U.S. Stock ETFs Push Higher as Investors Shift Out of Growth

U.S. markets and stock exchange traded funds gained momentum Tuesday as investors rotated out of growth and into underperforming sectors to extend the broad rally.

On Tuesday, the Invesco QQQ Trust (NASDAQ: QQQ) was up 0.3%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) rose 1.9%, and SPDR S&P 500 ETF (NYSEArca: SPY) gained 1.0%.

The S&P 500 energy, materials industrial, health and consumer staples indices led the charge on Tuesday as investors shifted out of high-flying technology and momentum stocks that have led much of the market rally since March.

“Today is counterintuitive. We are reading about California’s economy shutting down and a record spike in cases in Florida, and yet you have energy stocks leading,” Bob Shea, chief executive officer at TrimTabs Asset Management, told Reuters. “We’re seeing a mini-rotation into value.”

Meanwhile, gains in the banking and financial sector were muted after Wall Street banks reported quarterly losses and revealed plans to set aside billions of dollars to cover potential losses on bad loans among borrowers fettered by the coronavirus shutdown measures.

Looking at the earnings season ahead, investors are expecting corporate earnings among companies in the S&P 500 to record a plunge of 45% in the second quarter from the year-earlier period, the Wall Street Journal reports.

The S&P 500 financial sector is expected to suffer an even bigger 57% decline in year-over-year quarterly earnings.

“This shows that there’s a three-speed recovery in the economy,” Sebastien Galy, a macro strategist at Nordea Asset Management, told the WSJ. “Some banks will be better positioned than others” during times of volatility.

Investors were wary of further market gains after a recent spike in Covid-19 cases triggered new business restrictions, notably in California, and fueled uncertainty over the trajectory of the economic recovery process. Markets even slipped toward the end of Monday’s session on news that California rolled back some of its reopening plans.

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