We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Industrial ETFs to Gain as US Manufacturing Picks Up Amid Coronavirus
Read MoreHide Full Article
The latest update on U.S. manufacturing output looks impressive. Per the Federal Reserve’s recently-released data, industrial production including output at mines and utilities rose 0.9% in January after gaining a revised 1.3% in December. Further, the output at factories rose 1% month over month in January compared with a 0.9% gain in December and economists’ projection of a 0.7% increase.
This fourth straight-monthly increase is also highlighting the recovery from the pandemic-induced slowdown. Although the factories continue to struggle with supply-chain disturbances and labor shortages, the output is rebounding as the Fed’s gauge of factory output is just 1.9% below its pre-pandemic level, per a Bloomberg article.
Moreover, mining output, which includes oil and gas exploration rose 2.3% last month. However, production in the utilities sector dipped 1.2% in the previous month. In January, the manufacturing capacity utilization for the industry, which is the measure for studying how efficiently firms are utilizing their resources, was at 74.6%, up from 73.9%, per the Fed’s report. Moreover, total capacity utilization including factories, mines and utilities inched up to 75.6% from 74.9% as stated in a Bloomberg article. The overall plant-use rate was observed just below the pre-pandemic level of 76.9%.
Current U.S. Economic Scenario
U.S. retail sales climbed an impressive 5.3% in January on a month-over-month basis to hit a seven-month high, the Commerce Department informed on Feb 17. In fact, retail sales had declined 1% in December despite the holiday season witnessing record sales last year. Excluding autos, sales rose 5.9%, surpassing analysts’ estimates of a 1% rise.
The U.S. housing sector largely supported the economy by mostly staying resilient to the coronavirus outbreak amid a low-interest rate environment. Per the monthly National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder sentiment for newly-built single-family homes came in at 84 in February in comparison to 83 points in January, 86 in December, 90 in November and 30 in April (the lowest since June 2012). The metric also surpassed economists’ median forecast of 83, per a Bloomberg poll.
It is also believed that wider coronavirus vaccine rollouts are making a strong case in favor of a faster U.S. economic recovery in 2021. Biden is expected to increase the distribution of coronavirus vaccines by rolling out more funds to the local and state officials, increasing the number of vaccination sites and introducing a national education campaign, per a CNBC article. Moreover, positive developments with regard to discussions on providing an additional stimulus are raising hopes of a faster U.S. economic recovery.
Also, Federal Reserve Chairman Jerome Powell recently said that a “patiently accommodative” monetary policy is needed to cushion the economy after observing the sluggish labor market conditions, per a CNBC article.
Industrial ETFs to Gain
Against this backdrop, investors can still keep tabs on the following ETFs (see all industrial ETFs here):
The Industrial Select Sector SPDR Fund (XLI - Free Report)
Image: Bigstock
Industrial ETFs to Gain as US Manufacturing Picks Up Amid Coronavirus
The latest update on U.S. manufacturing output looks impressive. Per the Federal Reserve’s recently-released data, industrial production including output at mines and utilities rose 0.9% in January after gaining a revised 1.3% in December. Further, the output at factories rose 1% month over month in January compared with a 0.9% gain in December and economists’ projection of a 0.7% increase.
This fourth straight-monthly increase is also highlighting the recovery from the pandemic-induced slowdown. Although the factories continue to struggle with supply-chain disturbances and labor shortages, the output is rebounding as the Fed’s gauge of factory output is just 1.9% below its pre-pandemic level, per a Bloomberg article.
Moreover, mining output, which includes oil and gas exploration rose 2.3% last month. However, production in the utilities sector dipped 1.2% in the previous month. In January, the manufacturing capacity utilization for the industry, which is the measure for studying how efficiently firms are utilizing their resources, was at 74.6%, up from 73.9%, per the Fed’s report. Moreover, total capacity utilization including factories, mines and utilities inched up to 75.6% from 74.9% as stated in a Bloomberg article. The overall plant-use rate was observed just below the pre-pandemic level of 76.9%.
Current U.S. Economic Scenario
U.S. retail sales climbed an impressive 5.3% in January on a month-over-month basis to hit a seven-month high, the Commerce Department informed on Feb 17. In fact, retail sales had declined 1% in December despite the holiday season witnessing record sales last year. Excluding autos, sales rose 5.9%, surpassing analysts’ estimates of a 1% rise.
The U.S. housing sector largely supported the economy by mostly staying resilient to the coronavirus outbreak amid a low-interest rate environment. Per the monthly National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder sentiment for newly-built single-family homes came in at 84 in February in comparison to 83 points in January, 86 in December, 90 in November and 30 in April (the lowest since June 2012). The metric also surpassed economists’ median forecast of 83, per a Bloomberg poll.
It is also believed that wider coronavirus vaccine rollouts are making a strong case in favor of a faster U.S. economic recovery in 2021. Biden is expected to increase the distribution of coronavirus vaccines by rolling out more funds to the local and state officials, increasing the number of vaccination sites and introducing a national education campaign, per a CNBC article. Moreover, positive developments with regard to discussions on providing an additional stimulus are raising hopes of a faster U.S. economic recovery.
Also, Federal Reserve Chairman Jerome Powell recently said that a “patiently accommodative” monetary policy is needed to cushion the economy after observing the sluggish labor market conditions, per a CNBC article.
Industrial ETFs to Gain
Against this backdrop, investors can still keep tabs on the following ETFs (see all industrial ETFs here):
The Industrial Select Sector SPDR Fund (XLI - Free Report)
The fund tracks the Industrial Select Sector Index (read: 5 Top-Ranked ETFs That Investors Can Bet On).
AUM: $16.11 billion
Expense Ratio: 0.12%
Vanguard Industrials ETF (VIS - Free Report)
The fund tracks the MSCI US Investable Market Industrials 25/50 Index (read: Can Industrial ETFs Gain Despite Mixed Q4 Earnings?).
AUM: $4.25 billion
Expense Ratio: 0.10%
iShares U.S. Industrials ETF (IYJ - Free Report)
The fund tracks the Dow Jones U.S. Industrials Index (read: How Are Industrial ETFs Expected to Perform in 2021?).
AUM: $1.41 billion
Expense Ratio: 0.42%
Fidelity MSCI Industrials Index ETF (FIDU - Free Report)
The fund tracks the MSCI USA IMI Industrials Index.
AUM: $624.2 million
Expense Ratio: 0.08%
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>