Scalper1 News
The brisk momentum in the U.S. economy seemed to have taken a brief halt to start December as the economy’s manufacturing activity for November shrunk to below a six-year low. Contraction in manufacturing activity came after three years. Almost an eight-year high greenback and steep spending cuts in the energy sector to resist the stubbornly low oil prices were held responsible for this dropdown. However, other economic readings and solid auto sales confirmed that the economy is well on its growth path. The Institute for Supply Management (ISM) reported that the benchmark of domestic factory output declined to 48.6 from 50.1 in October. The data missed economists’ expectations of 50.5. Notably, a reading of below 50 indicates a contraction in activity. The measure for new orders slipped to 48.9, more than a three-year low level. The prices paid index dropped to 35.5 from 39 and fell shy of the expected 40. However, construction spending rose 1% to a seasonally adjusted $1.11 trillion rate, which is the highest level in almost eight years. Market Impact Since the offhand data sparked off concerns regarding the economic health of the U.S. to some extent, the dollar fell from its multi-year high level and PowerShares DB US Dollar Bullish ETF (NYSEARCA: UUP ) lost 0.5% on the day. The little confusion offered the gold ETF SPDR Gold Shares (NYSEARCA: GLD ) a short-lived respite as the fund added about 0.4% on the day. The benchmark U.S. 10-year Treasury note yield dropped to a one-month low of 2.15% as of December 1, 2015, giving iShares 10-20 Year Treasury Bond ETF (NYSEARCA: TLH ) a 0.7% nudge. The possibility of a slower rate hike trajectory (if the Fed shoots the lift-off this month) and a slimming manufacturing activity at the threshold of a rising rate environment left investors edgy. However, along with several other analysts, even we believe that this latest blow to ISM data is more the result of the soaring greenback, the one-and-a-half year long oil price rout that handicapped the entire energy sector and lower demand from abroad due to global growth issues. The underlying current in the U.S. economy seems pretty decent. ETFs to Watch Investors should also note that the stocks were fairly steady after the weak industrial data. Still, some investors may want to take a closer look at the industrial ETFs. Though industrial ETFs have underperformed so far this year, they’ve held their head high in the key trading session. Below, we highlight four ETFs which are still strong bets in an apparently-lagging sector. First Trust RBA American Industrial Renaissance ETF (NASDAQ: AIRR ) This fund provides exposure to the small and mid cap stocks in the industrial and community banking sectors by tracking the Richard Bernstein Advisors American Industrial Renaissance Index. The index first eliminates the stocks from the Russell 2500 Index that aren’t connected to manufacturing or related infrastructure and banking. Then it eliminates companies with non-U.S. sales greater than or equal to 25% and positive 12-month forward earnings estimates. For the banking component, only banks in traditional manufacturing hubs will be included in the holdings list. The approach results in a basket of 37 securities, which are widely spread out across components with none holding more than 4.35% of assets. The fund is often overlooked by investors as depicted by its AUM of $44.9 million and average daily volume of about 19,000 shares. The Zacks Rank #3 (Hold) fund charges 70 bps in fees per year and has lost 1.3% so far this year, but was up 0.7% yesterday. ARK Industrial Innovation ETF (NYSEARCA: ARKQ ) This is an actively-managed ETF seeking long-term capital appreciation by investing in companies that benefit from the development of new products or services, technological improvements and advancements in scientific research. Autonomous vehicle is the top industry in the fund with 33% exposure followed by robotics (31%) and 3D printing (23%). This approach results in a basket of about 40 stocks. The product has accumulated $13.8 million in its asset base and charges 95 bps in fees per year. The fund is down 0.5% in the year-to-date frame but added over 0.2% on December 1, 2015. iShares U.S. Industrials ETF (NYSEARCA: IYJ ) IYJ tracks the Dow Jones U.S. Industrials Index to provide exposure to 212 U.S. companies that produce goods used in construction and manufacturing. The fund is heavy on General Electric (NYSE: GE ) (10.7%). The ETF manages an asset base of $605 million and trades in an average volume of 82,000 shares. The fund is slightly expensive with 43 basis points as fees. It rose 0.4% on December 1, 2015 and is up over 0.5% so far this year. The fund has a Zacks ETF Rank #2 (Buy). Vanguard Industrials ETF (NYSEARCA: VIS ) This fund follows the MSCI US IMI Industrials 25/50 index and holds about 345 securities in its basket. The fund manages nearly $2 billion in its asset base and charges only 12 bps in annual fees. Volume is moderate as it exchanges roughly 105,000 shares a day on average. Aerospace has the top sector exposure with 23.3% weight followed by industrial conglomerates (19.6%). The Zacks Rank #3 product has lost 1.6% so far this year (as of December 1, 2015) but advanced 0.6% in the key trading session. Original Post Scalper1 News
Scalper1 News