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The broader U.S. market has been wavering for the last few days. First, tensions between President Donald Trump and North Korea’s leader Kim Jong-un were sky-high thanks to nuclear activity by the latter. Second, U.S. stocks have been guilty of overvaluation for quite some time.

Finally, the disbanding of President Trump’s Manufacturing Council and Trump’s warning of a government shutdown sparked off political anxiety in America. The latest Fed minutes also showed that policymakers are wary of weak inflation. Meanwhile, some U.S. economic readings have come in weak.

The net result is 0.9% one-month slide in the S&P 500-based ETF (SPY - Free Report) and a 1.4% decline in the Nasdaq 100-based ETF (QQQ - Free Report) . But the Dow Jones Industrial Average-based ETF (DIA - Free Report) gained about 1.3% in a month (as of August 23, 2017).

Let’s find out what led the Dow ETF scrape past the other two:

As per an article published on nytimes, the two indexes – The S&P 500 and the Dow Jones – “usually move within a percentage point or two of one another.”  But in the last three months (as of August 23, 2017) DIA returned (up 4.8%) almost double that of SPY (up 2.4%). Along with nytimes, we believe that the key cause of this divergence is Boeing shares.

Let’s delve a little deeper and find what other stocks were possible for this divergent performance and what could be the future of SPY and DIA.

Boeing’s Exposure to DIA & SPY

Boeing Company (BA - Free Report) holds the top spot in DIA with about 7.42% exposure while the stock is nowhere in the top-10 holdings of SPY. Boeing shares added about 30.5% in the last three months (as of August 23, 2017).

Apple’s Exposure to DIA & SPY

Apple (AAPL - Free Report) shares have about 5% exposure in DIA while its weight in SPY is relatively less at 3.95%.

UnitedHealth Group’s Exposure toDIA & SPY

UnitedHealth Group (UNH - Free Report) shares have about 6% exposure in DIA with no exposure in the top-10 holdings of SPY.

McDonald’s Exposure to DIA & SPY

McDonald's (MCD - Free Report) shares gained about 8.1% in the last three months. DIA puts about 5% of its portfolio in MCD while SPY’s top-10 holdings are void of MCD.

Visa’s Exposure to DIA & SPY

Visa (V - Free Report) has over 3% weight in DIA unlike SPY. As a result, VISA’s sharp ascent offered an edge to DIA over SPY.

Can the Edge of DIA Hold over SPY?

The DIA’s edge over SPY may lose in the coming days given the not-so-great prospect of McDonald’s and Visa as evident from the VGM scores. However, the index as well as the fund are likely to be favored by Boeing and UnitedHealth Group thanks to their bullish VGM score and Zacks Industry Rank.

Apple shares are likely to play a moderate role in DIA as well as SPY’s performance as the stock has a decent VGM score of C but belongs to a downbeat Zacks Industry Rank in the bottom 5%.

 

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