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Top ETF Stories of April

Sanghamitra Saha
Zacks.com featured highlights include: Lululemon, Sirius, Kohl's and Olympic Steel

The first month of April was decent for Wall Street despite a slew of hindrances like the continuation of trade war tensions between China and the United States as well as the tech crash. Overall, top three ETFs, SPY, DIA and QQQ added about 2.7%, 2.3% and 3.5%, respectively, in the last one month (as of Apr 30, 2018).

Below we highlight a few ETF events that pulled the strings of market movement in April.

Tech Crash

Tumult in the tech space that started in March showed little signs of slowdown in April. The semiconductor space got badly beaten down in AprilafterTaiwan Semiconductor Manufacturing Co Ltd TSM, the world’s biggest contract chipmaker, cut its full-year revenue target to reflect “softer demand for smartphones and uncertainty in cryptocurrency mining market.”

Taiwan Semiconductor’s guidance cut triggered a selloff in the entire semiconductor space. Semiconductor ETFs like VanEck Vectors Semiconductor ETF SMH and First Trust Nasdaq Smartphone Index Fund FONE saw selloffs. SMH and FONE lost about 3% each in the past one month (read: 4 ETF Areas Under Watch on Waning Smartphone Demand).

Oil Rally

Oil prices have been on a tear this year, with United States Oil Fund USO andUnited States Brent Oil Fund BNO adding about 7.8% and 9.5% in the last one month (as of Apr 27, 2018). Among the tailwinds were chances of an extension in the Saudi-led OPEC output cut deal and geopolitical tensions. Plus, there was the Venezuela crisis and news of a drop in U.S. oil inventory.

Some top gainers like PowerShares S&P SmallCap Energy Portfolio PSCE and SPDR S&P Oil & Gas Equipment & Services ETF XES added in the range of 20-22% in the past one month (read: Why to Consider Leveraged Oil ETFs Now).

Rising Rates

U.S. Treasury yields were on an uptrend on a host of factors in April. While the 10-year benchmark U.S. Treasury yield crossed the 3% mark for the first time since January 2014, two-year U.S. yields are at 2008 highs.

Chances of a massive supply of government debt in the near term and the likelihood of the fourth rate hike led to these gyrations in the fixed-income world. While iShares 20+ Year Treasury Bond ETF TLT lost about 2.3% in the last one month (as of Apr 30, 2018), inverse bond ETF Barclays Inverse US Treasury Aggregate ETN TAPR jumped about 13.6%.

Soaring Aluminum Prices

Russia was condemned internationally in April for supporting the Syrian government, which was allegedly responsible for a chemical weapons attack. The United States has imposed its harshest sanctions to date against Russian oligarchs, officials and agencies. 

Sanctions also targeted Russian aluminum company Rusal Plc. Since the company makes up about 7% of the global aluminum production, it raised concerns about tightening global supplies. iPath Bloomberg Aluminum Subindex Total Return ETN JJU has added more than 15% in the past one month.

ECB Keeps Rates Intact, No Cues for Tightening

The European Central Bank’s (ECB) latest meeting held on Apr 26, 2018 hinted at moderation in economic growth and the need to keep the policy rate constant. The ECB reaffirmed its intention to go slow about the possibilities of withdrawing the Euro-area stimulus. PowerShares CurrencyShares Euro Trust FXE shed about 1.9% in the past one month (as of Apr 30, 2018) while iShares Currency Hedged MSCI Eurozone HEZU expanded about 5.7% (read: Currency Hedged Euro Zone ETFs to Buy After ECB Meet).

Kuroda’s Second Term in BoJ Begins

BoJ also held its meeting in late April, which was in fact the first of Governor Kuroda’s second term. The bank of Japan (BOJ) decided to cast aside the “fiscal 2019” target for attaining 2% inflation. This happened for the first time since the massive bond purchase started in 2013.

As of now, 85% of the economists surveyed do not expect Kuroda to meet the price target before the end of his second term in 2023, per Bloomberg. PowerShares CurrencyShares Japanese Yen Trust FXY haslost about 3% in the past one month.

U.S. Q1 GDP Growth Slows but Beats

At month-end, the first reading of the U.S. GDP for the first quarter of 2018 released. The economy advanced at a 2.3% annual rate of growth, below the 2.9% growth logged in the fourth quarter but above market expectations of 2%.

However, things are likely to improve ahead. Economists expect growth to pick up in the second quarter as the Trump administration's $1.5 trillion income tax reform will then be felt on the paychecks of households. Income at the disposal of households grew 3.4% in the first quarter, jumping from the fourth quarter's 1.1% clip. So, investors should take a look at the future momentum of VanEck Vectors Retail ETF RTH.