Tag Archives: energy

Cold Snap Warms Up Natural Gas ETFs

Natural gas prices were thwarted by sluggish trends with the energy market rout and a milder winter so far this year. Among the issues hurting the broader energy space, ample supplies and falling demand on global growth worries are primary. This, along with considerably warmer temperature in December (due to a protracted and stronger El Nino) played foul, taking natural gas futures to a 14-year low (read: No Winter Cheer for Natural Gas ETFs?). As a result, most of the exchange traded products tracking natural gas are in red this year defying seasonal strength. Normally, Arctic Chills give life to this commodity every winter. The cold snap boosts electricity demand across the region putting natural gas in focus. In fact, in 2014, the Polar Vortex caused natural gas prices to jump over 50%. Winter Storm Jonas to Rescue This year, the winter storm Jonas recently salvaged this besieged commodity. The whiteout struck on the East Coast, with icy temperatures and a snow emergency bolstering demand for natural gas for a valid reason. As almost 50% of Americans use natural gas for heating purposes, withdrawals in natural gas supplies push up the commodity’s prices. The U.S. Energy Information Administration also gave same cues on Thursday when it declared the largest weekly drawdown of gas from storage this winter, as per Wall Street Journal. Natural-gas prices went ‘above $5 per million British thermal units in parts of the Northeast for the first time since last winter’, as indicated by Wall Street Journal. If such sub-zero temperatures continue even after the snow storm, it will bring a great deal of luck for natural gas, albeit for the short term. ETF Impact In fact, an ETF tracking the natural gas futures – United States Natural Gas ETF (NYSEARCA: UNG ) -added about 0.13% on January 22. Investors should note that natural gas equities, such as First Trust ISE-Revere Natural Gas Index Fund (NYSEARCA: FCG ), were the real winner that added 5.2% on January 22. Below we highlight a couple of natural gas ETFs that investors could use to play if the U.S. economy remains snowed in the near term (see all Energy ETFs here). iPath Dow Jones-UBS Natural Gas ETN (NYSEARCA: GAZ ) This is an ETN option for natural gas investors. It delivers returns through an unleveraged investment in the natural gas futures contract plus the rate of interest on specified T-Bills. The product follows the Dow Jones-UBS Natural Gas Total Return Sub-Index. The note is less popular with AUM of $4.9 million. It is a high-cost choice, charging 75 bps in annual fees. GAZ is down 30.6% in the year-to-date frame and gained about 2% on January 22, 2016. FCG in Focus This product offers exposure to the U.S. stocks that derive a substantial portion of their revenues from the exploration and production of natural gas. It follows ISE-REVERE Natural Gas Index and holds 30 stocks in its basket, which are well spread out across components (read: 5 ETFs Losing Half or More of Their Value in 2015 ). Southwestern Energy Company, Antero Resources Corporation and Gulfport Energy Corporation occupy the top three positions in the portfolio with a combined 16% of total assets. This indicates that no single company dominates the fund’s returns, preventing heavy concentration. The fund has a blended style and is diversified across various market cap levels with 53% in small caps, 31% in mid caps and the rest in large caps. The product has amassed $132.7 million in its asset base while sees solid volume of nearly 2.5 million shares per day. It charges 60 bps in annual fees from investors and has a Zacks ETF Rank of 3 (Hold) with a High risk outlook. The fund is down 13.7% so far this year (as of January 22, 2016). Bottom Line Though there have been some incredible price increases lately in the natural gas market despite weak demand-supply fundamentals, the commodity is due for a price reversal. The weather will likely warm up across the country with the advent of spring and natural gas demand will trip up then. This is truer in the light of the fact that present stockpiles are pretty higher than the five-year average and the year-ago level. So, investors solely relying on a weather play might proceed with a short-term notion. Original Post

Sector ETF Winners And Losers From The Winter Storm

Finally, the northeast U.S. encountered the winter storm Jonas defying widespread talks about a warmer winter this year. Freezing temperatures not only took the region under the quilt of heavy snow, but also left a deep impact on the U.S. economy. Though the snow storm has stopped, up to almost 30 inches of snow will likely paralyze economic activity for the coming few days. However, pros and cons are probably related to every event. Among all the sectors, there are a few that stand to gain from this blizzard, and others that are likely to be badly hit. Below we highlight some sectors which are in focus after the winter storm Jonas. Gainers Energy Why the energy sector is a clear winner of this weather disruption is anybody’s guess. As almost 50% of Americans use natural gas for heating purposes, expectations of higher usage of natural gas pushed up the commodity’s prices recently. Not only this, the positive side of increased heating demand was also felt in to the most beleaguered commodity – oil. As a result, the First Trust ISE-Revere Natural Gas Index Fund (NYSEARCA: FCG ) added over 5% on January 22 while the crude oil ETF, the United States Oil ETF (NYSEARCA: USO ) , advanced about 8.3% on the same day both on the cold snap and compelling valuation (read : Oil and Energy ETFs That Hit All-Time Lows ). Retail Retail sales have been a cause of concern for quite some time now. The key barometer of economic well-being is not keeping pace with economic growth. Retail and food services sales declined 0.1% in December, while the consensus had estimated the figure to remain unchanged. Meanwhile, retail sales increased 2.1% in 2015, its weakest yearly progress since 2009. One reason for this could be that after seeing one of the worst recessions few years ago, consumers are saving more and purchasing less. But the latest monthly slump was mainly due to the second-most mild December since late 1800s which debarred consumers to shell out on winter essentials like sweaters, coats or boots (read: Weak Retail Sales Hurt These ETFs; What Lies Ahead? ). So, the latest volley of snow and the expectation of chilly days ahead may boost sales of winter garments and benefit retailers. This theory put retail ETFs including the SPDR S&P Retail ETF (NYSEARCA: XRT ) , the Market Vectors Retail ETF (NYSEARCA: RTH ) and the PowerShares Dynamic Retail Portfolio ETF (NYSEARCA: PMR ) in focus. XRT, RTH and PMR were up 1.8%, 1.9% and 1.7%, respectively, on January 22. Losers Transportation Since roads, railways and runways are under the coverlet of almost record amounts of snow and people are locked inside, transportation stocks and the related ETFs are expected to be hurt. As per CNN , the Long Island Rail Road, suffered considerable damage during the storm and five out of its 12 branches- that make up about 20% of traffic in the rail network – will remain closed even after the storm, for repairs. Roadways are still not ready for communication and will likely leave an adverse impact on transportation ETFs like the SPDR S&P Transportation ETF (NYSEARCA: XTN ) and the iShares Transportation Average ETF (NYSEARCA: IYT ) . Though XTN and IYT added 1.9% and 1.3% respectively on January 22, 2016 in line with the broader market rally, their first-quarter results are likely to have a bearing of this cold snap. Both ETFs have a Zacks ETF Rank #4 (Sell). Airlines This sector is yet another victim of the whiteout. Such a momentous snow event has already cancelled about 10,000 flights. A rapid resumption seems implausible given the loads of snow on the runways and the still-unclear weather. Though airlines are trying to cope with storm-related losses by issuing weather waivers for fliers, we believe that airlines have to bear with some losses as travel demand has weakened. So, investors need to be watchful on the airline ETF, the U.S. Global Jets ETF (NYSEARCA: JETS ) . Like transportation ETFs, this airline ETF may also have to face some weakness in the Q1 earnings results. Hospitality Tourism and hospitality sectors are also likely to be hit during this snow storm. So, the PowerShares DWA Consumer Cyclicals Momentum Portfolio (NYSEARCA: PEZ ) which invests over 25% in Hotels, Restaurants & Leisure and over 11% in Airlines, or the PowerShares Dynamic Leisure and Entertainment Portfolio ETF (NYSEARCA: PEJ ) having considerable weights in restaurants, resorts and airlines are likely to feel the brunt of the snow storm as the underlying companies will do less business as long as the freezing phase continues. The Restaurant ETF (NASDAQ: BITE ) , otherwise a strong bet on the improving restaurant sector, might also see some weakness thanks to a temporary slack in sales. Link to the original post on Zacks.com

ECB To Be More Dovish? Watch These ETFs

The European Central Bank (ECB) president Mario Draghi surprised the global market yesterday by giving cues of further policy easing in its March meeting. This came on the heels of Draghi’s repeated assurance of a more intensified and protracted policy easing, if need be. With the Euro zone growth picture still dull and the inflationary environment slackening considerably, prospects of further rate cuts and a likely raise in ECB’s ongoing QE measure have high chances of manifestation. Draghi reaffirmed that the ECB will evaluate and ‘possibly reconsider’ the monetary policy in the March meeting. The reason behind this dovish stance was a 12-year low Brent crude which ruined the possibility of any improvement in inflation in 2016. The ECB economists had projected the annual inflation rate to inch up ‘from 0.2% recorded in December 2015 and average 1% this year, rising further in 2017’. But with oil prices sliding 40% more than the time when the projections were made, Draghi is now skeptical of inflation in 2016, as per the Wall Street Journal. At present, ECB expects 2016 inflation to be 0.7% (down from 1% projected earlier) while inflation for 2017 is expected to be 1.4% (down from 1.5% guided previously) (read: Dovish Draghi Drives Up These European ETFs ). The ECB took several meaningful steps in last two years to bolster the common currency bloc. It launched an asset buying program at the start of 2015 and extended the program by six more months to March 2017 at the end of the year. The bank also cut its deposit rate by 10 bps, shoving it deeper into the negative territory to -0.3% (read: 4 European ETFs to Buy on Cheaper Valuations, QE Launch ). While the markets did not appreciate ECB’s year-end stimulus measure as they expected an outsized expansion in the QE policy and steeper cuts in interest rates, global stocks liked ECB’s statement this time around. Market Impact Several Euro zone ETFs rallied on January 21 post Draghi’s comment. Among the toppers were the iShares MSCI Italy Capped ETF (NYSEARCA: EWI ) , the Barclays ETN + FI Enhanced Europe 50 ETN (NYSEARCA: FEEU ) , the Credit Suisse FI Enhanced Europe 50 ETN (NYSEARCA: FIEU ) , the iShares MSCI United Kingdom ETF (NYSEARCA: EWU ) and the iShares Currency Hedged MSCI EMU ETF (NYSEARCA: HEZU ) with gains of about 2.9%, 1.8%, 1.5%, 1.4% and 1.3%, respectively. Euro also shed gains as evident by 0.03% losses incurred by the CurrencyShares Euro Trust ETF (NYSEARCA: FXE ) . The fund shed more gains of about 0.1% after hours. ETFs to Play Investors may take advantage of this euphoria in the European market. The first option is to bet on our top-ranked European ETFs. Below we highlight two options. Deutsche X-trackers MSCI Germany Hedged Equity ETF (NYSEARCA: DBGR ) DBGR is a hedged German equity ETF providing exposure to 56 firms. The fund focuses on Consumer Discretionary, Financials and Health Care sectors. Expense ratio comes in at 0.45%. DBGR has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook. DRGR was up 1.3% on January 21, 2016. Deutsche X-trackers MSCI United Kingdom Hedged Equity ETF (NYSEARCA: DBUK ) This hedged UK ETF has amassed about $4 million in assets. The fund holds114 stocks presently and charges 45 bps in fees. Financials, Consumer Staples, Energy, Consumer Discretionary and Health Care have a double-digit weight in the fund. The fund was up 1.4% on January 21 and carries a Zacks ETF Rank #2 (Buy). Investors can also play this move by shorting the euro ETFs. Below, we highlight a few choices in the inverse euro ETF space. These ETFs profit when the euro declines and may be suitable for hedging purposes against the fall in the currency. ProShares Ultra Short Euro ETF (NYSEARCA: EUO ) This leveraged ETF looks to provide twice the inverse exposure to the performance of euro versus the U.S. dollar on a daily basis. The ETF charges a hefty annual expense ratio of 95 basis points. The product was up 0.04% on January 21. Investors could book more profits off this fund, should the euro continue to struggle. Market Vectors Double Short Euro ETN (NYSEARCA: DRR ) This is an exchange-traded note issued by Morgan Stanley. The product seeks to track the performance of the Double Short Euro Index. For every 1% weakening of the euro relative to the greenback, the index normally gains 2%. The product charges an expense ratio of 0.65% a year and advanced about 1% (as of January 21, 2016). Link to the original on Zacks.com