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U.S. Service Sector Activity Down in November: ETFs in Focus


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The Institute for Supply Management's (ISM) non-manufacturing index reflected deceleration in service activity in the United States, owing to normalized orders following the Hurricane season in the country.

The ISM non-manufacturing PMI came up with a reading of 57.4 in November 2017 compared with 60.1 in October. This was below economists' expectations of 59.3 for November. A reading above 50 indicates expansion.

Services PMI in Detail

Per Channel News Asia , agriculture, forestry and fishing & hunting was the only industry among the 17 surveyed, which contracted. Growth of new orders decreased, as the new orders index fell to 58.7 in November compared with 62.8 in October, while order backlogs declined to 51.5 from 53.5 in October. Export orders on the other hand improved to 57 from 60 in October.

There was a decrease in the ISM employment sub-index, as it decreased to 55.3 in November compared with 57.5 in the previous month. 

Economic Data 

GDP increased 3.3% annually in the July-September period compared with a 3.1% in the second quarter. This was above the initial estimate of 3% increase (read: 5 ETFs to Soar After Solid Q3 GDP Data ).

The Federal Reserve left its benchmark interest rate steady in the November meeting, but the markets widely expect the Fed to hike rates in December. Per the CME Fed watch tool , there is a 90.2% chance of a rate hike by 25 basis points and 9.8% chance of a 50 basis point hike. 

Let us now discuss a few ETFs focused on providing exposure to U.S. equities.

SPDR S&P 500 ETF SPY

This fund is the most popular ETF traded in the U.S. markets. It seeks to provide exposure to the largest and most stable companies and tracks the S&P 500 index. 

It has AUM of $258.5 billion and charges a fee of 9 basis points a year. From a sector look, the fund has high exposures to Information Technology, Financials and Health Care with 23.6%, 15.1% and 13.9% allocation, respectively (as of Dec 5, 2017). The fund's top three holdings are Apple Inc AAPL , Microsoft Corporation MSFT and Amazon.com Inc AMZN with 3.9%, 2.8% and 2.0% allocation, respectively (as of Dec 5, 2017). The fund has returned 17.2% in a year and 16.9% year to date (as of Dec 6, 2017). It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

iShares Core S&P 500 ETF IVV

This fund is a low-cost ETF that seeks to provide exposure to the large established U.S. companies and tracks the S&P 500 index. 

It has AUM of $140.1 billion and charges a fee of 4 basis points a year. From a sector look, the fund has high exposures to Information Technology, Financials and Health Care with 23.5%, 15.0% and 13.9% allocation, respectively (as of Dec 5, 2017). The fund's top three holdings are Apple Inc, Microsoft Corporation and Amazon.com Inc with 3.9%, 2.8% and 2.0% allocation, respectively (as of Dec 5, 2017). The fund has returned 17.2% in a year and 17.1% year to date (as of Dec 6, 2017). It has a Zacks ETF Rank #3 with a Medium risk outlook.

PowerShares QQQ ETF QQQ

This fund is a popular ETF that maintains a hefty exposure to U.S. tech companies and tracks the Nasdaq 100 index. 

It has AUM of $57.9 billion and charges a fee of 20 basis points a year. From a sector look, the fund has high exposures to Information Technology, Consumer Discretionary and Health Care with 60.1%, 21.5% and 10.3% allocation, respectively (as of Dec 5, 2017). The fund's top three holdings are Apple Inc, Microsoft Corporation, and Amazon.com Inc with 12.2%, 8.8% and 7.6% allocation, respectively (as of Dec 5, 2017). The fund has returned 30.1% in a year and 28.8% year to date (as of Dec 6, 2017). It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

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ISHARS-SP500 (IVV): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , ETFs
Referenced Symbols: AMZN , AAPL , MSFT , QQQ , SPY


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