The S&P Global US Manufacturing PMI was revised slightly down to 47.9 in August from a preliminary reading of 48 and hints at the deterioration in the health of the U.S. manufacturing sector so far this year.
Production decreased for the first time in seven months as sales continued to decline amid increasing reports of demand weakness. A renewed reduction in employment was also recorded due to spare capacity in the sector.
Meanwhile, OPEC+ plans to boost output, which is putting pressure on oil prices. Weakness in China’s economy has also been dragging prices lower. A report that Libya’s oil production is set to be restored weighed on oil prices too.
If these were not enough, there has been an upheaval in technology stocks as shares of the artificial intelligence king NVIDIA NVDA have been under pressure due to growth slowdown. NVIDIA’s steep decline erased almost $300 billion in market cap off the chipmaker and weighed on the broader market.
The VanEck Semiconductor ETF SMH, an index that tracks semiconductor stocks, was down 7.5% on Sept. 3, 2024, marking its worst day since March 2020. Against this backdrop, Wall Street has started September on a wobbly note.
Time for Safe-Sector ETFs?
SPDR S&P 500 ETF Trust SPY lost 2.1% on Tuesday, SPDR Dow Jones Industrial Average ETF DIA lost 0.5% and the Invesco QQQ Trust, Series 1 (QQQ) lost 2.5%, respectively.
Investors can seek refuge to safe sectors like consumer staples, healthcare, real estate and utilities. Exchange-traded funds (ETFs) like US Consumer Goods iShares ETF IYK, Nasdaq Food & Beverage ETF FTXG and Consumer Staples ETF Vanguard VDC – all hit a 52-week high on Tuesday.
Consumer Staples ETFs
Consumer staples ETFs are exchange-traded funds that focus on companies producing essential goods that consumers buy regularly, regardless of economic conditions. These typically include items like food, beverages, household goods, and personal care products. This sector and its related ETFs are non-cyclical in nature.
Healthcare ETFs
Healthcare ETFs are often considered a safe investment. Healthcare is a defensive sector, meaning it’s less sensitive to economic cycles compared to other sectors. People need healthcare services regardless of the economic climate, which can lead to more stable performance. US Healthcare Providers iShares ETF IHF also hit a 52-week high on Sept. 3, 2024.
Real Estate ETFs
The sector provides broad exposure to U.S. real estate investment trusts and real estate stocks. The sector fares better in a low-rate environment and yields high. With the Fed likely to cut rates in September, the sector should outperform. Vanguard Real Estate ETF VNQ yields 3.74% annually and charges 13 bps in fees.
Utilities ETFs
The Utility sector tends to be stable and provides consistent dividends. Utilities Select Sector SPDR ETF XLU, which charges 9 bps in fees and yields 2.88% annually. Fidelity Utilities MSCI ETF FUTY, which yields 2.87% annually and charges 8 bps in fees, recently hit a 52-week high.
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NVIDIA Corporation (NVDA) : Free Stock Analysis Report
SPDR S&P 500 ETF (SPY): ETF Research Reports
Vanguard Real Estate ETF (VNQ): ETF Research Reports
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
Utilities Select Sector SPDR ETF (XLU): ETF Research Reports
VanEck Semiconductor ETF (SMH): ETF Research Reports
iShares U.S. Healthcare Providers ETF (IHF): ETF Research Reports
Vanguard Consumer Staples ETF (VDC): ETF Research Reports
iShares U.S. Consumer Staples ETF (IYK): ETF Research Reports
Fidelity MSCI Utilities Index ETF (FUTY): ETF Research Reports
First Trust NASDAQ Food & Beverage ETF (FTXG): ETF Research Reports