A Little Light in a Murky Tunnel

Monday, May 11, 2020 - Markets this week were able to look past unprecedented U.S. unemployment numbers for the month of April being released with 20.5 million Americans out of work and an unemployment rate of 14.7% - the highest in more than 80 years, going on to stage a strong rally on Friday with Technology and Energy leading the way.  Of important note, approximately 80% of the job cuts last month were reported to be temporary layoffs, providing some encouragement that many will return to work once the coast is clear.  Investors took advantage of perceived undervaluation in the leading FANG stocks, while giving oil its first back-to-back weekly gains since February and the Energy sector a sizable boost.  This seems to be due to output cuts progressing quicker than originally anticipated, coupled with rising expected economic activity as parts of the global economy open up and restrictions are relaxed slowly with cautious optimism.  While overall health and economic challenges related to COVID-19 persist, there appears to be a bit of light emerging with increased investment in healthcare solutions and technology to fight back.  Of the 87% of S&P 500 constituents reporting Q1 2020 earnings to date, 68% have beat EPS estimates and 60% have surpassed revenue expectations.  Q1 earnings per share reported so far show being down 7.1% year-over-year vs the expectation of a 16% drop, while revenues reported to-date for Q1 came in up 0.9% year-over-year.

This week saw the Nasdaq claim positive territory for the year, rising by 6.0% by Friday’s close.  The S&P 500 Index followed with a 3.5% gain, and the Dow Jones Industrial Average rose 2.56%.

ETFG Equity Exposure Report - California-based diagnostic testing company, Quidel Corp. (QDEL), was first to be granted emergency FDA authorization to use the company’s new antigen test - Sofia 2 SARS Antigen FIA, which uses nasal swabs to detect presence of COVID-19. This is a big break in the Coronavirus battle, as antigen tests deliver results quickly and are relatively easy to produce with Quidel pledging to up production from 200,000 this week to over 1 million in the coming weeks.  The ETFs weighted most heavily with Quidel Corp. are the Janus Henderson Small Cap Growth Alpha ETF (JSML), the SSgA SPDR S&P Health Care Equipment ETF (XHE), the Invesco DWA Healthcare Momentum ETF (PTH), the Franklin Templeton Genomic Advancements ETF (HELX), and the ROBO Global Healthcare Technology and Innovation ETF (HTEC).

ETFG Quant Movers - The ETFs that had the largest weekly change in their respective, overall ETFG Quant ratings.

ETFG Quant Winners: This week, we are highlighting the ETFs that saw the largest movement in our ETFG Quant Total Score.

The ETFs with the biggest percentage increases in their ETFG Quant Total Score this week were the iPath S&P MLP ETN (IMLP), the Innovator IBD ETF Leaders ETF (LDRS), the Franklin FTSE Europe Hedged ETF (FLEH), the Global X SuperIncome Preferred ETF (SPFF), and the VictoryShares Developed Enhanced Volatility Wtd ETF (CIZ).

ETFG Quant Losers: The ETFs with the biggest percentage decreases in their ETFG Quant Total Score this week were the First Trust Preferred Securities and Income ETF (FPE), the Invesco S&P 500 Top 50 ETF (XLG), the Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE), the Elements Spectrum ETN (EEH), and the First Trust Switzerland AlphaDEX Fund (FSZ).

ETFG Weekly Select List - The five most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.

The energy sector emerged with the highest ETFG Quant scores for the second straight week, following back-to-back weekly gains in oil prices, along with increasing cuts in overall output moving along more rapidly than earlier thought.  The 5 ETFs in the Energy sector with the highest ratings from our ETFG Quant model include: the Invesco S&P 500 Equal Weight Energy ETF (RYE), the Invesco DWA Energy Momentum ETF (PXI), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), the Invesco Dynamic Energy Exploration & Production ETF (PXE) and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP),

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