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Play Sector 4 ETFs to Cash In On Upbeat U.S. Manufacturing Data

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The ISM Manufacturing PMI in the United States increased to 61.1 in September 2021, increasing for the second straight month and coming in above market expectations of 59.6. The latest reading came in as one of the strongest rates of expansion since 1983, thanks to solid increases in production (59.4 versus 60.0 in August) and new orders (66.7, the same as in August), as well as a moderate uptick in the employment levels (50.2 versus 49.0). At the same time, factories faced supply chain issues and inflationary pressure..

Of the 18 manufacturing industries, 17 reported growth in September. The winning industries are Furniture & Related Products; Petroleum & Coal Products; Machinery; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; Apparel, Leather & Allied Products; Textile Mills; Paper Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Fabricated Metal Products; Transportation Equipment; Primary Metals; Nonmetallic Mineral Products; and Plastics & Rubber Products. Only wood products registered a decline.

Against this backdrop, below we highlight a few sectors that emerged winners in the month of September. Though the associated sector ETFs have mostly lost past month due to a downbeat September, the latest manufacturing data shows strength in the sector which calls for a buy-the-dip strategy.

Computer & Electronic Products – VanEck Vectors Semiconductor ETF (SMH - Free Report)

The computer and peripherals space has been a COVID-19 winner due to the prevailing work-and-learn-from-home culture. This clearly points to an upbeat outlook. The fund has lost 6% past month.

Food & Beverage – Invesco Dynamic Food & Beverage ETF (PBJ - Free Report)

Demand for food and beverage should remain in the sweet spot in the coming days as these are necessary items and less ruffled by economic weakness. The fund PBJ, however, retreated 1.1% past month.

Chemicals – iShares U.S. Basic Materials ETF (IYM - Free Report)

Though strong supply chain issues, decent demand for chemicals ensures the rally in materials stocks. The fund IYM has lost about 4.3% past month.

Electrical Equipment, Appliances & Components – Industrial Select Sector SPDR ETF (XLI - Free Report)

As per the industry experts, “customer demand continues to swell as we prepare for the fourth quarter, and overall growth has been extremely good for the year. Supply chain concerns are growing beyond electronics and chips into most other commodities.” The fund lost about 3.6% past month.

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