On Monday, U.S. stocks closed at session highs, continuing their rally from last week's strong performance. The S&P 500 advanced nearly 1%, marking its eighth successive daily gain, while the Dow Jones Industrial Average gained 0.6%. The Nasdaq Composite led with a more than 1.4% increase, driven by strong performances in technology and consumer discretionary sectors.

This and other factors may be a boon to momentum ETFs, an exchange-traded fund that harnesses the best performing stocks of the moment, such as iShares MSCI USA Momentum Factor ETF (MTUM Quick QuoteMTUM - Free Report) .

Sector Performance Leading Momentum Investing

Technology Sector led the market. Nvidia (NVDA Quick QuoteNVDA - Free Report) and Tesla (TSLA Quick QuoteTSLA - Free Report) were standout performers, contributing to the Nasdaq's gains. Nvidia's stock advanced 4.4%, continuing its upward trend thanks to bullish analyst views, including a reiterated Buy rating from Goldman Sachs. Tesla added 3.1% gains on Aug 19.

AMD (AMD Quick QuoteAMD - Free Report) announced plans to acquire ZT Systems for $4.9 billion, boosting its stock price by over 4%. This move points toward ongoing consolidation trends within the tech sector. Consumer Discretionary sector also saw notable gains, reflecting broader market optimism and consumer spending trends.

Economic Outlook and Fed Expectations

Investor sentiment has improved amid signs of economic resilience, with concerns about a recession easing. Market expectations currently lean toward a 72% chance of a 0.25% rate cut in September, as indicated by the CME FedWatch tool.

Momentum ETFs to Gain

As such, most of the related exchange-traded funds (ETFs) will likely see a nice boost. Notably, high-beta and high-momentum products are expected to outperform in the near term and are intriguing choices for a short spell. High-beta ETFs experience larger gains than the broader market counterparts in a bullish market, while momentum investing looks to capture profits from buying hot stocks.

These ETFs include Invesco S&P 500 High Beta ETF (SPHB Quick QuoteSPHB - Free Report) , iShares MSCI USA Momentum Factor ETF (MTUM Quick QuoteMTUM - Free Report) , Invesco Dorsey Wright Momentum ETF (PDP), Invesco S&P Midcap Momentum ETF (XMMO Quick QuoteXMMO - Free Report) and Invesco S&P SmallCap Value with Momentum ETF (XSVM Quick QuoteXSVM - Free Report) .