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Top ETF Stories of September

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After a sturdy August, Wall Street suffered in September.Doubts over a faster rollout of coronavirus vaccines, rising COVID-19 cases in the United States and Europe, reports of major banks engaging in transfer of illicit funds, profit booking on tech stocks and pre-election volatility in the United States spelt trouble for the markets.

Each of the key indexes — S&P 500, Nasdaq and Dow — recorded their worst September since 2011.The S&P 500 witnessed its first monthly loss since March. Overall, the S&P 500, the Nasdaq and the Dow Jones were down about 4.1%, 4.5% and 3% respectively in September.

Against this backdrop, below we highlight a few top-performing ETF stories of September.

New Stimulus Talks

At month-end, House Democrats released a $2.2 trillion bill that includes the $600 per week enhanced unemployment benefit through January, a second $1,200-stimulus check, $436 billion worth of state and local aid, $25 billion to airline assistance for sustain payroll costs, and more money for a second round of Paycheck Protection Program among other measures.

Democrats and the White House have been struggling to clinch the fifth relief deal as doubts grow about lawmakers’ ability to approve legislation before the November election, per a CNBC article. While the Democratic-held House approved a $3.4 trillion proposal in May, the Trump administration has offered to inject only $1.3 trillion. House Democrats’ relief proposal should work wonders for the likes ofiShares Russell 2000 ETF (IWM - Free Report) and U.S. Global Jets ETF (JETS - Free Report) .

Tech Rout on Profit Booking

Tech stocks took a beating in September due to overvaluation concerns.  Along with big tech names, chip stocks were crushed as tensions between the United States and China flared up. Big names like Tesla and Apple were hammered in early September. Technology Select Sector SPDR Fund (XLK - Free Report) was off 5.2% in the past one month with Apple losing 7.2%.

Ebb and Flow in Vaccine Hopes

Investors should note that doubts regarding the faster rollout of vaccines emerged in early September as nine drug companies pledged not to submit vaccine candidates for FDA review until their safety and efficacy is proven in large clinical trials. AstraZeneca, Moderna, Pfizer, Johnson & Johnson, GlaxoSmithKline, Merck, Novavax, BioNTech and Sanofi are some of the companies that took the pledge. 

However, AstraZeneca’s (AZN - Free Report) resumption of its phase 3 trial renewed vaccine hopes again in the latter part of the month. Drugmaker AstraZeneca said that it has resumed British clinical trials of its COVID-19 vaccine, one of the most-advanced in development, after receiving a nod from safety watchdogs.

Few Upbeat Economic Datapoints

The beginning of the third quarter showed an improving trend in manufacturing activity in the United States. After clocking the highest reading since March 2019 in July, U.S. manufacturing activity accelerated to a nearly two-year high in August on solid new orders.

Coming to jobs data, the U.S. economy added 1.371 million jobs in August 2020, decreasing from the downwardly revised 1.734 million in the previous month and slightly below market forecasts of 1.4 million. Overall, the unemployment rate was 8.4% in the month of August, down from 10.2% even as employers slowed their hiring.

Tesla’s Battery Day Fails to Boost Investors’ Mood

Electric carmaker Tesla’s (TSLA - Free Report) Battery Day event, held on Sep 22, was a much-anticipated event. Many investors had high hopes from the event but the stock sold off about 5% in before market sessions on Sep 23. This was because Chief Executive Elon Musk said that some of the innovations showcased at the event were “close to working” and will “not reach serious high-volume production until 2022.” Tesla also failed to make it to the S&P 500 in September.

Thus, after a superb rally this year, Tesla may see more selling pressure in the near term. So, investors intending to tap the long-term potential in the stock may play the Tesla-heavy ETFs like MicroSectors FANG+ ETN (FNGS) and ARK Web x.0 ETF (ARKW - Free Report) as the basket approach is less risky.

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