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The U.S. stock market was off to a weak start in the New Year, extending the last year’s worst decline since 2008. Concerns over higher inflation and rising rates continued to weigh on investors’ sentiments. This has provided a compelling opportunity for investors to buy cheap heading into 2023.

As such, we have highlighted five ETFs from different zones that have plunged the most over the past year but have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy). These products, namely, SPDR S&P Internet ETF (XWEB - Free Report), Loncar Cancer Immunotherapy ETF (CNCR - Free Report), Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report), SPDR S&P Retail ETF (XRT - Free Report), and First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN - Free Report), are poised to outperform in the coming weeks when the market resumes its uptrend.

Ongoing Market Trends

After raising interest rates by 475 bps last year, the Federal Reserve is poised to continue hiking rates in the coming months, stoking fears that the U.S. economy may fall into a recession. The central bank projects at least 75 bps of rate hike, peaking at 5.1% by the end of 2023. The rate will then be cut to 4.1% in 2024.

A recessionary environment in 2023 could further hurt the technology sector as investors will continue to hunt for value-oriented companies and those with higher profit margins, more consistent cash flows and robust dividend yields. However, the economy seems resilient and inflation has eased in recent months, which could offer some upside to the sector.

The consumer price index jumped 7.1% year over year in November, down from a 7.7% year-over-year increase in October and a recent peak of 9.1% in June. This represents the lowest annual increase since late 2021. Further, Americans have regained confidence in the U.S. economy, with consumer confidence bouncing back in December and reversing consecutive declines in October and November to reach its highest level since April, per the University of Michigan's Consumer Confidence Index. The Conference Board Consumer Confidence Index also climbed to 108.3 from 101.4 in November.

We have highlighted the ETFs in detail below:

SPDR S&P Internet ETF (XWEB) — Down 57.9%

SPDR S&P Internet ETF targets the Internet corner of the broad tech space and follows the S&P Internet Select Industry Index. It holds 47 stocks in its basket, with each accounting for no more than 2.7% of assets.

SPDR S&P Internet ETF charges 35 bps in annual fees and trades in a volume of 2,000 shares per day on average. With an AUM of $20.5 million, XWEB carries a Zacks ETF Rank #1.

Loncar Cancer Immunotherapy ETF (CNCR) — Down 43.6%

Loncar Cancer Immunotherapy ETF offers exposure to a basket of companies that develop therapies to treat cancer by harnessing the body's own immune system. It holds 30 stocks in its basket, with each accounting for less than 4.3% of assets.

Loncar Cancer Immunotherapy ETF has AUM of $20.5 million and charges 79 bps in annual fees. The fund trades in an average daily volume of 8,000 shares and has a Zacks ETF Rank #2 with a High risk outlook.

Consumer Discretionary Select Sector SPDR Fund (XLY) — Down 36.4%

Consumer Discretionary Select Sector SPDR Fund offers exposure to the broad consumer discretionary space and tracks the Consumer Discretionary Select Sector Index. It holds 56 securities in its basket, with key holdings in specialty retail, Internet & direct marketing retail, hotels, restaurants and leisure, and automobiles with a double-digit allocation each.

Consumer Discretionary Select Sector SPDR Fund is the largest and most popular product in this space, with AUM of $12.6 billion and an average daily volume of around 4.7 million shares. It charges 0.10% in expense ratio and has a Zacks ETF Rank #2 with a Medium risk outlook.

SPDR S&P Retail ETF (XRT) — Down 32.1%

SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large, mid and small-cap stocks. It holds well-diversified 95 stocks in its basket, with none making up for more than 1.4% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in apparel retail, automotive retail, specialty stores, and Internet & direct marketing retail.

SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $292.4 million and an average trading volume of 4.4 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.

First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) – Down 30.7%

First Trust NASDAQ Clean Edge Green Energy Index Fund offers exposure to companies engaged in the manufacturing, development, distribution and installation of emerging clean-energy technologies, including solar photovoltaics, wind power, advanced batteries, fuel cells and electric vehicles. It tracks the Nasdaq Clean Edge Green Energy Index and holds 61 stocks in its basket.

First Trust NASDAQ Clean Edge Green Energy Index Fund manages assets worth $1.6 billion and charges 58 bps in fees per year. The product trades in an average daily volume of 205,000 shares and has a Zacks ETF Rank #2 with a High risk outlook.

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