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Risk-On Trade is Back: ETFs That Gained the Most

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Wall Street rebounded big time on Jan 4, 2018 as investors were surprised with a flurry of good news. Three big U.S. ETFs, SPDR S&P 500 ETF (SPY - Free Report) , SPDR Dow Jones Industrial Average ETF (DIA - Free Report) and Invesco QQQ Trust (QQQ - Free Report) added about 3.35%, 33.33% and 4.28% on the day, respectively.

First, U.S. employers added 312,000 new jobs in December, after an upwardly revised 176,000 in November. The number breezed past market expectations of 177,000. The December jobs gain took total U.S. employment to above 150 million for the first time. Average hourly earnings rose by 11 cents to $27.48. Over the year, average hourly earnings increased 3.2%.

Then, the Fed chair Jerome Powell came up with the much-desired dovish tone. He indicated that the Fed will be flexible on policy, including the balance sheet and is in no hurry to hike rates. He assured to take the downside risks of the Fed policy tightening into consideration in future meetings.

Investors should also note that the Fed had lowered its interest rate forecast for 2019 to two hikes from three. Since rising rate worries were the big culprit of the markets in 2018 and sent the S&P 500 into the bear market in late December from intraday-basis, such dovish comments from the Fed chair are sure to initiate a sturdy rally.

On the trade front, Chinese officials will meet their U.S. counterparts for trade negotiations starting later Monday, the first direct talks of 2019. Hopes of trade truce also charged up the markets (read: 5 Sector ETFs Most Exposed to Trade Tensions).

Things are shoring up even on the oil patch. Likely demand growth due to the upcoming U.S.-China trade talks and supply cuts by key OPEC producers under the new deal boosted oil prices. United States Oil (USO - Free Report) and United States Brent Oil (BNO - Free Report) were up by 2.31% and 2.53% on Jan 4, respectively (read: 6 Wining ETF Areas From a Late Santa Rally).

Against this backdrop, almost all corners of the markets were in the green on Jan 4 and are likely to exhibit the solid run in the coming days. Below we highlight a few ETFs that gained the most.

InfraCap MLP ETF (AMZA - Free Report) – Up 6.3%

The fund seeks total returns primarily through investments in equity securities of publicly traded master limited partnerships and limited liability companies taxed as partnerships. The fund charges 193 bps in fees and yields about 19.75% annually.

Ark Web X.0 ETF (ARKW - Free Report) – Up 6.29%

The fund is active in nature. E-commerce (21.9%), big data and machine learning (20.8%), cloud computing and cyber security (18.1%) and Internet of things (10.1%) are the areas that the fund concentrates on.

KraneShares CSI China Internet ETF (KWEB - Free Report) – Up 5.94%

Hopes of U.S.-Sino trade truce probably have boosted this fund. The fund looks to measure the performance of the investable universe of publicly traded China-based companies that are into the Internet and Internet-related sectors.

Barclays Inverse US Treasury Aggregate ETN (TAPR - Free Report) – Up 5.94%

As jobs data came in way sturdier than expected, wager on economic strength pushed up long-term U.S. Treasury yields by higher margin than the short-term ones. This steepening of the yield curve resulted in solid gains in TAPR (see all inverse bond ETFs here).

The underlying index of the product employs a strategy that tracks the sum of the returns of periodically rebalanced short positions in equal face values of each of the 2-year, 5-year, 10-year, long-bond and ultra-long U.S. Treasury futures contracts.

S&P Metals & Mining SPDR (XME - Free Report) – Up 5.88%

The underlying S&P Metals & Mining Select Industry Index represents the metals and mining sub-industry portion of the S&P Total Market Index (see all materials ETFs here).

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