Yahoo Finance Will ETFs Win During Thanksgiving Week Amid Recessionary Fears?
Wall Street remains typically upbeat in Thanksgiving week, marking the start of a year-end Santa rally. “The last five trading days of November are traditionally positive, since 1950,” said Sam Stovall, chief investment strategist at CFRA. “There’s a two-thirds likelihood the market is up on the day before Thanksgiving and a 57% likelihood the day after Thanksgiving, and a 71% likelihood that it’s up on Monday,” as quoted on CNBC.
However, this year is a little different given the sky-high inflation, the resultant rate hikes and recessionary fears. Wall Street was downbeat last week. Each of the key equity gadgets — the S&P 500 (down 0.7%), the Dow Jones (down 0.01%), the Nasdaq Composite (down 1.6%) and the Russell 2000 (down 1.8%) — lost last week. Rising rate worries and recessionary fears were the key concerns. This raised doubts over the possibility of a successful thanksgiving week this year.
Can Wall Street Remain Positive This Thanksgiving?
Minutes from the FOMC's latest meeting, the Federal Reserve committee which votes on monetary policy, are likely to show officials planning a half-point rate hike at their December meeting. Federal Reserve Bank of Atlanta President Raphael Bostic was the latest Fed member to reinforce this likelihood.
He said that he was comfortable to retreat from 75-basis-point increases at the next meeting but declared that rates may reach 4.75%-5% before the Fed is done with its current tightening cycle. “If the economy proceeds as I expect, I believe that 75 to 100 basis points of additional tightening will be warranted,” Bostic said. This is a kind of “mixed bag” news as this means rates will go up from here at a relatively moderate rate.
The Consumer Price Index (CPI) came in at favorable. CPI rose at a 7.7% clip last month, down from 8.2% in September. Though recessionary concerns are rife, of S&P 500 companies that conducted earnings calls from September 15 to November 16, 26% fewer companies mentioned the term “recession,” — 179 cited the word, down from 242 in the last quarter's earnings period, per FactSet data, as quoted on Yahoo Finance.
Against this backdrop, we highlight a few ETFs for Thanksgiving week. These ETFs have higher chances of gaining in the week.
ETFs in Focus
Industrial Select Sector SPDR ETF XLI – Zacks Rank #2 (Buy)
Industrial activities have been in decent shape. Growing employment in manufacturing sector calls for that strength. The sector is expected to witness revenue growth of 12.9% in Q3 revenues, after 10.8% growth in Q2 (read: 5 Sector ETFs to Play for Revenue Growth Potential).
iShares U.S. Utilities ETF IDU – Zacks Rank #2
The utilities sector has come up with mostly decent results this earnings season. More than half of S&P 500 companies beat on bottom line while most of the companies surpassed the top-line estimates. Being a low-beta sector, utility is relatively protected from large swings (ups and downs) in the stock market and is thus considered a defensive investment or safe haven amid economic or political turmoil.
AXS 1.25X NVDA Bear Daily ETF NVDS
Nvidia has gained a lot in recent times, but may not continue this run. “It’s the worst of all worlds, because the rate of revenue growth is declining, macro fundamentals are deteriorating, and the valuation is still exceptionally high,” said James Abate, chief investment officer at Centre Asset Management, per Bloomberg. Abate owns Nvidia but has been cutting his position in the stock.
Nvidia disappointed investors with its third-quarter fiscal 2023 results, wherein it missed earnings estimates and forecast weakness in revenues for the ongoing quarter. However, fiscal third-quarter revenues beat estimates (read: Nvidia Misses Q3 Earnings, Shares Up: ETFs in Focus).
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Industrial Select Sector SPDR ETF (XLI): ETF Research Reports
iShares U.S. Utilities ETF (IDU): ETF Research Reports
AXS 1.25X NVDA Bear Daily ETF (NVDS): ETF Research Reports
