U.S. Services PMI Up In June: ETFs In Focus

Service activity in the U.S. accelerated in June, as represented by the Institute for Supply Management’s (ISM) non-manufacturing index.

The ISM non-manufacturing PMI came up with a reading of 57.4 in June 2017 compared with 56.9 in May. This was above economists’ expectations of a reading of 56.5 for June. A reading above 50 indicates expansion.

Per CNBC, other services was the only industry among the 17 surveyed, which experienced contraction. Moreover, there was acceleration in growth of new orders as the new orders index surged to 60.5 in June compared with 57.7 in May.

There was a decline in the ISM employment sub-index, as it fell to 55.8 in June compared with 57.8 in the previous month. However, changes in U.S. non-farm payrolls were positive as 222,000 new positions were created in June compared with expectations of 179,000. The jobless rate stood at 4.4%.

Moreover, the economy seems to be in good shape. Trade deficit shrank 2.3% in May 2017, owing to an increase in exports. Strong consumer confidence is also representative of optimism in the economy, as it hit 118.9 in June compared with 117.6 in May (read: US Trade Deficit Declines in May: ETFs in Focus).

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

SPDR S&P 500 ETF (NYSE:SPY) (AX: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 $235.73 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 22.24%, 14.77% and 14.49% allocation, respectively (as of July 6, 2017). The fund’s top three holdings are Apple Inc (NASDAQ:AAPL) , Microsoft Corporation (NASDAQ:MSFT) and Amazon.com Inc (NASDAQ:AMZN) with 3.60%, 2.56% and 1.85% allocation, respectively (as of July 6, 2017). The fund has returned 15.76% in the last one year and 9.31% year to date (as of July 7, 2017). It currently has a Zacks ETF Rank 2 with a Medium risk outlook (read: Amazon's Foray Into Grocery to Hurt/Help These Stocks & ETFs).

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 $116.39 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 22.17%, 14.71% and 14.46% allocation, respectively (as of July 6, 2017). The fund’s top three holdings are Apple Inc, Microsoft Corporation and Amazon.com Inc with 3.59%, 2.56% and 1.85% allocation, respectively (as of July 6, 2017). The fund has returned 15.26% in the last one year and 8.80% year to date (as of June 30, 2017). It currently has a Zacks ETF Rank 2 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 $50.20 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 57.81%, 22.12% and 11.43% allocation, respectively (as of July 7, 2017). The fund’s top three holdings are Apple Inc, Microsoft Corporation, and Amazon.com Inc with 11.6%, 8.28% and 7.22% allocation, respectively (as of July 7, 2017). The fund has returned 25.47% in the last one year and 16.83% year to date (as of July 7, 2017). It currently has a Zacks ETF Rank 1 (Strong Buy) with a Medium risk outlook.

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