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ETFs to Ride the Market Rally on Strong Economic Data

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Wall Street has impressed investors with a solid start of second-quarter 2021. Notably, the S&P 500 Index closed above the technical barrier of 4,000 for the first time on Apr 1. The rally continued on Apr 5 as the benchmark climbed 1.4%, hitting another new record closing high.

Markedly, the first quarter saw decent performances as the Dow Jones Industrial Average and the S&P 500 surged 7.8% and 5.8%, respectively. These indices witnessed their fourth straight positive quarter (per a CNBC article).

The second quarter is benefiting from the impressive progress made in the previous quarter. Notably, the passage of the $1.9-trillion coronavirus relief package, Fed’s decision to maintain rates near zero until 2023, accelerated coronavirus vaccine distributions and reopening of global economies are helping strengthen the optimism for economic recovery. In fact, the central bank raised its economic growth outlook considering the vaccine and stimulus optimism and it also expects higher inflation this year.

Furthermore, there are certain new economic data releases which are pointing toward economic recovery. Notably, the recently-released robust job and manufacturing data majorly boosted market participants' confidence. The Department of Labor reported that the U.S. economy added 916,000 nonfarm jobs in March compared with an upwardly revised 468,000 in February. The consensus estimate stood at 657,000. March's job addition was the highest since August 2020. Workforce participation rate came in at 61.5% in comparison with the pre-pandemic level of 63.3% in February 2020.

The unemployment rate slid to 6% last month from 6.2% in February. Meanwhile, the real unemployment rate (including discouraged workers and those holding part-time jobs for economic reasons) declined to 10.7% in March from 11.1% in February (read: 4 Sector ETFs to Sizzle on Robust March Jobs Report).

Going on, the Institute of Supply Management (ISM) reported that its manufacturing Purchasing Managers' Index (PMI) for March rose to 64.7% from 60.8% in February, marking the highest reading since December 1983 and the 10th consecutive month of growth. The consensus estimate stood at 61.3%. Notably, any reading above 50 means expansion of manufacturing activities.

Out of the total 18 industries, 17 reported expansion. The sub-index for new orders jumped to 68% from 64.8% in February, reflecting the highest level since January 2004. The sub-index for manufacturing employment came in at 59.6% versus 54.4% in February, marking the highest reading since February 2018.

It is also worth noting here that, on Mar 31, President Joe Biden unveiled his $2.3-trillion infrastructure development plan that focuses on improving American infrastructure. The proposal includes funds for restoring roads and bridges, shoring up affordable housing, backing clean-energy projects and creating a nationwide broadband network. This will create millions of jobs, resulting in solid hiring in the coming months and benefit sectors like basic materials, industrials and utilities.

ETFs to Ride the Wave

Investors who seek to capitalize on the strong trends should consider the following ETFs:

SPDR S&P 500 ETF Trust (SPY - Free Report)

This fund seeks to provide investment results that before expenses correspond generally to the price and the yield performance of the S&P 500 Index. Its AUM is $349.48 billion and the total expense ratio, 0.09% (read: S&P 500 Tops 4,000: Are ETFs Awaiting More Gains?).

iShares Core S&P 500 ETF (IVV - Free Report)

The fund seeks to track the investment results of an index composed of large-capitalization U.S. equities. Its AUM is $261.94 billion and the total expense ratio, 0.03% (read: Most Loved/Hated ETFs of Q1).

Vanguard S&P 500 ETF (VOO - Free Report)

The fund seeks to track the performance of the S&P 500 Index. Its AUM is $205.58 billion and the total expense ratio, 0.03% (read: March ETF Asset Report: What's Hot, What's Not).

SPDR Dow Jones Industrial Average ETF Trust (DIA - Free Report)

The fund seeks to provide investment results that before expenses correspond generally to the price and the yield performance of the Dow Jones Industrial Average. Its AUM is $28.62 billion and the total expense ratio, 0.16% (read: 5 Hottest Stocks in the Dow ETF).

Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report)

The fund is based on the Dow Jones Industrial Average Yield Weighted index. Its AUM is $136.1 million and the total expense ratio, 0.07% (read: Dow Hits Record High: Will ETFs Rally Further?).

iShares Dow Jones U.S. ETF (IYY - Free Report)

The fund seeks to track the investment results of a broad-based index composed of U.S. equities. Its AUM is $1.52 billion and the total expense ratio, 0.20%.

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