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Weekly ETF Roundup: US Equity Rocks, EM Lags

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The U.S. stock market had a great week with all the major indices logging in more than 2% gains — the best week in two months. Notably, the Dow Jones posted seven consecutive days of gains, its largest winning streak since November.

A combination of strong earnings, jump in oil prices and mild inflation has renewed confidence in the equity world. Oil prices surged following Trump’s decision to pull the United States out of the Iran nuclear deal. The technology sector also gave a boost as the big tech names such as Facebook (FB - Free Report) , Alphabet (GOOGL - Free Report) and Apple (AAPL - Free Report) came roaring back again after two months of slide. Additionally, easing trade war fears added to the strength (read: Why You Should Believe in Buffett & Bet on These Apple ETFs).

Meanwhile, the latest inflation data led to the biggest weekly spike in three weeks in the two-year Treasury yields to 2.538% while 10-year Treasury yields dropped to below 2.97% after climbing 3.01% last week. As a result, the spread between the 2-year and 10-year yield has narrowed to the lowest level since August 2007.

Against such a backdrop, ETFs overall gathered about $6.8 billion capital last week, with U.S. equity ETFs leading the way higher with $6.8 billion inflows, closely followed by $1.1 billion in U.S. fixed income ETFs. However, international equity ETFs shed more than $1.5 billion, per etf.com.

U.S. Equity ETFs Dominate

While SPDR S&P 500 (SPY - Free Report) was the most-hated ETFwith massive outflows of $2.3 billion last week, iShares Core S&P 500 ET IVV and PowerShares QQQ Trust (QQQ - Free Report) remained the hot spot accumulating $5.2 billion and $1.7 billion assets, respectively. IVV tracks the S&P 500 while QQQ follows the Nasdaq-100 index. The former gained 2.5% and has a Zacks ETF Rank #3 while the latter having a Zacks ETF Rank #2 (Buy) delivered 2.8% returns.

The Zacks Rank #3 Vanguard S&P 500 VOO tracking the S&P 500 index also pulled in $435.9 million in capital, followed by SPDR Portfolio S&P 500 Growth ETF SPYG with inflows of $266 million, respectively. SPYG targets the growth corner of the broad U.S. stock market by tracking the S&P 500 Growth Index and carries a Zacks ETF Rank #2 (read: 5 Ultra-Cheap Growth ETFs for a Large-Cap Play This Spring).

Money has also flooded the small-cap space as iShares Core S&P Small Cap ETF (IJR - Free Report) and Vanguard Small-Cap ETF VB led the way gathering $309.5 million and $227.6 million, respectively. Both funds have a Zacks ETF Rank #3. Strong dollar has fled investors’ to small cap funds.

A Hot Sector ETF

As FANG stocks regained momentum, Technology Select Sector SPDR Fund (XLK - Free Report) gathered about $331.8 million in its asset base last week. The ETF offers broad exposure to the technology sector and follows the Technology Select Sector Index. It has a Zacks ETF Rank #2 (read: 5 Niche Tech ETFs Hitting All-Time Highs).

Bond ETFs: A Mixed Bag

As yields rise, investors seeking protection from rising rates poured money into the lower-dated bonds like iShares 1-3 Year Treasury Bond ETF (SHY - Free Report) and Schwab Short-Term US Treasury ETF SCHO. This is because short-duration bond ETFs are less vulnerable and act as a better hedge to rising rates. SHY and SCHO have an effective duration of 1.92 years and 1.95 years, respectively. The former accumulated more than $1.1 billion in its asset base last week while the latter saw inflows of $330 million. Both funds have a Zacks ETF Rank #3 (read: Will Bond ETFs Sustain Their April Momentum in May?).

On the other hand, rising yields have dampened the appeal for the high yield ETFs like iShares iBoxx USD High Yield Corporate Bond ETF (HYG - Free Report) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD - Free Report) . Bond ETFs saw outflow of at least $550 million last week each. The iShares 20+ Treasury Bond ETF (TLT - Free Report) tracking the long end of the yield curve also fell out of favor during the week, pulling out $332 million from its AUM. HYG and TLT have a Zacks ETF Rank #4 (Sell) while LQD carries a Zacks ETF Rank #3.

Emerging Market ETFs Lose

The two ultra-popular ETFs — iShares MSCI Emerging Markets ETF (EEM - Free Report) and Vanguard FTSE Emerging Markets ETF VWO — saw outflows of $711.1 million and $352.9 million, respectively, driven by a strong dollar. Both have a Zacks ETF Rank #3 (read: Are Good Times Over for Emerging Market ETFs?).

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