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ETFs to Play on Gaza Truce, Easing Inflation & Solid Bank Earnings
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Key Takeaways
The deceleration of core CPI inflation brings relief, easing some concerns among economists and investors.
Banks also reported strong Q4 earnings, including JPMorgan Chase, Goldman Sachs, Wells Fargo and Citigroup.
ETFs like SPHB, MTUM, SPMO and XSMO stand to gain in this environment.
A global equities gauge surged on Wednesday while U.S. Treasury yields fell after data showed that core U.S. inflation rose less than expected in December, raising hopes that the Federal Reserve could cut rates further in the near term. If this was not enough, the Gaza ceasefire deal added enthusiasm to the risk-on trade sentiments.
Cooling Inflation
The annual inflation rate in the United States rose for the 3rd consecutive month to 2.9% in December 2024 from 2.7% in November, in line with market expectations. This year-end rise is partly driven by low base effects from last year, particularly for energy.
On a monthly basis, the CPI rose by 0.4%, the highest since March, and above forecasts of 0.3%. The index for energy rose 2.6%, accounting for over 40% of the monthly increase. Excluding the volatile food and energy categories, the so-called core inflation declined to 3.2%, after remaining stuck at 3.3% for three consecutive months.
The deceleration in core price increases brings relief, alleviating concerns among economists and investors that inflation may have remained persistently above the Fed’s 2% target.
Ceasefire Agreement Reached
On Wednesday, Israel and Hamas finalized a ceasefire and hostage release deal aimed at ending the 15-month war in the Gaza Strip. The conflict has caused widespread devastation and inflamed regional tensions.
Speaking from the White House, U.S. President Joe Biden announced that the deal's implementation would occur in three phases, potentially starting as early as Sunday, Jan. 19. The Israeli security cabinet must approve the agreement before it proceeds. Israeli President Isaac Herzog has urged the government to endorse the deal.
The deal is built on a framework proposed by the Biden administration in May. International leaders have expressed hope that the agreement will mark the beginning of lasting peace and reconstruction efforts in Gaza.
Strong Bank Earnings
The fourth-quarter earnings season kicked off positively on Wednesday, with major banks topping Wall Street expectations.
JPMorgan Chase (JPM - Free Report) : Shares climbed about 2% after the bank reported better-than-expected earnings per share (EPS) and revenues, driven by strong performance in fixed-income trading and investment banking.
Goldman Sachs (GS - Free Report) ): The bank’s shares surged 6% following a top- and bottom-line beat for the previous quarter.
Wells Fargo (WFC - Free Report) ): Shares rose more than 6.6% as the bank announced that net interest income is projected to increase by 1% to 3% in 2025.
Citigroup (C - Free Report) ): Shares gained 6.5% after the company surpassed fourth-quarter estimates.
ETFs to Play
Against this backdrop, below we highlight a few exchange-traded funds (ETFs) that can prove to be gainful in the coming days.
The underlying S&P 500 High Beta Index consists of the 100 stocks from the S&P 500 Index with the highest sensitivity to market movements, or beta, over the past 12 months. The ETF charges 25 bps in fees and yields 0.79% annually. The ETF gained about 1.9% on Jan. 15, 2025.
The underlying MSCI USA Momentum SR Variant Index measures the performance of U.S. large and mid-capitalization stocks exhibiting relatively higher momentum characteristics. The ETF charges 15 bps in fees and yields 0.74% annually. The ETF gained about 1.9% on Jan. 15, 2025.
The underlying S&P 500 Momentum Index tracks the performance of stocks in the S&P 500 Index that have a high momentum score. The ETF charges 13 bps in fees and yields 0.48% annually. The ETF gained about 1.9% on Jan. 15, 2025.
Invesco S&P SmallCap Momentum ETF offers exposure to companies in the S&P SmallCap 600 Index having the highest “momentum scores.” It tracks the S&P Smallcap 600 Momentum Index, holding more than 100 stocks in its basket. The ETF charges 39 bps in fees and yields 0.62% annually. The ETF gained about 1.7% on Jan. 15, 2025.
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ETFs to Play on Gaza Truce, Easing Inflation & Solid Bank Earnings
Key Takeaways
A global equities gauge surged on Wednesday while U.S. Treasury yields fell after data showed that core U.S. inflation rose less than expected in December, raising hopes that the Federal Reserve could cut rates further in the near term. If this was not enough, the Gaza ceasefire deal added enthusiasm to the risk-on trade sentiments.
Cooling Inflation
The annual inflation rate in the United States rose for the 3rd consecutive month to 2.9% in December 2024 from 2.7% in November, in line with market expectations. This year-end rise is partly driven by low base effects from last year, particularly for energy.
On a monthly basis, the CPI rose by 0.4%, the highest since March, and above forecasts of 0.3%. The index for energy rose 2.6%, accounting for over 40% of the monthly increase. Excluding the volatile food and energy categories, the so-called core inflation declined to 3.2%, after remaining stuck at 3.3% for three consecutive months.
The deceleration in core price increases brings relief, alleviating concerns among economists and investors that inflation may have remained persistently above the Fed’s 2% target.
Ceasefire Agreement Reached
On Wednesday, Israel and Hamas finalized a ceasefire and hostage release deal aimed at ending the 15-month war in the Gaza Strip. The conflict has caused widespread devastation and inflamed regional tensions.
Speaking from the White House, U.S. President Joe Biden announced that the deal's implementation would occur in three phases, potentially starting as early as Sunday, Jan. 19. The Israeli security cabinet must approve the agreement before it proceeds. Israeli President Isaac Herzog has urged the government to endorse the deal.
The deal is built on a framework proposed by the Biden administration in May. International leaders have expressed hope that the agreement will mark the beginning of lasting peace and reconstruction efforts in Gaza.
Strong Bank Earnings
The fourth-quarter earnings season kicked off positively on Wednesday, with major banks topping Wall Street expectations.
JPMorgan Chase (JPM - Free Report) : Shares climbed about 2% after the bank reported better-than-expected earnings per share (EPS) and revenues, driven by strong performance in fixed-income trading and investment banking.
Goldman Sachs (GS - Free Report) ): The bank’s shares surged 6% following a top- and bottom-line beat for the previous quarter.
Wells Fargo (WFC - Free Report) ): Shares rose more than 6.6% as the bank announced that net interest income is projected to increase by 1% to 3% in 2025.
Citigroup (C - Free Report) ): Shares gained 6.5% after the company surpassed fourth-quarter estimates.
ETFs to Play
Against this backdrop, below we highlight a few exchange-traded funds (ETFs) that can prove to be gainful in the coming days.
Invesco S&P 500 High Beta ETF (SPHB - Free Report)
The underlying S&P 500 High Beta Index consists of the 100 stocks from the S&P 500 Index with the highest sensitivity to market movements, or beta, over the past 12 months. The ETF charges 25 bps in fees and yields 0.79% annually. The ETF gained about 1.9% on Jan. 15, 2025.
iShares MSCI USA Momentum Factor ETF (MTUM - Free Report)
The underlying MSCI USA Momentum SR Variant Index measures the performance of U.S. large and mid-capitalization stocks exhibiting relatively higher momentum characteristics. The ETF charges 15 bps in fees and yields 0.74% annually. The ETF gained about 1.9% on Jan. 15, 2025.
Invesco S&P 500 Momentum ETF (SPMO - Free Report)
The underlying S&P 500 Momentum Index tracks the performance of stocks in the S&P 500 Index that have a high momentum score. The ETF charges 13 bps in fees and yields 0.48% annually. The ETF gained about 1.9% on Jan. 15, 2025.
Invesco S&P SmallCap Momentum ETF (XSMO - Free Report)
Invesco S&P SmallCap Momentum ETF offers exposure to companies in the S&P SmallCap 600 Index having the highest “momentum scores.” It tracks the S&P Smallcap 600 Momentum Index, holding more than 100 stocks in its basket. The ETF charges 39 bps in fees and yields 0.62% annually. The ETF gained about 1.7% on Jan. 15, 2025.