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5 Top Stocks in S&P 500 ETF as Biden Takes Office

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As Biden took oath as the 46th president of the United States, Wall Street hit another record high on the optimism that increased fiscal spending under the new administration would revive economic growth and bolster corporate earnings (read: ETFs to Watch as Biden Heads to White House).

This is especially true as Biden signed a series of executive orders to reverse the policies of the Donald Trump administration on immigration, climate change, racial equality and the handling of the coronavirus pandemic just hours after taking office. The new president promises to boost infrastructure spending to rebuild roads and bridges, as well as build high-tech infrastructure such as 5G networks. This, coupled with $1.9 trillion coronavirus-relief plan laid out early this month, will help the economy to get out the pandemic slowdown and heal the labor market. Additionally, the president aims to roll out 100 million vaccines in the first 100 days of his presidency.

Janet Yellen, Biden’s designated nominee for Treasury Secretary, infused further confidence in the stock market as she supported additional aid spending, urging Congress to “act big” on stimulus. Apart from Biden’s policies, solid results from Netflix (NFLX - Free Report) added to the strength, igniting a rally in the big tech stocks (read: Netflix Pops on Solid Q4 Subscriber Growth: ETFs to Bet On).

Notably, the S&P 500 climbed about 1.4%, marking the biggest gain in an Inauguration Day since 1985, when the S&P 500 rose 2.3% on the start of Ronald Reagan's second presidential term, according to LPL Financial data. The benchmark jumped 14.3% between Election Day and Inauguration Day, the biggest jump ever, topping that of President Hoover (13.3%) in 1929.

Against such a backdrop, the proxy version of the S&P 500 Index, SPDR S&P 500 ETF Trust (SPY - Free Report) , has also gained 1.4% on Biden’s Inauguration Day. Let’s take a closer look at the fundamentals of SPY and its best stocks:

Inside the SPY

The ETF holds 504 stocks in its basket with each accounting for no more than 6.4% of assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, healthcare, consumer discretionary, financials and communication services accounting for a double-digit allocation each. It has AUM of $334.5 billion and charges 9 bps in fees per year. The product trades in heavy volume of around 593 million shares a day on average, ensuring higher liquidity with a tight bid/ask spread, leading to lower trading costs for investors (see: all the Large Cap Blend ETFs here).

SPY has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. Though most stocks in the fund’s portfolio are in the green on the day, we have highlighted five stocks that led the rally and have a Zacks Rank #1 (Strong Buy) or 2 (Buy):

Best-Performing Stocks of SPY

Invesco Ltd. (IVZ - Free Report) : This Zacks Ranked #1 independent investment manager operator offers a wide range of investment products and services. It gained 6.5% on Inauguration Day with more room for upside given its earnings growth rate of 31.9% for this year and its placement in the top 19% of the Zacks Industry Rank. You can see the complete list of today’s Zacks #1 Rank stocks here.
 
PulteGroup Inc. (PHM): This Zacks Ranked #2 company is engaged in homebuilding and financial services businesses, primarily in the United States. The stock has climbed 6.1% and has an estimated earnings growth of 17.68% for this year. It belongs to a solid industry, which is placed at the top 14% in terms of ranking among more than 250 Zacks industries.

Lennar Corporation (LEN - Free Report) : This Zacks Ranked #1 company is engaged in homebuilding and financial services in the United States. It has gained 5.5% in yesterday’s trading session and has an estimated earnings growth rate of 8.3% for this fiscal year (ending November 2021). Lennar belongs to an industry that is currently ranked 35, placing it in top 14% among more than 250 Zacks industries.

Alphabet Inc. (GOOGL - Free Report) : This Zacks Ranked #2 company is a provider of online advertising services in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. The stock was up 5.4% on Jan 20 and has an estimated earnings growth of 19.9% for this year. It belongs to a top-ranked industry (in the top 48%).

TakeTwo Interactive Software Inc. (TTWO - Free Report) : This Zacks Ranked #2 company is a leading developer and publisher of video games. It gained 4.2% on Biden’s Inauguration Day. The uptrend is likely to continue given its modest estimated earnings growth rate of 0.5% for fiscal year (ending March 2022) and the placement among a top-ranked the Zacks industry (top 15%) (read: Video Gaming ETFs to Win as Sales Keep Rising Amid Pandemic).

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