Tag Archives: etf

ETFs To Gain Or Lose After Strong Jobs Report

Wall Street had a strong start to the second quarter courtesy of encouraging data released on April 1. In particular, a solid March job report injected further optimism into the economy, driving stocks higher. This is especially true as U.S. hiring continued its strong momentum with 215,000 jobs added last month following the revised 245,000 job additions in February. This is much above Reuters’ expectation of 205,000 (see: all the Large Cap ETFs here ). The majority of the additions were seen in retail, health care, and construction that more than offset the decline in the manufacturing and mining sectors. Notably, the economy has been creating over 200,000 jobs per month since 2014. Average hourly wages grew by 7 cents to $25.43 in March bringing the year-over-year increase to 2.3%. This is much better than the 2-cent decline in February but lower than the 2.6% year-over-year wage growth in December that marked the strongest improvement since 2009. However, the unemployment rate ticked up slightly to 5% from an eight-year low of 4.9%. Meanwhile, the labor force participation rate, which indicates the percentage of working-age people who are employed or looking for work, climbed to the highest level since March 2014 at 63%. The robust pace of job creation suggests that the U.S. is one of the healthiest economies in the world that will be able to withstand global uncertainty. However, the data failed to alter the cautious expectations for a rates hike. Given this, a few ETFs will severely impact by the solid jobs data while some are expected to gain in the weeks ahead. Below, we have highlighted some of these that are especially volatile post jobs data: ETFs to Gain PowerShares DB USD Bull ETF (NYSEARCA: UUP ) A healthy job market and the resultant improving economy are expected to pull in more capital into the country and lead to appreciation of the U.S. dollar. UUP is the prime beneficiary of the rising dollar as it offers exposure against a basket of six world currencies – euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. This is done by tracking the Deutsche Bank Long US Dollar Index Futures Index Excess Return plus the interest income from the fund’s holdings of the U.S. Treasury securities. In terms of holdings, UUP allocates nearly 57.6% in euro and 25.5% collectively in Japanese yen and British pound. The fund has so far managed an asset base of $818.6 million while sees an average daily volume of around 1.7 million shares. It charges 80 bps in total fees and expenses, and lost 0.04% on the day following the jobs report. The fund has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook (read: ETF Winners & Losers Following Yellen Comments ). SPDR Homebuilders ETF (NYSEARCA: XHB ) Solid labor market fundamentals along with affordable mortgage rates will continue to fuel growth in a recovering homebuilding sector, creating a buying opportunity in housing-related stocks and ETFs. The most popular choice in the homebuilding space, XHB, follows the S&P Homebuilders Select Industry Index. In total, the fund holds about 37 securities in its basket with none accounting for more than 5.73% share. The product focuses on mid-cap securities with 65% share, followed by 27% in small caps. The fund has amassed about $1.5 billion in its asset base and trades in heavy volume of about 3.6 million shares. Expense ratio comes in at 0.35%. XHB added 0.7% on the day and has a Zacks ETF Rank of 2 with a High risk outlook. SPDR S&P Retail ETF (NYSEARCA: XRT ) Retail will also benefit from accelerating job growth and modest wage growth that will lead to increased spending power. XRT tracks the S&P Retail Select Industry Index, holding 100 securities in its basket. It is widely spread across each component as none of these holds more than 1.47% of total assets. Small-cap stocks dominate about three-fifths of the portfolio while the rest have been split between the other two market-cap levels. XRT is the most popular and actively traded ETF in the retail space with AUM of about $605 million and average daily volume of around 4.4 million shares. It charges 35 bps in annual fees and lost 0.1% on the day. The product has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with a Medium risk outlook. ETFs to Lose SPDR Gold Trust ETF (NYSEARCA: GLD ) An upbeat jobs report dampened the appeal for gold as it reflects strength in the economy and boosted investor risk sentiment. As a result, the strongest Q1 rally of the yellow metal in nearly three decades could come to a halt and the product tracking this bullion like GLD will lose. The fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $31.9 billion and average daily volume of around 8.7 million shares a day. Expense ratio came in at 0.40%. The fund was down 0.6% on the day and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ) The U.S. government bonds would be badly hit as strong hiring led to speculation that the economy can withstand a tighter monetary policy. This would lead to higher Treasury yields and lower bond prices. In particular, bonds and ETFs tracking the long end of the yield curve would be impacted the most. The ultra-popular long-term Treasury ETF – TLT – tracks the Barclays Capital U.S. 20+ Year Treasury Bond Index and has AUM of $8.1 billion. Expense ratio came in at 0.15%. Holding 32 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 26.61 years and effective duration of 17.77 years. The fund is up just 0.05% following the jobs report and has a Zacks ETF Rank of 2 with a High risk outlook. Link to the original post on Zacks.com

High Dividend Sector ETFs Hitting All-Time Highs

A few days back, the market was abuzz with faster-than-expected rate hike bets in the U.S. on hawkish tip-offs from some Fed officials after a dovish meeting in mid March. However, recently Fed chair Yellen put all hearsay to rest by emphasizing global growth issues. Also, the Fed chair indicated a ‘cautious’ stance that may be adopted by the U.S. central bank on the policy tightening issue going forward. Following the dovish statements, stocks and bonds soared. Investors should also note that yields on U.S. treasuries dropped following Yellen’s remarks. Below we discuss a few ETFs that popped after Yellen’s speech and could remain in focus ahead. In a falling yield environment, investors rushed to tap every possible option that can cater to their income need. Along with broader dividend funds, high yielding sector ETFs have also been witnessing strong pricing performance lately. Below we highlight a few winning sectors and their ETFs that hit all-time highs reflecting Yellen’s comments. Utilities Utilities usually have strong yields and are embraced by investors when Treasury bond yields fall. Also, the utility sector is considered a safer option when volatility levels spike. This sector is less volatile in nature and relatively immune to the market peaks and troughs. Moreover, the space is less exposed to currency translation due to lack of foreign coverage (read: Protect Your Portfolio with These Utility ETFs ). By virtue of their stronger yields and defensive nature, the following utilities ETFs touched all-time highs lately. The Utilities Alphadex First Trust (NYSEARCA: FXU ) hit an all-time high on March 31 2016. The fund added over 2.7% in the last five trading days (as of March 31, 2016) and yields about 2.85% annually and FXU has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Smart Beta ETFs That Stood Out Amid Market Volatility ). The Guggenheim S&P Equal Weight Utilities ETF (NYSEARCA: RYU ) hit an all-time high on March 31, 2016. The fund returned 2.6% in the last five trading days (as of March 31, 2016) and yields 3.20% annually and follows an index which is the equal weighted version of the S&P 500 Utilities Index. Real Estate Real Estate is also a highly interest rate sensitive sector. These firms are usually highly leveraged and face maximum interest rate risk in the REIT world. Now, REITs are required to distribute 90% of their annual taxable income through dividends which make them high dividend yield vehicles. With interest rates expected to remain subdued for longer and bond yields trending down, the Real Estate Select Sector SPDR ETF (NYSEARCA: XLRE ) hit an all-time high, adding about 2.2%, on March 29, 2016. The fund yields 2.06% annually (as of the same date). The fund was up over 3.7% in the last five trading days (as of March 31, 2016). Telecom Telecom, another defensive sector by nature, also offers investors solid dividend yields. The Fidelity MSCI Telecommunications Services Index ETF (NYSEARCA: FCOM ) hit an all-time high on March 31, 2016. The product advanced about 4.4% in the last five trading days (as of March 31, 2016). Consumer Staples Consumer staple stocks have been performing better in recent months as investors are slowly moving toward defensive sectors. Also, consumer staples stocks and ETFs are high yield in nature which put this sector in focus following Yellen’s speech. Also, many consumer staples stocks are rich in global presence and are likely to outperform amid falling dollar. The Fidelity MSCI Consumer Staples Index ETF (FTSA) touched an all-time high on March 31, 2016. The fund added about 1.5% in the last five trading days (as of March 31, 2016). The fund yields about 2.52% annually (as of March 31, 2016). Link to the original post on Zacks.com

Why You Should Closely Watch Apple’s Stock Chart

Loading the player… Apple ( AAPL ) shares tried to make a pivotal move in the stock market today with the recapturing of a key technical level. Credit Suisse raised its price target on Apple from 140 to 150, saying that gross profit from Apple services — including Apple Pay, Apple Music and iCloud — has big growth potential. Meanwhile, Brean Capital cut its price target from 170 to 155. The analyst said that the Street’s iPhone unit shipment expectations for the March and June quarters may be too optimistic. Shares jumped as much as 1.9% in heavy volume Monday morning, breaking past resistance at the 110 price level and retaking the critical 200-day moving average in intraday trade. Apple hasn’t traded above the 200-day since five months ago, and even then it stayed above the line only briefly. Shares pared their gains to close up 1% at 111.12, pennies below their 200-day line at 111.32. If the stock can close above the 200-day line, it would be bullish. The stock has suffered severe technical damage over the last year, but it’s up more than 20% from its January low. Apple is now 16% below its all-time high of 134.54, reached at the end of last April. Among other widely held tech stocks, Microsoft ( MSFT ) is trading about 2% below its late December high and a consolidation base buy point of 56.95. Microsoft shares were down 0.5% in intraday trade. Facebook ( FB ) fell 3% in big volume on a cautious report from Deutsche Bank. Facebook is now trading about 4% below its February high and a buy point at 117.69. Google owner Alphabet ( GOOGL ) is trading 6% below a cup-base buy point of 810.45. Alphabet lost 0.6% Monday. And Netflix ( NFLX ) is hitting resistance at its 200-day line for a second session. The stock is 21% below its December peak. Netflix shares fell 1.3% Monday.