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ETFs to Buy as U.S. Manufacturing Hits 13-Year High
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The U.S. manufacturing sector closed 2017 on a high note as gains in orders and output was the best for factories in 13 years. The sector grew in December at the quickest clip in three months (read: 7 Successful New ETFs of 2017).
As per the recent manufacturing report from the Institute for Supply Management (ISM), the reading was 59.7 in December (a reading of 50 or higher points to growth), up from 58.2 recorded in November. Economists had forecast a score of 58.2.
The new orders index rose to 69.4, the highest in nearly 14 years, up from 64 in November. Production rose to 65.8 from 63.9 recorded in November. The data came in at the highest since May 2010.
Of the 18 manufacturing industries, 15 recorded an increase in December with Machinery, Computer & Electronic Products; Paper Products; Apparel & Allied Products; Metals and Nonmetallic Mineral Products deserving special mention. Wood Products and Textile Mills registered a retreat in the month.
Most of the industrial ETFs were in the green post release of the manufacturing data (see all industrials ETFs here).
Investors should note that some sectors will emerge stronger in the light of stellar manufacturing. Below we highlight a few sector ETFs that may win in the coming days.
Machinery
With the machinery sector leading the growth, Industrial Select Sector SPDR ETF (XLI - Free Report) comes to the forefront. Solid international sales and improving domestic market are helping the machinery sector.
Computer & Electronic Products
This area is also witnessing a ‘ramp-up’ and is placing SPDR S&P Technology Hardware ETF in a sweet spot.
Transportation Equipment
With “domestic and international sales on the rise”, this segment registered considerable improvement in December. iShares Transportation Average ETF (IYT - Free Report) can thus gain ahead.
Materials
Chemical products business is progressing in the right direction.All suppliers of paper products are exhibiting strong business activity. As a result, materials ETFs like Materials Select Sector SPDR ETF (XLB - Free Report) should gain ahead.
Bottom Line
All in all, the improving trend noticed over the last few months indicate a growth in the coming days. Though the Fed is sounding hawkish, interest rates are still at moderate levels. Notably, a low interest rate environment favors the industry as the sector depends on interest rates for its operations (read: What Do Fed Minutes Mean for the ETF World?).
On the other hand, the long-tottering energy sector might be on an upward trajectory in the days to come thanks to an oil price recovery. This can spell optimism for the manufacturing sector as a whole. Moreover, the scenario beyond the U.S. border is likely to be rosy. So, an uptick in global growth and Trump-induced fiscal stimulus should chalk out a nice backdrop for industrial stocks and ETFs in 2018 (read: Tax Bill: What ETF Investors Need to Know).
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ETFs to Buy as U.S. Manufacturing Hits 13-Year High
The U.S. manufacturing sector closed 2017 on a high note as gains in orders and output was the best for factories in 13 years. The sector grew in December at the quickest clip in three months (read: 7 Successful New ETFs of 2017).
As per the recent manufacturing report from the Institute for Supply Management (ISM), the reading was 59.7 in December (a reading of 50 or higher points to growth), up from 58.2 recorded in November. Economists had forecast a score of 58.2.
The new orders index rose to 69.4, the highest in nearly 14 years, up from 64 in November. Production rose to 65.8 from 63.9 recorded in November. The data came in at the highest since May 2010.
Of the 18 manufacturing industries, 15 recorded an increase in December with Machinery, Computer & Electronic Products; Paper Products; Apparel & Allied Products; Metals and Nonmetallic Mineral Products deserving special mention. Wood Products and Textile Mills registered a retreat in the month.
Most of the industrial ETFs were in the green post release of the manufacturing data (see all industrials ETFs here).
Investors should note that some sectors will emerge stronger in the light of stellar manufacturing. Below we highlight a few sector ETFs that may win in the coming days.
Machinery
With the machinery sector leading the growth, Industrial Select Sector SPDR ETF (XLI - Free Report) comes to the forefront. Solid international sales and improving domestic market are helping the machinery sector.
Computer & Electronic Products
This area is also witnessing a ‘ramp-up’ and is placing SPDR S&P Technology Hardware ETF in a sweet spot.
Transportation Equipment
With “domestic and international sales on the rise”, this segment registered considerable improvement in December. iShares Transportation Average ETF (IYT - Free Report) can thus gain ahead.
Materials
Chemical products business is progressing in the right direction.All suppliers of paper products are exhibiting strong business activity. As a result, materials ETFs like Materials Select Sector SPDR ETF (XLB - Free Report) should gain ahead.
Bottom Line
All in all, the improving trend noticed over the last few months indicate a growth in the coming days. Though the Fed is sounding hawkish, interest rates are still at moderate levels. Notably, a low interest rate environment favors the industry as the sector depends on interest rates for its operations (read: What Do Fed Minutes Mean for the ETF World?).
On the other hand, the long-tottering energy sector might be on an upward trajectory in the days to come thanks to an oil price recovery. This can spell optimism for the manufacturing sector as a whole. Moreover, the scenario beyond the U.S. border is likely to be rosy. So, an uptick in global growth and Trump-induced fiscal stimulus should chalk out a nice backdrop for industrial stocks and ETFs in 2018 (read: Tax Bill: What ETF Investors Need to Know).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>