The technology sector helped to fuel Friday’s trading session, which saw the Dow Jones Industrial Average gain over 150 points less than 2 hours away from the close as tech ETFs like the Technology Select Sector SPDR ETF (NYSEArca: XLK) gained.
XLK rose 1.46 percent and is up 14.33 percent year-to-date based on Morningstar performance numbers. After XLK and the tech sector in general took a hit in the fourth quarter of 2018 due to a bout of volatility, it has since then rebounded, moving past its 200-day moving average in 2019.
“Coming off the lows in December, we thought that was a volatility event. We thought we could get back to those all-time highs by about late March to early April,” said Craig Callahan, president at Icon Funds.
Top XLK holdings Apple Inc and Cisco systems gained a combined 3.2 percent.
Trade news is also factoring in to Friday’s gain as Chinese negotiators are suggesting to combine a U.S. state visit with the signing of a trade deal. China’s hope is that all the trade deal particulars will be squared away prior to President Xi Jinping meeting with U.S. President Donald Trump.
“US-China trade negotiations will likely reach a temporary deal, transforming future negotiations into a framework to monitor China’s compliance with trade and intellectual property policies,” said Alberto Gallo, head of macro strategies at Algebris Investments, wrote in a note.
Related: An Effective Avenue for Small-Cap Exposure
ETFs to Play
With tech giants like Apple Inc and Cisco Systems leading Friday’s gain, will strength in large cap equities continue at the expense of losses in small cap equities?
For investors looking for continued upside in large cap equities over small caps, the Direxion Russell Large Over Small Cap ETF (NYSEArca: RWLS) offers them the ability to benefit not only from large cap equities potentially performing well, but from their outperformance compared to their small cap brethren.
Conversely, if investors believe that small cap equities will outperform large cap equities, the Direxion Russell Small Over Large Cap ETF (NYSEArca: RWSL) provides a means to not only see small cap stocks perform well, but a way to capitalize on their outperformance versus their large cap brethren.
For more relative market trends, visit our Relative Value Channel.