall Street's biggest players will be on vacation this week, ETF investors should trade strategically, with an eye towards the most active funds. Investors with short term ETF positions should double-check their exposure before 1 p.m. on Thursday. When U.S. markets close after a half day on Christmas Eve, investors will have to wait until Monday, while the rest of the world trades through the end of the week.