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US April Manufacturing Softs But Tops Estimates: ETFs in Focus
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The U.S. ISM Manufacturing PMI rose to 47.1 in April 2023, up from a three-year low of 46.3 the previous month, and slightly above market consensus of 46.8. Although manufacturing sector activity shrank for a sixth consecutive month due to higher borrowing costs and tight credit, there are still opportunities for investors to capitalize on in certain sector ETFs.
Manufacturing Sector Contraction Slowing Down
The contraction rates softened for both output (48.9 vs 47.8 in March) and new orders (45.7 vs 44.3), while employment levels stabilized after two periods of decline (50.2 vs 46.9). The survey also showed there were faster deliveries and shorter lead times from suppliers. On the price front, input costs rebounded in April after decreasing slightly the month before.
Select Sectors Continue to Show Resilience
Despite the overall weakness in manufacturing, some industries showed growth in April. The Petroleum & Coal Products and Transportation Equipment sectors registered expansion, while Printing & Related Support Activities, Apparel, Leather & Allied Products, and Fabricated Metal Products also reported growth.
The transportation equipment industry expanded in April, making it a potentially attractive investment opportunity. This sector ETF IYT measures the performance of companies from the Industrial Transportation, Airline and General Industrial Services industries of the U.S. equity market. The fund has a Zacks Rank #2 (Buy).
Survey for Miscellaneous Manufacturing revealed that quotes and orders are still strong. The backlog continues to grow due to increased bookings and supply chain constraints on electronic components.
The underlying Industrial Select Sector Index includes companies from the following industries: industrial conglomerates; aerospace & defense; machinery; air freight & logistics; road & rail; commercial services & supplies; electrical equipment; construction & engineering; building products; airlines; and trading companies & distributors. The fund charges 10 bps in fees. The fund has a Zacks Rank #3 (Hold).
Chemical – iShares U.S. Basic Materials ETF (IYM - Free Report)
Business is reviving a bit in the automotive and construction industries — not on par with 2022 but beginning to flourish as per the survey conducted in the Plastics & Rubber Products. The fund has a Zacks Rank #3. The fund charges 39 bps in fees.
The underlying Russell 1000 Basic Materials RIC 22.5/45 Capped Gross Index measures the performance of the basic materials sector of the U.S. equity market. The fund charges 39 bps in fees.
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US April Manufacturing Softs But Tops Estimates: ETFs in Focus
The U.S. ISM Manufacturing PMI rose to 47.1 in April 2023, up from a three-year low of 46.3 the previous month, and slightly above market consensus of 46.8. Although manufacturing sector activity shrank for a sixth consecutive month due to higher borrowing costs and tight credit, there are still opportunities for investors to capitalize on in certain sector ETFs.
Manufacturing Sector Contraction Slowing Down
The contraction rates softened for both output (48.9 vs 47.8 in March) and new orders (45.7 vs 44.3), while employment levels stabilized after two periods of decline (50.2 vs 46.9). The survey also showed there were faster deliveries and shorter lead times from suppliers. On the price front, input costs rebounded in April after decreasing slightly the month before.
Select Sectors Continue to Show Resilience
Despite the overall weakness in manufacturing, some industries showed growth in April. The Petroleum & Coal Products and Transportation Equipment sectors registered expansion, while Printing & Related Support Activities, Apparel, Leather & Allied Products, and Fabricated Metal Products also reported growth.
Transportation Equipment – iShares U.S. Transportation ETF (IYT - Free Report)
The transportation equipment industry expanded in April, making it a potentially attractive investment opportunity. This sector ETF IYT measures the performance of companies from the Industrial Transportation, Airline and General Industrial Services industries of the U.S. equity market. The fund has a Zacks Rank #2 (Buy).
Industrials – Industrial Select Sector SPDR ETF (XLI - Free Report)
Survey for Miscellaneous Manufacturing revealed that quotes and orders are still strong. The backlog continues to grow due to increased bookings and supply chain constraints on electronic components.
The underlying Industrial Select Sector Index includes companies from the following industries: industrial conglomerates; aerospace & defense; machinery; air freight & logistics; road & rail; commercial services & supplies; electrical equipment; construction & engineering; building products; airlines; and trading companies & distributors. The fund charges 10 bps in fees. The fund has a Zacks Rank #3 (Hold).
Chemical – iShares U.S. Basic Materials ETF (IYM - Free Report)
Business is reviving a bit in the automotive and construction industries — not on par with 2022 but beginning to flourish as per the survey conducted in the Plastics & Rubber Products. The fund has a Zacks Rank #3. The fund charges 39 bps in fees.
The underlying Russell 1000 Basic Materials RIC 22.5/45 Capped Gross Index measures the performance of the basic materials sector of the U.S. equity market. The fund charges 39 bps in fees.