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5 Top Stocks at the Forefront of S&P 500 ETF Rally This Year

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The S&P 500 has been hitting a series of record highs on expectation of stronger economic recovery and bouts of solid economic data. Notably, the benchmark logged in the third consecutive week of gains for the first time in nearly six months, adding 2.7% last week. With this, it topped the new milestone of 4,000 for the first time on the first day of April and has the potential to march higher at least in the near term.

The solid run is likely to continue on hopes of solid economic recovery backed by continued progress in more COVID-19 vaccines, rapid vaccinations, reopening of the economy and a slew of new stimulus measures. The Fed’s continued accommodative stance and better-than-expected Q1 earnings ahould fuel continued strength (read: S&P 500 Tops 4,000: Are ETFs Awaiting More Gains?).

Further, the International Monetary Fund (IMF) upgraded the U.S. economic growth forecast from 5.1% to 6.4% for this year, suggesting the strongest growth in decades. It projects that the United States is likely to become the engine of global economic growth this year, leading to the return of a strong risk appetite.

If these weren’t enough, the Federal Reserve Chair Jerome Powell bolstered confidence by saying that “the U.S. economy is at a turning point thanks to government support and a speedy campaign to inoculate Americans against COVID-19.” Powell added, “We feel like we’re at a place where the economy’s about to start growing much more quickly and job creation coming in much more quickly.”

Notably, the S&P 500 rebounded about 84% from its bottom reached in March last year, representing the best start to the new bull market on record, per LPL data.

Against such a backdrop, the proxy version of the S&P 500 Index, SPDR S&P 500 ETF Trust (SPY - Free Report) , is also hitting record highs lately and gained 2.7% last week. Let’s take a closer look at the fundamentals of SPY and its best stocks:

Inside the SPY

The ETF holds 505 stocks in its basket with each accounting for no more than 6% 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 $354.3 billion and charges 9 bps in fees per year. The product trades in heavy volume of around 79 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 were in the deeper green so far this year, we have highlighted five stocks that led the rally and have a Zacks Rank #1 (Strong Buy) or #2 (Buy):

You can see the complete list of today’s Zacks #1 Rank stocks here.

Best-Performing Stocks of SPY

L Brands Inc. (LB - Free Report) : It has evolved from an apparel-based specialty retailer to a segment leader focused on women’s intimate and other apparel, personal care, beauty and home fragrance products. It has soared 79.6% so far this year and has an estimated earnings growth rate of 39.6% for the fiscal year (ending January 2022). The stock has a Zacks Rank #1 and VGM Score of A.

Applied Materials Inc. (AMAT - Free Report) : This company is one of the world’s largest suppliers of equipment for the fabrication of semiconductor, flat panel liquid crystal displays, and solar photovoltaic cells and modules. The stock has surged 61% and has estimated earnings growth of 43.4% for the fiscal year (ending October 2021). It has a Zacks Rank #2 and VGM Score of B (read: ETFs to Tap the Sustained Semiconductor Boom).

Invesco Ltd. (IVZ - Free Report) : This company operates as an independent investment manager and offers a wide range of investment products and services. The stock has climbed 51% so far this year and has estimated earnings growth of 36.8% for this year. It has a Zacks Rank #2 and VGM Score of B.

Nucor Corporation (NUE - Free Report) : It is a leading producer of structural steel, steel bars, steel joists, steel deck and cold finished bars in the United States. It has jumped 51% so far this year and has estimated earnings growth of 135.3% for this year. Nucor Corporation has a Zacks Rank #1 and VGM Score of A.

Mohawk Industries Inc. (MHK - Free Report) : This company is a leading global manufacturer of flooring products that enhance residential and commercial space. It has jumped 44% and has estimated earnings growth of 36.3% for this year. The stock has a Zacks ETF Rank #2 and VGM Score of A (read: Homebuilding ETFs Standing Tall Amid Rising Costs).

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