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ETFs to Play the Reopening Trade on Merck's Oral Antiviral Pill News

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Wall Street started October on a positive note, with all three major indices in the green. The Dow Jones Industrial Average rose 1.4% on Oct 1. Moreover, the S&P 500 and the Nasdaq Composite indices rose 1.2% and 0.8%, respectively, on the day. The upside was primarily driven by optimism surrounding the news highlighting positive updates on Merck & Co., Inc. (MRK - Free Report) and Ridgeback Biotherapeutics’ investigational oral antiviral medicine, molnupiravir.

According to Merck, molnupiravir helped in majorly decreasing the probability of hospitalization or death at a planned interim evaluation of the Phase 3 MOVe-OUT trial in at-risk, non-hospitalized adult patients with mild-to-moderate COVID-19. At the interim analysis, molnupiravir decreased the hospitalization or death risk by about 50%. Notably, 7.3% of patients given molnupiravir were either hospitalized or died through Day 29 following randomization (28/385), compared with the 14.1% of placebo-treated patients (53/377), per the company. An emergency use authorization from the FDA would make molnupiravir the first oral antiviral to combat COVID-19.

Despite being spooked about inflation and price pressure, investors played the reopening trade on Oct 1. Travel, hospitality and financials were the spaces that saw gains. Royal Caribbean (RCL - Free Report) and Las Vegas Sands (LVS - Free Report) were up 3.8% and 4.3%, respectively, on the day. Southwest Airlines (LUV - Free Report) also gained 5.6% on Oct 1.

In this regard, Angelo Kourkafas, an investment strategist at Edward Jones, has commented that “We have seen this rotation back to the so-called reopening plays and the more cyclical areas, which I think makes a lot of sense over the next couple of weeks as we think about the Covid trends improving, with the cases falling from last month’s peak, and the news about the Merck pill appears promising,” per a CNBC article.

ETFs to Ride the Reopening Optimism

Against this backdrop, let’s look at the following ETFs that are well-poised to gain as the reopening of the U.S. economy may pick up further pace following Merck’s announcement:

United States Oil Fund (USO - Free Report)

The United States Oil Fund’s investment objective is for the daily changes, in percentage terms, of its shares’ net asset value (NAV) to reflect the daily changes, in percentage terms, of the spot price of light, sweet crude oil delivered to Cushing, OK, as measured by the daily changes in the Benchmark Oil Futures Contract. It has total expense ratio of 0.83% (read: Top ETF Stories of Third Quarter).

Fidelity MSCI Consumer Discretionary Index ETF (FDIS - Free Report)

U.S. consumer sentiment also improved marginally despite rising concerns about coronavirus cases and rising inflationary levels. The University of Michigan’s preliminary consumer sentiment inched up to 71 in September from 70.3 last month, per a BloombergQuint article. The strength in consumer sentiment can be the primary driving force behind the solid consumer discretionary space performance as consumers are expected to splurge this holiday season after being restricted for more than a year.

The fund intends to provide investment results that before expenses generally correspond with the price and yield performance of the MSCI USA IMI Consumer Discretionary Index. It charges investors 8 basis points (bps) in annual fees as stated in the prospectus (read: Will ETFs Gain as US Consumer Sentiment Improves in September?).

The Industrial Select Sector SPDR Fund (XLI - Free Report)

The industrial sector, which faced disruption in global supply chains and factory closedowns, is expected to recover from the coronavirus-led slump. The re-opening of the U.S. economy, accelerated coronavirus vaccine rollout, and addition of stimulus are expected to drive demand and economic activities in the sector. The fund seeks to provide investment results that before expenses generally correspond to the price and yield performance of the Industrial Select Sector Index. It has an expense ratio of 12 bps (read: Fed Plans QE Taper: Time for Cyclical Sector ETFs?).

Vanguard S&P Small-Cap 600 ETF (VIOO - Free Report)

Small-cap stocks, as indicated by the Russell 2000 Index, have been performing impressively. This upside is being led mainly by small-cap companies that are closely tied to the U.S. economy and thus are well-positioned to outperform when the economy improves. VIOO seeks to track the performance of the S&P Small-Cap 600 Index. It has an expense ratio of 0.10%.

U.S. Global Jets ETF (JETS - Free Report)

Studying the carriers’ stressed balance sheets, it is safe to say that the space is likely to get massive support from the reopening of the U.S. economy. JETS provides investors access to the global airline industry, including airline operators and manufacturers across the world. The fund has an expense ratio of 0.60% (read: 5 Top ETF Stories of Nine Months of 2021).

ETFMG Travel Tech ETF (AWAY - Free Report)

The United States will likely relax travel restrictions for international visitors who are vaccinated against COVID-19 in November, including those from the U.K. and the EU, the White House said recently, per a CNBC article. Foreigners visiting the United States will have to present a vaccination proof or a negative COVID-19 test taken within three days of departure.  The latest White House announcement came post the peak summer travel season, signaling strong holiday travel demand.

This fund is the first ETF to focus on technology-focused global travel and tourism companies. It charges an expense ratio of 0.75% (read: What September Lull? 4 ETF Areas That Are Up At Least 10%).

Invesco Dynamic Leisure and Entertainment ETF (PEJ - Free Report)

This fund tracks the Dynamic Leisure & Entertainment Intellidex Index and holds a small basket of 31 stocks. PEJ charges 63 bps in annual fees.