U.S. Stock ETFs Falter as Stimulus Bets Drive Cyclicals | ETF Trends

U.S. markets and stock exchange traded funds are mixed, with cyclical sectors pushing higher, as investors looked to more fiscal stimulus and increased vaccine distributions to support a broad economic recovery.

On Monday, the Invesco QQQ Trust (NASDAQ: QQQ) was down 0.2%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) was up 0.3%, and iShares Core S&P 500 ETF (NYSEArca: IVV) was 0.1% lower.

“The reflation trade continues to push equity markets across all industries and multi-caps … and this rally could continue in the near-term,” Tony Bedikian, head of global markets at Citizens Bank, told Reuters. “It has been a bit of parabolic run up here so we may be due for a correction but it is hard to see a catalyst for that at the moment just because there is so much stimulus, both monetary and fiscal and the anticipation of more fiscal measures.”

House Democrats are prepping legislation for President Joe Biden’s $1.9 trillion coronavirus relief proposal this week, the Wall Street Journal reports.

“The fiscal stimulus package is looking like it will be on the larger side,” Seema Shah, chief strategist at Principal Global Advisors, told the WSJ. “The backdrop, if anything, has really improved. It has just firmed up what everyone was expecting.”

Meanwhile, the decline in new coronavirus cases, rollout of vaccinations, and a better-than-expected fourth-quarter earnings season have all added to hopes of a quick recovery this year.

With about three-quarters of S&P 500 companies reported, about 80% have beaten profit estimates, according to FactSet data.

“All the earnings being reported are generally a lot higher than most estimates,” Charles Hepworth, an investment director at GAM Investments, told the WSJ.

On the other hand, some still warn of delays in vaccine distributions and new Covid-19 variants that could contribute to a near-term risks.

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