The S&P 500 wrapped up its worst week since March 2020, tumbling 5.8%. All 11 S&P 500 sectors are down more than 15% from their recent highs. SPDR S&P 500 ETF Trust SPY, the proxy version of the S&P 500 Index, has plunged about 6% last week.
Despite the massive decline, some of the stocks in SPY’s portfolio have risen. These are FedEx Corporation FDX, Duke Realty Corporation DRE, Vertex Pharmaceuticals Incorporated VRTX, Biogen Inc. BIIB and Monster Beverage Corporation MNST.
Decades-high inflation has made investors jittery. U.S. consumer prices accelerated at the fastest rate in May since 1981, as Americans grapple with a surge in the cost of gas, food and shelter. Additionally, concerns over slowing economic growth and a more aggressive Federal Reserve continued to weigh.
Fed Chair Jerome Powell raised interest rates by 75 bps in its latest FOMC meeting, pushing the federal funds rate between 1.5% and 1.75%, to quell inflation through a tighter monetary policy. This marked the biggest interest-rate increase since 1994. The Fed could raise rates by 50 or 75 basis points at the July Fed meeting and stressed that policy will be “sensitive and flexible,” as per Powell (read: Fed Raises Rates by 75 bps: ETFs Set to Surge).
Overall, an increase in interest rates means higher loan rates for consumers and businesses, including mortgages, credit cards and auto loans. The Fed signaled that it would continue lifting rates at the most rapid pace in decades, which could further weigh on stocks. All the Fed officials see rates rising to at least 3% by the year-end, with a median estimate of 3.4%. They expect rates to rise to 3.8% by the end of 2023.
Further, the rounds of data suggest a slowdown in economic activity in the key sectors. Mortgage rates reached their highest level in more than 13 years, while retail sales registered a bigger-than-expected drop in May as record gasoline prices prompted households to cut back on spending.
Let’s take a closer look at the fundamentals of SPY.
SPY in Focus
SPDR S&P 500 ETF Trust holds 505 stocks in its basket, with each accounting for no more than 6.5% of assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, healthcare, financials and consumer discretionary accounting for a double-digit allocation each.
SPDR S&P 500 ETF Trust has AUM of $345 billion and charges 9 bps in fees per year. The product trades in a heavy volume of around 90 million shares a day on average, ensuring higher liquidity with a tight bid/ask spread, leading to lower trading costs for investors. SPY has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (see: all the Large Cap Blend ETFs here).
Below we have highlighted the above-mentioned five best-performing stocks in the ETF.
Best-Performing Stocks of SPY
FedEx is the leader in global express delivery services. The company provides a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managed collaboratively, under the FedEx brand. The stock soared 11% last week and accounts for a 0.2% share in the ETF.
FedEx has an estimated earnings growth rate of 9.8% for the fiscal year (ending May 2023). It has a Zacks Rank #2 (Buy) and VGM Score of A. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Duke Realty is a domestic pure-play industrial real estate investment trust in the United States, engaged in owning, managing and developing industrial properties across the nation. It makes up for a 0.06% share in the fund’s basket and gained 3.3% last week.
Duke Realty’s earnings are expected to grow a massive 11% for this year. The stock carries a Zacks Rank #3.
Vertex Pharmaceuticals is focused on the discovery, development, and commercialization of small molecule drugs targeting serious diseases. The company’s main area of focus is cystic fibrosis (CF). The stock climbed 3.2% last week and accounts for 0.2% in the fund’s basket.
Vertex Pharmaceuticals has an expected earnings growth rate of 8.5% for this year and a Zacks Rank #3. It carries a solid VGM Score of B (read: Yield Curve Inverts: 4 Value Sector ETFs to Play).
Biogen is one of the world’s leading biotechnology companies, which focuses on developing innovative therapies for treating serious neurological and neurodegenerative diseases, including its core growth areas of multiple sclerosis and neuroimmunology, Alzheimer’s disease and dementia, movement disorders including Parkinson’s disease, neuromuscular disorders, including spinal muscular atrophy and amyotrophic lateral sclerosis and ophthalmology. The stock gained 2.1% last week and accounted for 0.09% in the fund’s basket.
Biogen saw positive earnings estimate revision of 4 cents for this year and has a Zacks Rank #3. It has a solid VGM Score of B.
Monster Beverage is a marketer and distributor of energy drinks and alternative beverages. It has gained 1.2% and its earnings are expected to increase 4.3% for this year. Monster Beverage makes up for 0.1% of assets in SPY and has a Zacks Rank #3.
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