After dismal trading for more than a week, Wall Street showed strong rebound following China stimulus measures, which alleviated concerns over the coronavirus outbreak impact on the global economy, and strong U.S. economic data. Notably, the S&P 500 posted its biggest one-day gain in about six months while the Dow logged in its biggest single-day rise in more than five months. The Nasdaq Composite Index hit new all-time highs (read: Best & Worst ETFs of Coronavirus-Affected January).
The People's Bank of China has stepped in by injecting trillions of yuan and lowering rates to support the affected economy. The bank has injected a total of $1.7 trillion yuan ($242.9 billion) into the Chinese monetary system via open market operations since the start of the week and unexpectedly lowered the interest rates on reverse repurchase agreements by 10 basis points (bps).
On the domestic front, a solid rebound in the U.S. manufacturing sector, which had languished in contraction territory for five months, also boosted investors’ confidence in the economy and stock market. The Institute for Supply Management’s PMI rose to 50.9 in January from a December reading of 47.8, backed by strength in new orders, production and exports. Meanwhile, new orders for U.S. manufactured goods rose in December at the fastest pace in more than a year.
As most corners of the market rallied on the slew of positive news, few sectors scaled new highs. We have highlighted four ETFs from different sectors that hit all-time highs in the recent trading session:
Technology Select Sector SPDR Fund (XLK - Free Report) – All-Time High Price: $99.33
As the technology sector has huge exposure to China, it has gained the most on the news. This ETF targets the broad technology sector by tracking the Technology Select Sector Index, It holds 71 stocks in its basket and charges 13 bps in annual fees. XLK is the most popular technology ETF with AUM of $26.4 billion and average daily volume of 10.3 million shares. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Microsoft's Azure Returns to Growth: 5 ETFs to Buy).
Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) – All-Time High Price: $128.94
The bouts of upbeat economic data as well as rising consumer confidence provided boost to the consumer discretionary sector. XLY tracks the Consumer Discretionary Select Sector Index, holding 64 securities in its basket. It is the largest and most popular product in this space with AUM of nearly $15.4 billion and average daily volume of around 3.7 million shares. The fund has 0.13% in expense ratio and carries a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Will Consumer Discretionary ETFs Suffer the Coronavirus Blow?).
Fidelity MSCI Utilities Index ETF (FUTY - Free Report) – All-Time High Price: $45.17
The utilities sector gained the most of market uncertainty. Being low-beta in nature, the sector is relatively protected from large swings (ups and downs) in the stock market and is thus considered a defensive investment or safe haven amid economic or political turmoil. Additionally, it offers solid dividend payouts and excellent capital appreciation over the long term. FUTY provides exposure to 66 utilities stocks with AUM of $1 billion. This is done by tracking the MSCI USA IMI Utilities Index. The ETF has 0.08% in expense ratio while average daily volume is good at 167,000 shares a day. It has a Zacks ETF Rank #2 with a Medium risk outlook (read: ETFs to Buy as Utilities Are Favored Amid Virus Scare).
Invesco DWA Financial Momentum ETF (PFI - Free Report) — All-Time High Price: $41.28
As China injects liquidity into the markets, financial stocks benefit. PFI offers exposure to 46 companies that are showing relative strength (momentum) by tracking the Dorsey Wright Financials Technical Leaders Index. It has gathered $62.9 million in its asset base and charges 60 bps in annual fees. The fund trades in volume of 33,000 shares a day on average
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