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ETFs in Focus in the Holiday Week

Though the U.S. stock market has had a spectacular run in 2017 on strong global economic growth and optimism related to President Trump’s pro-business policies, stock trading has been tight in the shortened-holiday week due to low volumes. However, several events led to major positive or negative movements in some corners of the market. Here are a few of the developments:

Market Movers

The tech sector has been in the news this week, owing to recent developments relating to Apple’s latest product, the iPhone X. Reports of weaker iPhone X demand led to a sell-off in shares of Apple and its suppliers, driving the tech sector lower. Per a Reuters article citing Taiwan’s Economic Daily’s report, Apple is expected to slash its forecast sales of its flagship phone in the current quarter to 30 million units from the previous estimate of 50 million units.

The S&P 500 Technology sub-sector nosedived as a result. Moreover, various market analyses predict that the tech sector will not benefit as much as expected earlier from President Donald Trump’s tax reform that was passed into law last week.

Another major sector that was in news was the retail sector. The retail sector saw holiday sales jump to a six-year high. U.S. retail holiday sales increased 4.9% year over year in the Nov 1-Dec 24 period, compared with 3.7% last year. Moving on to the online sales space, Amazon saw a blockbuster season. Moreover, per a Reuters’ report, the online retail behemoth is in talks with authorities to expand into Saudi Arabia, which led to a rally in the company’s share price (read: Holiday Sales At 6-Year High: Best Consumer ETFs & Stocks).

Moving on to the energy sector, crude oil prices have been rallying owing to a set of events. Crude breached $60 a barrel this week, the highest since June 2015. This was primarily helped by an extension in supply cuts into late 2018 by OPEC and an explosion in a crude pipeline in Libya. Moreover, per the Energy Information Administration (EIA), U.S. commercial crude inventories decreased by 4.6 million barrels in the week ended Dec 22 compared with a Wall Street Journal analysis predicting a decline of 3.7 million barrels.

On the industrial metal side, strength in commodity prices led to a rally in U.S. equities. Copper prices rallied to a near four-year high on Dec 27, 2017, driven by strong import demand from China. Imports of refined copper increased 19% year over year in November to 329,168 tons.

Let us now discuss a few ETFs focused on providing exposure to the discussed sectors.

iShares U.S. Technology ETF IYW

This fund provides exposure to the U.S. technology sector. It has AUM of $4.1 billion and charges a fee of 44 basis points a year. From a sector look, Software & Services, Technology Hardware & Equipment and Semiconductors & Semiconductor Equipment have the highest exposure to the fund, with 53.2%, 26.0% and 19.3% allocation, respectively. Apple Inc AAPL, Microsoft Corp MSFT and Facebook Inc FB are the top three holdings of the fund, with 17.1%, 12.9% and 8.3% allocation, respectively.  The fund lost 0.6% so far this week. IYW has a Zacks ETF Rank of #1 (Strong Buy) with a Medium risk outlook (read: Top Large-Cap Growth ETFs of 2017).

VanEck Vectors Retail ETF RTH

This fund provides exposure to the U.S. retail sector. It has AUM of $57.1 million and charges a fee of 35 basis points a year. From a sector look, Consumer Discretionary, Consumer Staples and Health Care have the highest exposure to the fund, with 63.3%, 28.4% and 8.5% allocation, respectively. Amazon.com Inc AMZN, Home Depot Inc HD and Wal-Mart Stores Inc WMT are the top three holdings of the fund, with 19.8%, 7.9% and 7.0% allocation, respectively.  The fund has returned 0.5% so far this week. RTH has a Zacks ETF Rank of #3 (Hold) with a Medium risk outlook.

iPath Dow Jones-UBS Copper ETN JJC

This fund offers exposure to one of the most widely used industrial metals. It seeks to deliver the returns of copper and tracks the Dow Jones-UBS Copper Subindex Total Return index. The index provides returns available through unleveraged investments in futures contracts on the metal.

It has AUM of $71.1 million and charges a fee of 75 basis points a year. The fund has returned 2.1% so far this week. JJC has a Zacks ETF Rank of #4 (Sell) with a Medium risk outlook (read: Copper ETFs in Focus on Rising Demand).

Energy Select Sector SPDR Fund XLE

This fund seeks to provide exposure to energy stocks and tracks the Energy Select Sector Index. It has AUM of $18.1 billion and charges a moderate fee of 14 basis points a year.

From a sector look, the fund has exposure to Oil, Gas & Consumable Fuels and Energy Equipment & Services, with 85.4% and 14.6% exposure, respectively. The fund’s top three holdings are Exxon Mobil Corp XOM, Chevron Corp CVX and Schlumberger Ltd SLB with 22.4%, 17.2% and 6.8% allocation, respectively.  The fund has returned 0.7% so far this week. XLE has a Zacks ETF Rank #3 with a High risk outlook.

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Amazon.com, Inc. (AMZN): Free Stock Analysis Report
 
Facebook, Inc. (FB): Free Stock Analysis Report
 
Home Depot, Inc. (The) (HD): Free Stock Analysis Report
 
Apple Inc. (AAPL): Free Stock Analysis Report
 
Microsoft Corporation (MSFT): Free Stock Analysis Report
 
VANECK-RETAIL (RTH): ETF Research Reports
 
SPDR-EGY SELS (XLE): ETF Research Reports
 
IPATH-BB COPR (JJC): ETF Research Reports
 
ISHARS-US TECH (IYW): ETF Research Reports
 
Schlumberger N.V. (SLB): Free Stock Analysis Report
 
Chevron Corporation (CVX): Free Stock Analysis Report
 
Exxon Mobil Corporation (XOM): Free Stock Analysis Report
 
Wal-Mart Stores, Inc. (WMT): Free Stock Analysis Report
 
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