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ETF Asset Report of Last Week: Value Tops

Wall Street delivered a mixed performance last week with the S&P 500 (up 1.6%), the Nasdaq Composite (up 3.31%) and the Russell 2000 (up 3.88%) returning positively and the Dow Jones (down 0.15%) losing a little.

The Fed hiked its benchmark interest rate by 25 bps and gave an indication that more rate hikes are in the cards as inflation remains high. However, as inflation is showing signs of cooling, future rate hikes are likely to be smaller in magnitude. The latest hike takes rates to a target range of 4.5%-4.75%, the highest since October 2007. The move also marked the eighth increase in rates since March 2022.

The last week was also marked with key tech earnings. While Apple Inc. AAPL and Amazon (AMZN) underperformed, Facebook’s parent company Meta Platforms (META) outperformed. In terms of economic data points, ISM manufacturing data came in weaker.

Meanwhile, jobs data came in at upbeat. The United States economy added 517,000 jobs in January of 2023, beating market expectations of 187,000 and December’s gain of 260,000. The unemployment rate in the United States inched lower to 3.4% in January 2023, the lowest level since May 1969 and below market expectations of 3.6%.  The labor force participation rate edged higher to 62.4% (read: 5 Sector ETFs That Show Promise After Superb January Jobs Data).

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Against this backdrop, below we highlight ETF asset report of the past week.

Value ETFs Win

Vanguard Value ETF VTV amassed about $2.73 billion last week. Value stocks perform better in a rising rate environment which we have been witnessing currently. With economic data points coming in upbeat, chances of a more hawkish Fed in the coming days rose. This has favored value ETF investing.

Large-Cap Equity ETFs Gain

BNY Mellon US Large Cap Core Equity ETF BKLC and Invesco QQQ Trust QQQ hauled in about $1.23 billion and $1.15 billion, respectively last week. As risk-on sentiments bounced back in recent weeks and international equities outperforming U.S. stocks, large-cap equity stocks and ETFs that have considerable international exposure regained their mojo.

Financial ETFs Top

Financial Select Sector SPDR Fund XLF attracted about $1.20 billion last week. The benchmark U.S. treasury yield started the week at 3.55% and ended the week at 3.53%. Three-month U.S. treasury yield started the week at 4.72% and ended the week at 4.70%. This has steepened the yield curve a bit. A less hawkish Fed has resulted in this trend. This is a winning scenario of bank stocks as a steepening yield curve increases banks’ net interest margin.

High-Yield Bonds In Favor

iShares iBoxx USD High Yield Corporate Bond ETF HYG fetched about $859.6 million in assets. Policy tightening in the United States has so far been so aggressive that bonds are offering attractive yields. Upbeat jobs data also fanned possibilities of steeper Fed rate hikes.

Energy ETFs Lost

Energy Select Sector SPDR Fund XLE saw about $722.3 million in assets gushing out of the fund. Oil and gas prices were under pressure following a set of bearish news coming out of the United States last week. hurt by a much smaller-than-usual inventory draw and forecasts of warmer weather remaining through the United States till mid-February caused natural gas prices to fall.

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Apple Inc. (AAPL) : Free Stock Analysis Report

Invesco QQQ (QQQ): ETF Research Reports

iShares iBoxx $ High Yield Corporate Bond ETF (HYG): ETF Research Reports

Energy Select Sector SPDR ETF (XLE): ETF Research Reports

Financial Select Sector SPDR ETF (XLF): ETF Research Reports

Vanguard Value ETF (VTV): ETF Research Reports

BNY Mellon US Large Cap Core Equity ETF (BKLC): ETF Research Reports

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Zacks Investment Research