Trade Optimism & Earnings Effect: 5 Hot ETF Charts

After a bumpy ride last year, U.S. bulls are roaring higher on hopes of optimism over a trade deal between the United States and China. With this, the bull market is turning 10 on Mar 9. Notably, the S&P 500 closed above 2,800 for the first time in nearly four months while the Dow Jones also broke 26,000 for the first time since Nov 9 in the week that went by.

The Fed’s stance of being patient toward rising rates this year also boosted investors’ sentiment. Additionally, better-than-expected corporate earnings added to the strength. This is especially true as the Q4 earnings for 89% of the S&P 500 index market capitalization are up 12.7% on 7.2% revenue growth, with 67.4% beating EPS estimates and 61.8% surpassing top-line expectations, according to the latest Earnings Trends.

Though Q4 growth is decelerating and is below the pace set in the first three quarters of the year, both earnings and revenue growth rates are better than 10.7% and 5.2%, respectively, projected at the start of the Q4 earnings season.  

While these trends have led to rally in many corners of the equity ETF world, we have highlighted five ETFs that buoyed on the combination of trade optimism and decent earnings. In addition, we have given a chart for their performances since the start of the year and compared them with the broad market fund (SPY - Free Report) and the broad sector.

SPDR S&P Oil & Gas Equipment & Services ETF (XES - Free Report)

This fund tracks the S&P Oil & Gas Equipment & Services Select Industry Index, which measures the performance of the companies engaged in the oil and gas equipment and services industry. Trade deal talks have led to anticipation of higher demand for oil in the world’s second-largest economy. This coupled with OPEC-led fresh crude output cut and sanctions on Venezuela's oil exports pushed up oil price. Further, earnings have been upbeat for the oil and gas sector with 86.7% of the sector’s total market capitalization reported so far are up 100.3% on higher revenues of 12.5%. While many energy ETFs have performed exceptionally well, XES stole the show, gaining 28.4% so far this year. The fund has a Zacks ETF Rank of #4 (Sell) with a High risk outlook.

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