After stumbling at the beginning of the week, U.S. stocks surged to record highs on the heels of a recovery in oil prices and a second consecutive month of upbeat employment data. Stocks began the week slightly lower after disappointing PMI data from the Eurozone and China, Eurozone stress test results and the BOE's rate cut, conjured up fears of a contracting global economy. However, these worries were quickly offset after the release of July's non-farm payrolls report revealed the U.S. 255,000 jobs in July, well above the consensus estimate of 180,000. The strong July jobs report helped push the S&P 500 and NASDAQ to new all-time highs on Friday. Both benchmark indexes ended the week up 0.4% and 1.1% respectively.
Not surprisingly, the rally in these widely followed benchmarks fueled gains in broad-based equity ETFs. ETFs that track the S&P 500, including the Vanguard S&P 500 Index Fund (VOO) and iShares Core S&P 500 ETF (IVV), registered new intraday highs in the immediate aftermath of Friday's job report announcement. Additionally, following a sixth consecutive week of gains for the NASDAQ, the Powershares QQQ Trust (QQQ) topped all other funds in inflows this week as it gathered $904 million in fresh assets. Overall, U.S. equity-based ETFs took in $780 million for the week.
Despite the rally in U.S. equities and signs of a strengthening U.S. economy, emerging market and gold-based ETFs continued to attract investor capital. A look at our fund flow summary reveals that, on an absolute basis, 4 out of the top 10 inflows leaders were emerging market funds, with iShares Core MSCI Emerging Markets ETF (IEMG), iShares MSCI Emerging Markets ETF (EEM), iShares JP Morgan USD Emerging Markets Bonds ETF (EMB), and Vanguard FTSE Emerging Markets ETF (VWO) all adding over $300 million in fresh assets. We expect capital to continue to flow into emerging markets, as the ongoing search for yield continues.
Additionally, our fund flow summary illustrates that caution lingers in the markets as the defensive play and rate-sensitive SPDR Gold Trust (GLD) ranked second in fund inflows for the week, adding over $830 million in assets.
Our weekly Quant Movers list was dominated by small cap ETFs, with the Vanguard Russell 2000 Value ETF (VTWV), Vanguard Russell 2000 (VTWO), Schwab US Small Cap ETF (SCHA), and Powershares Russell 2000 Pure Value Portfolio (PXSV) were among our top gainers. In the current environment of stretched large cap equity valuations, small cap ETFs may offer investors an attractive option, as vehicles of growth and price appreciation.
With only 66% of S&P 500 companies having reported second quarter earnings, earnings releases will continue to drive market activity in the week ahead. Given the volatility surrounding earnings releases, it is important to be mindful of funds that devote large weightings to single companies. Expect ETFs, such as the Consumer Discretionary Select Sector SPDR Fund (XLY) and SPDR S&P 500 Pharmaceuticals ETF (XPH), with their large weightings towards Disney and Allergan respectively, to be particularly affected by this week's announcements. If you are interested in taking a deeper look at funds that may be affected by upcoming earnings releases, visit our ETF Equity Exposure Summary to identify funds that have large single-name exposures.
Thank you for reading ETF Global Perspectives!
ETFG 21 Day Free Trial: https://www.etfg.com/signup/quick
Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. ETF Global LLC (“ETFG”) and its affiliates and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively ETFG Parties) do not guarantee the accuracy, completeness, adequacy or timeliness of any information, including ratings and rankings and are not responsible for errors and omissions or for the results obtained from the use of such information and ETFG Parties shall have no liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of such information. ETFG PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall ETFG Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the information contained in this document even if advised of the possibility of such damages.
ETFG ratings and rankings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. ETFG ratings and rankings should not be relied on when making any investment or other business decision. ETFG’s opinions and analyses do not address the suitability of any security. ETFG does not act as a fiduciary or an investment advisor. While ETFG has obtained information from sources they believe to be reliable, ETFG does not perform an audit or undertake any duty of due diligence or independent verification of any information it receives.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested. Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate. Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor.