Weekly ETF Roundup: What's Hot And Not

Last week led to increased political risk while a jump in oil prices and strong corporate earnings helped to recover investors’ sentiment at the end of the week.

Washington Turmoil

The turmoil in Washington dealt a big blow to U.S. stocks last week, resulting in a nasty run in Wednesday’s trading session. Triggering the move was chaos over Trump’s firing of the Federal Bureau of Investigation (FBI) Director James Comey and allegations that he had asked Comey to end an investigation into the former National Security Adviser Michael Flynn's ties with Russia. This has raised fears of an impeachment of the President and the possible delay in its pro-growth policies that has pushed the stock market to record highs (read: Political Turmoil Triggers Sell-Off: 5 Sector ETFs Hit Hard).

In particular, the Dow and the S&P 500 saw the worst one-day drop since September 9 while the Nasdaq has tumbled the most since June 24, 2016. The dollar index, which tracks the U.S. currency against six peers, fell to its lowest level since November 9. Meanwhile, the CBOE Volatility Index (VIX), also known as the fear gauge, spiked 46% to 15.59, its biggest daily rise since Britain’s vote to exit from the EU in June.

Given this, SPDR S&P 500 ETF Trust (AX:SPY) saw the biggest capital outflow of nearly $2.4 billion last week as per etf.com, followed by outflows of $1.8 billion for iShares Russell 2000 ETF IWM and $1.1 billion for PowerShares QQQ Trust QQQ.

The financial sector led the market selloff with SPDR S&P Regional Banking ETF (CO:KRE) shedding 4.3% on the day. First Trust Nasdaq Bank ETF FTXO, iShares U.S. Regional Banks ETF (LON:IAT) , and First Trust Nasdaq ABA Community Bank Index QABA slid more than 4% on the day. The slide sent the bank ETFs into a correction territory (a drop of at least 10% from its recent peak). KRE, IAT and QABA have a Zacks ETF Rank of 1 or ‘Strong Buy’ rating, suggesting this could be an attractive entry point (read: Sector ETF Winners and Losers on Trump Controversy).

Brazil Crisis

Brazil was caught in a political crisis with another presidential corruption scandal. Less than 10 months into President Michel Temer administration, he is facing calls for his resignation after he found involved in a bribery scandal. The crisis led to bloodbath in Brazilian stocks and ETFs on Thursday.

The Brazil Bovespa index tumbled more than 10% initially but recovered slightly to close at down 8.8%, marking the worst day since October 22, 2008. iShares MSCI Brazil Capped ETF EWZ dropped more than 18% initially but recovered to close 16.3% lower on the day. With this slide, the ETF eroded most of its gains made earlier this year, having gained just 4.9% so far. It has a Zacks ETF Rank of 3 or ‘Hold’ rating (read: Brazil ETFs Fall as President Temer Faces Corruption Charges).

Energy: A Sweet Spot

Oil prices, which were under immense pressure from higher U.S. output and increased inventories, jumped 5.5% last week after the world's top two oil producers agreed to extend their production cuts for nine more months. Saudi Arabia and Russia, which together control a fifth of global supplies, are at the forefront to extend the Organization of the Petroleum Exporting Countries’ (OPEC) output cut deal from the first half of 2017 to the end of the first quarter of 2018 to rein in the supply glut and stabilize the market. Though the extension is yet to finalize at the meeting in Vienna on May 25, the deal seems likely.

This has instilled fresh optimism into the energy sector, leading to a rally in the stocks. Investors jumped into the leveraged energy space to tap this opportune moment with VelocityShares 3x Long Crude Oil ETN UWT, ProShares UltraPro 3x Crude Oil ETF (NYSE:USO) OILU and UBS ETRACS ProShares Daily 3x Long Crude ETN WTIU. UWT offers three times (3x or 300%) exposure to the S&P GSCI Crude Oil Index ER while the other two provide triple exposure to the Bloomberg WTI Crude Oil Subindex. These funds have gained nearly 16% each last week (read: Saudi, Russia Boost Oil Price: Bet on Leveraged ETFs).

Craze for International ETFs Spiked

Amid the political uncertainty in U.S. and Brazil, investors continued to shift to international equity ETFs that saw around $5.9 billion inflows in the last week as against the outflow of $6.8 billion for U.S. equity funds. This represents the third consecutive week of international inflows. Some of the top asset gatherers last week include iShares MSCI EAFE ETF EFA, Vanguard FTSE Developed Markets ETF VEA, Vanguard FTSE Europe ETF (NYSE:VG) and iShares Core MSCI EAFE ETF IEFA. All these funds gained over 1% last week and have a Zacks ETF Rank of 3.

While emerging market funds – iShares Core MSCI Emerging Markets ETF IEMG and Vanguard FTSE Emerging Markets ETF VWO – also topped the top 10 list of inflows, they lost 0.2% and 0.5%, respectively. Both ETFs have a Zacks ETF Rank of 3.

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Vonage Holdings Corp. (VG): Free Stock Analysis Report

NASDAQ-100 SHRS (QQQ): ETF Research Reports

SPDR-SP 500 TR (SPY (NYSE:SPY)): ETF Research Reports

ISHARS-R 2000 (IWM): ETF Research Reports

ISHARS-BRAZIL (EWZ): ETF Research Reports

ISHARS-EAFE (EFA): ETF Research Reports

FT-NDQ BANK (FTXO): ETF Research Reports

SPDR-KBW REG BK (KRE): ETF Research Reports

ISHARS-US RG BK (IAT): ETF Research Reports

FT-NDQ ABA CBIF (QABA): ETF Research Reports

VANGD-FTSE EM (VWO): ETF Research Reports

VANGD-FTSE EUR (VGK): ETF Research Reports

VANGD-FTSE DV M (VEA): ETF Research Reports

VS-3X LG CR OIL (UWT): ETF Research Reports

E-TRC PRS D3XLC (WTIU): ETF Research Reports

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