The Federal Reserve stepped in to calm the stock markets given the signs of increasing new coronavirus cases in states that have lifted lockdown orders. Florida is seeing an average of more than 1,600 new cases per day, and Arizona and North Carolina are experiencing an average of more than 1,200 new cases daily.
The central bank announced that it would begin purchasing individual corporate bonds as part of its emergency lending program to inject liquidity into the virus-stricken economy. The move represents an expansion of the Fed’s previously announced secondary market corporate credit facility, which had only included purchases of exchange-traded funds. A flood of liquidity in the form of fiscal and economic stimulus has sparked a remarkable rally in the stock market since the lows reached in late-March.
Further, a Bloomberg report states that President Donald Trump’s administration is preparing a $1 trillion infrastructure proposal to spur the world’s largest economy back to life. The Department of Transportation's preliminary version reserves most of the funding for projects such as roads and bridges, but also sets aside money for 5G wireless infrastructure and rural broadband. The existing U.S. infrastructure funding law authorizes $305 billion over five years and expires on Sep 30. Lawmakers will either extend it or come up with a long-term replacement.
The latest move brought back risk-off trading and bolstered investors’ confidence. In fact, all the three major U.S. indices rebounded following the news on Jun 15. Amid such backdrop, cyclical sectors like financials, consumer discretionary, materials, and industrials tend to perform better than others as they are attractively valued at the current levels. These sectors were beaten down badly by the coronavirus-led market sell-off in March, making their stocks bargain picks. Also, the cyclical stocks are tied to economic activities and when growth improves, these sectors perform well (read: Top-Ranked Beaten Down ETFs to Buy Now).
Notably, most of the ETFs in the cyclical sectors have a solid Zacks ETF Rank #2 (Buy), indicating their outperformance. These funds also have lower P/E ratio than that of SPY (23.05). Below we have highlighted some of them.
SPDR S&P Bank ETF (KBE - Free Report) – P/E Ratio: 14.27
This fund offers equal-weight exposure to 89 banking stocks by tracking the S&P Banks Select Industry Index. Regional banks dominate the portfolio with 73.6% share while diversified banks, thrifts & mortgage finance, other diversified financial services, and asset management & custody banks take the remainder. It has amassed $1.4 billion in its asset base while trading in heavy volume of nearly 3 million shares a day on average. The product charges 35 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook.
SPDR S&P Retail ETF (XRT - Free Report) - P/E Ratio: 19.15
With AUM of $398.7 million, this product tracks the S&P Retail Select Industry Index, holding 87 securities in its basket. Internet & direct marketing retail takes the largest share at 25.8% while apparel retail, automotive retail, and specialty stores round off the next three spots with a double-digit allocation each. The fund charges 35 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Oil Back to $40 Level: ETFs to Gain or Lose).
iShares U.S. Industrials ETF (IYJ - Free Report) - P/E Ratio: 20.87
This product provides exposure to 206 U.S. companies that produce goods used in construction and manufacturing by tracking the Dow Jones U.S. Industrials Index. It is tilted toward capital goods’ companies at 48.9% while software services and transportation round off the next two spots with double-digit exposure each. The fund has AUM of $750.3 million and average daily volume of around 48,000 shares. It charges 42 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Sector Rotation: Investors Flocking to Cyclical ETFs).
Financial Select Sector SPDR Fund (XLF - Free Report) - P/E Ratio: 17.19
This fund follows the Financial Select Sector Index and provides exposure to companies in the diversified financial services, insurance, banks, capital markets, mortgage real estate investment trusts, consumer finance, and thrifts and mortgage finance industries. It holds 66 stocks in its basket and charges investors 13 bps in annual fees. The fund has accumulated nearly $16.8 billion in AUM and trades in volumes of 76 million shares on average per day.
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Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
The Federal Reserve stepped in to calm the stock markets given the signs of increasing new coronavirus cases in states that have lifted lockdown orders. Florida is seeing an average of more than 1,600 new cases per day, and Arizona and North Carolina are experiencing an average of more than 1,200 new cases daily.
The central bank announced that it would begin purchasing individual corporate bonds as part of its emergency lending program to inject liquidity into the virus-stricken economy. The move represents an expansion of the Fed’s previously announced secondary market corporate credit facility, which had only included purchases of exchange-traded funds. A flood of liquidity in the form of fiscal and economic stimulus has sparked a remarkable rally in the stock market since the lows reached in late-March.
Further, a Bloomberg report states that President Donald Trump’s administration is preparing a $1 trillion infrastructure proposal to spur the world’s largest economy back to life. The Department of Transportation's preliminary version reserves most of the funding for projects such as roads and bridges, but also sets aside money for 5G wireless infrastructure and rural broadband. The existing U.S. infrastructure funding law authorizes $305 billion over five years and expires on Sep 30. Lawmakers will either extend it or come up with a long-term replacement.
The latest move brought back risk-off trading and bolstered investors’ confidence. In fact, all the three major U.S. indices rebounded following the news on Jun 15. Amid such backdrop, cyclical sectors like financials, consumer discretionary, materials, and industrials tend to perform better than others as they are attractively valued at the current levels. These sectors were beaten down badly by the coronavirus-led market sell-off in March, making their stocks bargain picks. Also, the cyclical stocks are tied to economic activities and when growth improves, these sectors perform well (read: Top-Ranked Beaten Down ETFs to Buy Now).
Notably, most of the ETFs in the cyclical sectors have a solid Zacks ETF Rank #2 (Buy), indicating their outperformance. These funds also have lower P/E ratio than that of SPY (23.05). Below we have highlighted some of them.
SPDR S&P Bank ETF (KBE - Free Report) – P/E Ratio: 14.27
This fund offers equal-weight exposure to 89 banking stocks by tracking the S&P Banks Select Industry Index. Regional banks dominate the portfolio with 73.6% share while diversified banks, thrifts & mortgage finance, other diversified financial services, and asset management & custody banks take the remainder. It has amassed $1.4 billion in its asset base while trading in heavy volume of nearly 3 million shares a day on average. The product charges 35 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook.
SPDR S&P Retail ETF (XRT - Free Report) - P/E Ratio: 19.15
With AUM of $398.7 million, this product tracks the S&P Retail Select Industry Index, holding 87 securities in its basket. Internet & direct marketing retail takes the largest share at 25.8% while apparel retail, automotive retail, and specialty stores round off the next three spots with a double-digit allocation each. The fund charges 35 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Oil Back to $40 Level: ETFs to Gain or Lose).
iShares U.S. Industrials ETF (IYJ - Free Report) - P/E Ratio: 20.87
This product provides exposure to 206 U.S. companies that produce goods used in construction and manufacturing by tracking the Dow Jones U.S. Industrials Index. It is tilted toward capital goods’ companies at 48.9% while software services and transportation round off the next two spots with double-digit exposure each. The fund has AUM of $750.3 million and average daily volume of around 48,000 shares. It charges 42 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Sector Rotation: Investors Flocking to Cyclical ETFs).
Financial Select Sector SPDR Fund (XLF - Free Report) - P/E Ratio: 17.19
This fund follows the Financial Select Sector Index and provides exposure to companies in the diversified financial services, insurance, banks, capital markets, mortgage real estate investment trusts, consumer finance, and thrifts and mortgage finance industries. It holds 66 stocks in its basket and charges investors 13 bps in annual fees. The fund has accumulated nearly $16.8 billion in AUM and trades in volumes of 76 million shares on average per day.
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 >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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