The coronavirus outbreak in January may have kept global investors edgy but has failed to subdue Wall Street’s euphoria. SPDR S&P 500 ETF Trust (ASX:SPY) , SPDR Dow Jones Industrial Average (NYSE:DIA) ETF Trust (NYSE:D) IA) and Invesco QQQ Trust QQQ added about 3.3%, 3.1% and 4.6%, respectively, last week despite the virus scare. Key U.S. indexes, in fact, hit fresh highs.
Upbeat U.S. economic datapoints and Chinese stimulus mainly lifted markets. But with China making up for roughly 16% of world GDP, some damaging impact can’t avoided. Research house IHS Markit sees coronavirus as a bigger threat to global economy than the SARS outbreak of 2003. While a slowdown in global economic activity is highly expected for the first quarter of 2020, the impact should be short-lived (read: Currency ETF Winners & Losers From Coronavirus Outbreak).
In the end, underlying fundamentals will rule the stock market over the long term. In this regard, we delve a little deeper into the Zacks Chief Strategist John Blank’s full Feb Market Strategy report that points to some well-positioned sectors. We also highlight the sector ETFs that could be hot picks for February.
Technology – Technology Select Sector SPDR ETF (NYSE:XLK) XLK
Among with the broader technology sector, miscellaneous technology, computer-office equipment and computer-software services, electronics and semiconductor appear well-positioned.
The phase-one U.S.-China trade deal and increasing demand for emerging technology are to drive the space.Cloud computing and AI will keep ruling the technology sector, with 2020 likely to be a breakout year for edge computing, per Deloitte.
The underlying Technology Select Sector Index includes companies from the following industries: computers & peripherals; software; diversified telecommunication services; communications equipment; semiconductor & semiconductor equipment; internet software & services; IT services; wireless telecommunication services; electronic equipment & instruments; and office electronics. The fund has a Zacks Rank #1 (Strong Buy) (read: Apple (NASDAQ:AAPL) ETFs to Buy Post Blockbuster Q1 Results).
Energy – Invesco Solar ETF (LON:TAN)
The underlying MAC Global Solar Energy Index is comprised of companies in the solar energy industry. Among the energy space, clean energy is hot.
The solar industry has been seeing a rebound in global solar demand. The sector has every reason to gain this election year as most democrat candidates, including Bloomberg, are pledging to end the fossil-fuel era, going completely against President’s Trump’s call. Tesla’s (NASDAQ:TSLA) improving solar division is also driving the space (read: 2 ETF Areas to Gain From Michael Bloomberg's Campaign).
Communication Services – Communication Services Select Sector SPDR ETF XLC
The rapid adoption of satellite broadband services, arrival of direct-to-home TV offerings and advancement of digital technology have been driving the communication space.
The underlying Communication Services Select Sector Index seeks to provide an effective representation of the communication services sector of the S&P 500 Index. Facebook (NASDAQ:FB) (19.1%), Alphabet (NASDAQ:GOOGL) Class A (11.8%), Alphabet Class C (11.8%) and Netflix (NASDAQ:NFLX) (5.19%) are the top four holdings of the fund. XLC has a Zacks Rank #2 (read: ETFs to Gain on Disney's Q1 Earnings & Solid Subscriber Growth).
Consumer Discretionary – Consumer Discretionary Select Sector SPDR ETF (TSXV:XLY)
Upbeat jobs data, rising wealth effect, low rates and a steady U.S. economy bode well for the consumer discretionary stocks.
The underlying Consumer Discretionary Select Sector Index looks to provide an effective representation of the consumer discretionary sector of the S&P 500 Index. Amazon (NASDAQ:AMZN) (25.5%), Home Depot (NYSE:HD) (10.5%) and McDonald’s (NYSE:MCD) (6.5%) hold the top three spots in the fund. XLY has a Zacks Rank #2 (read: 4 Sector ETFs That Hit All-Time Highs).
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Dominion Energy Inc. (D): Free Stock Analysis Report
Tesla, Inc. (TSLA): Free Stock Analysis Report
Technology Select Sector SPDR ETF (XLK): ETF Research Reports
SPDR S&P 500 ETF (NYSE:SPY): ETF Research Reports
Invesco QQQ (QQQ): ETF Research Reports
Invesco Solar ETF (TAN): ETF Research Reports
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports
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Zacks Investment Research