Investors cheered the Wall Street rally on upbeat third-quarter earnings results from certain major companies. The Dow Jones Industrial Average increased 1.6% on Oct 14. The other two broad indices, the S&P 500 and the Nasdaq Composite, were also up 1.7% each. Encouragingly, the S&P 500 index saw the biggest jump since March.
Notably, the third-quarter earnings season has begun with a bang. All the eight S&P 500 members that reported earnings on Oct 14 surpassed Wall Street’s earnings per share estimations (per a CNBC article).
Major banking players like Bank of America
BAC
, Morgan Stanley
MS
and Citigroup (C) witnessed their shares climbing 4.5%, 2.5% and 0.8%, respectively, after surpassing earnings estimates, according to a CNBC article. The drugstore chain Walgreens Boots Alliance
WBA
also surged 7.4% after beating earnings expectations.
Mark Haefele, chief investment officer of UBS Global Wealth Management, has commented that “So far, the overwhelming majority of large US companies have been able to generate higher profitability despite rising labor costs because sales growth has been so robust. We expect the same to be true in 3Q,” according to a CNBC article.
Meanwhile, falling U.S. 10-year Treasury yield supported gains of at least 2% in major technology stocks like Microsoft
MSFT
, Apple
AAPL
and Google-parent Alphabet (GOOGL).
In an encouraging development, a lower-than-expected number of weekly jobless claims added to investors’ optimism. Initial unemployment insurance claims in the week ending Oct 8 came in at 293,000, as mentioned in a CNBC article. According to the same article, the metric had fallen below the 300,000 level for the first time during the pandemic.
The latest ISM Manufacturing Purchasing Managers’ Index (PMI)data for the United States paints a rosy picture for the industrial sector. According to a Reuters article, the metric rose to 61.1% in September from 59.9% in August and surpassed forecasts of a decrease to 59.6. Any reading above 50% indicates expansion in U.S. manufacturing activities. Notably, the manufacturing sector, which makes up 12% of the U.S. economy, saw the reading rise forthe 16th consecutive month.
In another positive development, optimism surrounding the news highlighting positive updates on Merck (MRK) and Ridgeback Biotherapeutics’ investigational oral antiviral medicine, molnupiravir, can support the sector. The update supports the spaces expected to gain from the reopening of economies as molnupiravir will help fight against COVID-19, if approved by the FDA.
Going on, U.S. consumer sentiment marginally improved despite rising concerns about coronavirus cases and inflation levels. The University of Michigan’s preliminary consumer sentiment inched up to 71 in September from 70.3 last month, per a BloombergQuint article.
The progress in coronavirus vaccine rollout presents a strong case favoring a faster return to normalcy and economic recovery.
ETFs to Ride the Wave
Investors who seek to capitalize on the strong trends should consider the following ETFs:
SPDR S&P 500 ETF Trust
SPY
This fund seeks to provide investment results that before expenses generally correspond to the price and the yield performance of the S&P 500 Index. Its AUM is $387.52 billion and the total expense ratio, 0.09%.
iShares Core S&P 500 ETF
IVV
The fund seeks to track the investment results of an index composed of large-capitalization U.S. equities. Its AUM is $290.03 billion and the total expense ratio, 0.03%.
Vanguard S&P 500 ETF
VOO
The fund seeks to track the performance of the S&P 500 Index. Its AUM is $250.73 billion and the total expense ratio, 0.03%.
SPDR Dow Jones Industrial Average ETF Trust
DIA
The fund seeks to provide investment results that before expenses generally correspond to the price and the yield performance of the Dow Jones Industrial Average. Its AUM is $29.43 billion and the total expense ratio, 0.16% (read:
What Lies Ahead for Dow ETFs in Q3 Earnings?
).
iShares Dow Jones U.S. ETF
IYY
The fund seeks to track the investment results of a broad-based index composed of U.S. equities. Its AUM is $1.70 billion and the total expense ratio, 0.20% (read:
ETFs to Play Dow Jones’ Best Start to October Since 2003
).
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