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Though Wall Street was off to a rocky start in May on renewed U.S.-China trade tensions, slump in tech stocks trigged by the Amazon (AMZN - Free Report) selloff, and a cautious message from the annual meeting of Warren Buffett's Berkshire Hathaway, things are likely to smoothen out through the month. Wall Street edged higher on May 4 as investors shifted their focus to the reopening of economies (read: 5 ETF Strategies to Follow Warren Buffett's Coronavirus Tips).
Meanwhile, corporate earnings have come in mixed. Some are exceeding expectations, while some have been reporting extreme coronavirus-induced weakness. Most companies are refraining from providing guidance. Whatever the case, no downbeat economic data points or corporate earnings are shocking as investors have been sort of mentally prepared.
The S&P 500, the Dow Jones and the Nasdaq gained about 0.4%, 0.1% and 1.2%, respectively, on May 4. Massive monetary and fiscal policy easing should help the market rally ahead. After all, with the coronavirus pandemic likely to last as long as two years (per a report), we must all learn to adjust.
Against this backdrop, below we highlight a few sector ETFs that have been acting as charging bulls lately.
Technology — Invesco DWA Technology Momentum ETF (PTF - Free Report) — Up 2.32% on May 4
Tech stocks have been investors’ darlings this year despite the coronavirus outbreak. Social distancing norms enacted globally to mitigate the spread of the virus compelled people to incline more toward technology as they depend more on cloud computing, video gaming, streaming and e-commerce.
We already had a bunch of inspiring big tech earnings this season from the likes of Facebook , Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) . Apple (AAPL - Free Report) earnings too have come in decent. Tech sector is cash rich and has a better debt profile than many sectors in the S&P 500. Tech earnings are likely to grow 2.8% in the first quarter of 2020 on 6.2% higher revenues. This is in contrast to a 12.5% slump in S&P 500 earnings on 2.1% increase in revenues.
Energy— SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) — Up 5.16% on May 4
The month of April would always be known for the ebbs and flows in the WTI crude market due to storage crisis. Due to lockdown-led low demand, ample supplies and drying storage capacity, May WTI crude contract fell to the negative territory on Apr 20, for the first time in history, and the June contract too suffered lately (read: Oil in Great Contango: Here's How to Play With Crude ETFs).
However, the demand scenario is more bullish for later months as reopening of economies will definitely boost the requirement of oil and gas. WTI June futures gained about 18.5% in the past five days at the time of writing. Higher energy prices are instilling optimism among producers that have been battered in the past month.
Moreover, natural gas prices have been the beneficiary of the latest oil crash. During shutting-in of oil wells (due to low prices), producers will also lose on some associated natural gas production. Lesser natural gas output caused a spurt in demand (read: Oil Crash & Weather Concerns Boost Natural Gas ETFs).
Biotech — SPDR S&P Biotech ETF (XBI - Free Report) — Up 5.06% on May 4
Healthcare and biotech stocks and ETFs have been in investors’ favor amid the ongoing medical emergency. Biotech stocks, in fact, had their best monthly gain in two decades in April. Large pharma and biotech companies are working on medicines, vaccines and testing kits. Most recently, Gilead (GILD - Free Report) indicated that the trial for coronavirus treatment Remdesivir has met its initial goal. And Remdesivir received the FDA nod for emergency usefor coronavirus as an experimental drug. Moderna Inc. (MRNA - Free Report) , which is developing experimental vaccines, said it had entered an agreement to manufacture a billion doses a year. This optimism should keep Wall Street charged up.
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3 Sector ETFs Gaining Momentum in May
Though Wall Street was off to a rocky start in May on renewed U.S.-China trade tensions, slump in tech stocks trigged by the Amazon (AMZN - Free Report) selloff, and a cautious message from the annual meeting of Warren Buffett's Berkshire Hathaway, things are likely to smoothen out through the month. Wall Street edged higher on May 4 as investors shifted their focus to the reopening of economies (read: 5 ETF Strategies to Follow Warren Buffett's Coronavirus Tips).
Meanwhile, corporate earnings have come in mixed. Some are exceeding expectations, while some have been reporting extreme coronavirus-induced weakness. Most companies are refraining from providing guidance. Whatever the case, no downbeat economic data points or corporate earnings are shocking as investors have been sort of mentally prepared.
The S&P 500, the Dow Jones and the Nasdaq gained about 0.4%, 0.1% and 1.2%, respectively, on May 4. Massive monetary and fiscal policy easing should help the market rally ahead. After all, with the coronavirus pandemic likely to last as long as two years (per a report), we must all learn to adjust.
Against this backdrop, below we highlight a few sector ETFs that have been acting as charging bulls lately.
Technology — Invesco DWA Technology Momentum ETF (PTF - Free Report) — Up 2.32% on May 4
Tech stocks have been investors’ darlings this year despite the coronavirus outbreak. Social distancing norms enacted globally to mitigate the spread of the virus compelled people to incline more toward technology as they depend more on cloud computing, video gaming, streaming and e-commerce.
We already had a bunch of inspiring big tech earnings this season from the likes of Facebook , Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) . Apple (AAPL - Free Report) earnings too have come in decent. Tech sector is cash rich and has a better debt profile than many sectors in the S&P 500. Tech earnings are likely to grow 2.8% in the first quarter of 2020 on 6.2% higher revenues. This is in contrast to a 12.5% slump in S&P 500 earnings on 2.1% increase in revenues.
Energy— SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) — Up 5.16% on May 4
The month of April would always be known for the ebbs and flows in the WTI crude market due to storage crisis. Due to lockdown-led low demand, ample supplies and drying storage capacity, May WTI crude contract fell to the negative territory on Apr 20, for the first time in history, and the June contract too suffered lately (read: Oil in Great Contango: Here's How to Play With Crude ETFs).
However, the demand scenario is more bullish for later months as reopening of economies will definitely boost the requirement of oil and gas. WTI June futures gained about 18.5% in the past five days at the time of writing. Higher energy prices are instilling optimism among producers that have been battered in the past month.
Moreover, natural gas prices have been the beneficiary of the latest oil crash. During shutting-in of oil wells (due to low prices), producers will also lose on some associated natural gas production. Lesser natural gas output caused a spurt in demand (read: Oil Crash & Weather Concerns Boost Natural Gas ETFs).
Biotech — SPDR S&P Biotech ETF (XBI - Free Report) — Up 5.06% on May 4
Healthcare and biotech stocks and ETFs have been in investors’ favor amid the ongoing medical emergency. Biotech stocks, in fact, had their best monthly gain in two decades in April. Large pharma and biotech companies are working on medicines, vaccines and testing kits. Most recently, Gilead (GILD - Free Report) indicated that the trial for coronavirus treatment Remdesivir has met its initial goal. And Remdesivir received the FDA nod for emergency usefor coronavirus as an experimental drug. Moderna Inc. (MRNA - Free Report) , which is developing experimental vaccines, said it had entered an agreement to manufacture a billion doses a year. This optimism should keep Wall Street charged up.
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 >>