Stock ETFs Post Strong Start To December | ETF Trends

U.S. stocks and index ETFs vaulted upwards on Tuesday, starting December on a high note, as the Dow Jones Industrial Average targeted the 30,000 level once again.

The Dow added 0.9%, while the S&P 500 and Nasdaq Composite chartered fresh, all-time highs, climbing more than 1.25% apiece.

With most of the market sectors in the green, the major stock index ETFs, the SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust (QQQ) are all showing respectable gains as well.

Communication services and financials were two of the most successful sectors in the S&P 500, adding 2.1% and 1.8%, respectively, helping to lift the Communication Services Select Sector SPDR Fund (XLC) 2.34% and the SPDR S&P Bank ETF (KBE) 2.37%.

Investors were optimistic amid news that Treasury Secretary Mnuchin is set to discuss “keeping the government running” with House Speaker Nancy Pelosi, with the secretary noting, “I’m sure we’ll also be mentioning COVID Relief.” In addition, a group of lawmakers presented a $908 billion stimulus plan, including $208 billion in Paycheck Protection Program small business loans.

Analysts are now sanguine about stock and index ETF prospects, in light of the historic run in November, where the Dow rallied 11.8% to notch its best one-month performance since January 1987. The S&P 500 and Nasdaq Composite added 10.8% and 11.8%, respectively, for their healthiest monthly gains since April. The S&P 500 has now added roughly 12% for 2020.

“December looks like it will be a very strong finish for 2020,” wrote Tom Lee of Fundstrat Global Advisors, who cited data that showed during bull markets when the S&P 500 was up more than 10% through November for the year, it always added to that gain in December.

The data “confirms our view that strong markets finish strong,” said Lee.

Despite the historic market gains however, financial pundits are still concerned about the spike in coronavirus cases and how it will affect the economy. “The rise in new COVID-19 cases, both here and abroad, is concerning and could prove challenging for the next few months,” Federal Reserve Chairman Jerome Powell said. “A full economic recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities.”

November’s rally was assisted by a cornucopia of positive coronavirus vaccine news from companies like Pfizer, Moderna, and AstraZeneca, which generated optimism for a swift economic recovery.

“Vaccine news has further buoyed spirits with several therapeutic/preventative lights now at the end of the pandemic tunnel being another set of positive data points,” wrote Tobias Levkovich, chief U.S. equity strategist at Citi. However, he added investors may be getting too complacent about the risks the market still faces. It appears that the market is either “anticipating an even stronger 2021 profits outlook possibly tied to rapid inoculation-driven recovery and continued corporate cost containment, or the S&P 500 may be ahead of itself in the near term, particularly when considering no new short-term fiscal stimulus and the impact of second wave outbreaks.”

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