S&P 500 Shows Resilience: 5 Top Stocks in the ETF

The S&P 500 Index stands as a beacon of resilience amid volatile conditions and underscores economic optimism and steady inflows. For the first time since 2018, the index has recorded 100 consecutive sessions without a daily drop of 1.5% or more.

While the index has experienced four declines of more than 1% since it peaked earlier this year, daily fluctuations have generally remained subdued, reminiscent of the stability seen in 2018. The S&P 500 index is up 16% so far in 2023. SPDR S&P 500 ETF Trust SPY, the proxy version of the S&P 500 Index, has risen 16.8%.

We have highlighted five stocks from different sectors that have gained more than 50% this year and have a Zacks Rank #1 (Strong Buy) or #2 (Buy). These are Nvidia NVDA, Royal Caribbean Cruises RCL, Palo Alto Networks PANW, PulteGroup Inc. PHM and Amazon.com AMZN.

What’s Behind the Resilience?

The resilience came on the back of optimism that the economy has withstood the worst of the Fed’s policy tightening. The central bank has raised interest rates 11 times to the highest level since 2001 over the course of 16 months.

Inflationary pressures are easing, meaning that rate hikes will likely end soon. Though inflation remains well above the Fed’s 2% target, it has dropped from a peak of 9.1%. Recent indicators suggest that economic activity has been expanding at a moderate pace, buoyed by robust consumer spending. Job gains have also been robust in recent months, and the unemployment rate has remained low. Notably, the economy has added 278,000 jobs per month so far this year and the unemployment rate of 3.8% is not far from a half-century low.

Contributing to the resilience is the continued investor interest in equities. Recent data from LSEG Lipper reveals that U.S. ETFs have garnered a net inflow of $13.4 billion in the week ending Sep 13, marking the ninth increase in the past 12 weeks.

However, surging oil price is adding to inflationary pressure. Fed Chair Jerome Powell had indicated the possibility of further rate hikes, if needed, to ensure inflation remains under control.

Let’s take a closer look at the fundamentals of SPY.

SPY in Focus

SPDR S&P 500 ETF Trust holds 503 stocks in its basket, with each accounting for no more than 7% of the assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, healthcare, financials and consumer discretionary accounting for a double-digit allocation each.

SPDR S&P 500 ETF Trust has AUM of $413 billion and charges 9 bps in fees per year. The product trades in a heavy volume of around 63 million shares a day on average, ensuring higher liquidity with a tight bid/ask spread, leading to lower trading costs for investors. SPY has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Below we have highlighted the abovementioned five best-performing stocks in the ETF.

Best-Performing Stocks of SPY

Nvidia is the worldwide leader in visual computing technologies and the inventor of graphic processing unit or GPU. The stock has jumped 200% so far this year. It saw a solid earnings estimate revision of $2.84 over the past 30 days for the fiscal year ending January 2024, with an estimated growth of 219.5%.

Nvidia makes up for 2.9% of the assets in SPY and has a Zacks Rank #1.

Royal Caribbean is a cruise company that owns and operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. The stock has gained 97% and accounts for a 0.06% share in the SPY portfolio.

Royal Caribbean has an estimated earnings growth rate of 182.8% for this year and a Zacks Rank #1.

Palo Alto Networks offers network security solutions to enterprises, service providers and government entities worldwide. The stock makes up 0.19% of the assets in the SPY portfolio and has gained 72% this year.

Palo Alto Networks saw a solid earnings estimate revision of 39 cents over the past 30 days for fiscal year ending July 2024 with an estimated growth rate of 20.3%. It carries a Zacks Rank #2.

PulteGroup is engaged in homebuilding and financial services businesses, primarily in the United States. The stock has risen 67.5% so far this year and makes up 0.04% of the assets in the SPY portfolio.

PulteGroup has an estimated earnings growth rate of 7.59% for this year and carries a Zacks Rank #1.

Amazon.com is one of the largest e-commerce providers, with sprawling operations in North America and now spreading across the globe. The stock has climbed 67% and accounts for a 3.4% share in the SPY portfolio.

Amazon saw a positive earnings estimate revision of 7 cents over the past 30 days for this year, with an estimated growth of 214.1%. It has a Zacks Rank #1.
Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report

NVIDIA Corporation (NVDA): Free Stock Analysis Report

PulteGroup, Inc. (PHM): Free Stock Analysis Report

SPDR S&P 500 ETF (SPY): ETF Research Reports

Palo Alto Networks, Inc. (PANW): Free Stock Analysis Report

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Zacks Investment Research

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