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June 6 was the day for the S&P 500 and the commodity oil. The index hit its seven-month high and oil prices touched their highest levels of the year. Fed chief Janet Yellen appears to be the navigator of this market momentum. Her positive rhetoric on the state of the U.S. economy brushed off worries that arose from the shockingly downbeat job data for the month of May (read: Dull U.S. Job Data Brighten These ETFs).
In her speech, Yellen sounded confident about the growth of the U.S. economy, but made no specific comments on the timing of the next rate hike. The broader market took this as a reversal of the possibility of a June rate hike. Goldman Sachs now sees 40% chance of a rate hike in July. This is almost double the chance that the bond market is anticipating.
Overall, almost no chance of a hike in June and a few more days of cheap money inflows boosted investors’ sentiments. Yellen referred to the jobs report as "disappointing," but stressed on the fact that the health of the economy should not judged by a lone data.
After all, other economic indicators have lately been stronger. As per the Institute for Supply Management (ISM), the manufacturing PMI was 51.3 in May, up from 50.8 recorded in April (read: Retail Sales Back to Health; ETFs to Watch).
The return of risk-on sentiments helped biotech shares to soar. While several biotech ETFs logged gains on June 6, XBI added a substantial 2.7% (read: What Lies Ahead for Biotech ETFs?).
Oil price gains favored this sector. In any case, the energy sector has been in good shape lately with easing supply glut. Yellen’s comments should cut some strength out of the rising greenback as traders now have pushed back the timeline of the next rate hike.
This dimmer greenback invariably brightens up the commodity investing. Moreover, geo-political issues in a key oil producing nation Nigeria is also posing threats to the supply scenario which in turn is shoring up oil prices. XES added over 8.6% on June 6, 2016 (read: Best Oil Rally in 7 Years; 3 Energy ETF Winners).
With Yellen acknowledging the fact that the “federal funds rate will probably need to rise gradually over time to ensure price stability and maximum sustainable employment in the longer run,” the financial sector has also found reasons to rejoice. The financial sector generally performs better in a rising rate environment.
As a result, the sector performed decently on June 6 with KCE returning about 1.7%. The fund puts about 56.2% in Asset Management & Custody Banks while the Investment Banking & Brokerage segment accounts for over 41% of the basket.
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Yellen Upbeat on Economy: Wining Sector ETFs
June 6 was the day for the S&P 500 and the commodity oil. The index hit its seven-month high and oil prices touched their highest levels of the year. Fed chief Janet Yellen appears to be the navigator of this market momentum. Her positive rhetoric on the state of the U.S. economy brushed off worries that arose from the shockingly downbeat job data for the month of May (read: Dull U.S. Job Data Brighten These ETFs).
In her speech, Yellen sounded confident about the growth of the U.S. economy, but made no specific comments on the timing of the next rate hike. The broader market took this as a reversal of the possibility of a June rate hike. Goldman Sachs now sees 40% chance of a rate hike in July. This is almost double the chance that the bond market is anticipating.
Overall, almost no chance of a hike in June and a few more days of cheap money inflows boosted investors’ sentiments. Yellen referred to the jobs report as "disappointing," but stressed on the fact that the health of the economy should not judged by a lone data.
After all, other economic indicators have lately been stronger. As per the Institute for Supply Management (ISM), the manufacturing PMI was 51.3 in May, up from 50.8 recorded in April (read: Retail Sales Back to Health; ETFs to Watch).
Overall retail sales expanded 1.3% in April from March, representing the largest gain since March 2015. New U.S. single-family home sales logged the biggest leap in 24 years in April (read: Can Surging Housing ETFs Withstand Fed Hike Worry?).
Below we highlight a few sector ETFs that recorded nice gains on June 6.
Biotech
SPDR S&P Biotech ETF (XBI - Free Report)
The return of risk-on sentiments helped biotech shares to soar. While several biotech ETFs logged gains on June 6, XBI added a substantial 2.7% (read: What Lies Ahead for Biotech ETFs?).
Energy
SPDR S&P Oil & Gas Equipment & Services (XES - Free Report)
Oil price gains favored this sector. In any case, the energy sector has been in good shape lately with easing supply glut. Yellen’s comments should cut some strength out of the rising greenback as traders now have pushed back the timeline of the next rate hike.
This dimmer greenback invariably brightens up the commodity investing. Moreover, geo-political issues in a key oil producing nation Nigeria is also posing threats to the supply scenario which in turn is shoring up oil prices. XES added over 8.6% on June 6, 2016 (read: Best Oil Rally in 7 Years; 3 Energy ETF Winners).
Financial
SPDR S&P Capital Markets ETF (KCE - Free Report)
With Yellen acknowledging the fact that the “federal funds rate will probably need to rise gradually over time to ensure price stability and maximum sustainable employment in the longer run,” the financial sector has also found reasons to rejoice. The financial sector generally performs better in a rising rate environment.
As a result, the sector performed decently on June 6 with KCE returning about 1.7%. The fund puts about 56.2% in Asset Management & Custody Banks while the Investment Banking & Brokerage segment accounts for over 41% of the basket.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>