Stock ETFs Fall on Last Day of Banner Month | ETF Trends

Stocks tumbled on Monday following the long holiday weekend, as investors took profits on the last day of the month from the robust moves made in November.

The Dow Jones Industrial Average fell 422 points, or 1.4%, while the S&P 500 dropped 1.1% and the Nasdaq Composite lost 1.3%.

Meanwhile, key stock index ETFs, like the SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust (QQQ) are losing ground Monday as well.

Aside from Monday’s declines, the three major indices have had a strong month based on promising vaccine developments that bolstered optimism of a smooth economic reopening however, and are still set to finish November with substantial monthly gains. Based on Friday’s closing prices, the Dow was targeting a monthly gain of 12.9%, setting up for its most substantial potential gains since early 1987. The S&P 500 was similarly looking for 11.3%, while the Nasdaq targeted a 11.9% advance in November.

While much of the stock market is bathed in red on Monday, cyclical sectors have paved the way for the market’s November rally, aided by a plethora of positive vaccine news. In addition, other sectors such as energy surged 29% this month, while financials, industrials, and materials have all added at least 11% during this period.

There has also been a healthy push into small-cap stocks, which have been beaten down, fueling a 20.6% run in the Russell 2000 so far in November, on track for its best month ever, benefitting ETFs like the iShares Russell 2000 ETF (IWM).

IWM YTD Performance

“This rally has been notable as the rotation from Growth to Value has continued to gain momentum despite the negative news flow of Covid cases surging around the country and lockdowns again being imposed in various parts of the nation,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

The coronavirus has continued to ravage the globe however, with over 266,000 people deaths in the U.S., and more than 13 million confirmed cases across the nation, according to data from Johns Hopkins University. Dr. Anthony Fauci said on Sunday that the U.S. is projected to enter a brutal period of the pandemic in which restrictions and travel advisories will be compulsory.

Nevertheless, Moderna rallied 17% amid comments Monday that new trial data revealed its Covid-19 vaccine candidate was more than 94% effective. The company is ready to request the FDA for emergency clearance later in the day.

Now analysts are anticipating some possible retracement after the extensive market run, but project the bull market to continue.

“The length and strength of the current rally suggests to us that the market could be vulnerable to some pullback at these levels,” wrote John Stoltzfus, chief investment strategist at Oppenheimer Asset Management. “That said, the bull market that has emerged from the lows on March 23rd of this year has shown similarities to its predecessor … in having a predilection to climb walls of worry aided and abetted by monetary policy and secular trends deeply embedded in technology and globalization.”

A trifecta of recent positive catalysts should continue to buoy markets. Equities have welcomed a decisive Biden victory and a divided Congress, and news flow on vaccine efficacy has been much better than expected,” Barclays equity strategists led by Maneesh Deshpande said in a note last week. “Importantly, corporate earnings continue to surprise to the upside and we expect this trend to continue. A reversal of the significant mutual fund YTD outflows should provide additional support.”

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