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ETF Winners/Losers in Light of U.S. Manufacturing Data

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On Jun 1, 2022, the Institute of Supply Management (ISM) reported that its manufacturing index for May rose to 56.1% from 55.4% in April, beating the consensus estimate of 54.5%. Faster increases were seen for new orders (55.1 versus 53.5), production (54.2 versus 53.6) and inventories (55.9 versus 51.6). Also, price pressures were relieved for the second month (82.2 versus 84.6) while employment shrank (49.6 versus 50.9).

Business sentiment remained strongly optimistic related to demand but supply chain and pricing issues remain the biggest drags, per tradingeconomics. As many as 15 manufacturing industries reported growth in May.

Against this backdrop, below we highlight a few sectors that emerged winners last month. Though some associated sector ETFs have lost in returns past month, the latest manufacturing data has shown strength in the sector, calling for a buy-the-dip strategy.


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

Orders of Chemical Products remained strong. The chemical industry takes about considerable portion of the fund IYM, which is down 0.3% (as of Jun 1, 2022).

Semiconductors – VanEck Semiconductor ETF (SMH - Free Report)

Industry survey revealed that “suppliers are seeing a light at the end of the tunnel for restoration of (semiconductor) component supply. Second-quarter and Q3 supply appears to be loosening.” The fund has a Zacks Rank #1 (Strong Buy). SMH is up 4.7% past month.

Industrials — Industrial Select Sector SPDR ETF (XLI - Free Report)

Although material prices of machineries continue to rise, order books remain strong. The fund XLI is down 1.1% past month.


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

The industry survey revealed that input costs, particularly grain, oil, dairy and protein, are rising faster than that can be passed onto retail and food service.  PBJ has declined 3.6% in the past month.

Transportation – SPDR S&P Transportation ETF (XTN - Free Report)

The Transportation Equipment industry has been grappling with semiconductor shortages. The situation is deteriorating due to China’s COVID-19 lockdowns with no production or port activities.



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