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U.S. Service Sector Activity Down in July: ETFs in Focus

Service activity in the U.S. decelerated in July, as represented by the Institute for Supply Management’s (ISM) non-manufacturing index.


The ISM non-manufacturing PMI came up with a reading of 53.9 in July 2017 compared with 57.4 in May. This was below economists’ expectations of a reading of 56.9 for July and below 54.9 in the year-ago period. A reading above 50 indicates expansion.


Per CNBC, management of companies & support services and agriculture, forestry, fishing and hunting were the only industries among the 17 surveyed, which contracted. Moreover, growth of new orders decelerated as the new orders index fell to 55.1 in July compared with 60.5 in June.


There was a decline in the ISM employment sub-index, as it fell to 53.6 in July compared with 55.8 in the previous month. However, changes in U.S. non-farm payrolls were positive as 209,000 new positions were created in July compared with expectations of 180,000. The jobless rate stood at 4.3% (read: Unemployment Shrinks to 4.3%, Weight Watchers Gains Big).


Moreover, the economy seems to be in good shape. GDP in Q2 grew 2.6% owing to a boost from trade. Strong consumer confidence is also representative of optimism in the economy, as it hit a 16-year high of 121.1 in July compared with 118.9 in June.


Let us now discuss a few ETFs focused on providing exposure to U.S. equities.


SPDR S&P 500 ETF SPY


This fund is the most popular ETF traded in the U.S. markets. It seeks to provide exposure to the largest and most stable companies and tracks the S&P 500 index (read: 5 Smart Beta ETFs With Brilliant Returns).


It has AUM of $242.53 billion and charges a fee of 9 basis points a year. From a sector look, the fund has high exposures to Information Technology, Financials and Health Care with 22.93%, 14.63% and 14.23% allocation, respectively (as of August 4, 2017). The fund’s top three holdings are Apple Inc AAPL, Microsoft Corporation MSFT and Facebook Inc FB with 3.84%, 2.64% and 1.89% allocation, respectively (as of August 4, 2017). The fund has returned 13.59% in the last one year and 10.88% year to date (as of August 7, 2017). It currently has a Zacks ETF Rank 2 with a Medium risk outlook (read: Amazon's Foray Into Grocery to Hurt/Help These Stocks & ETFs).


iShares Core S&P 500 ETF IVV


This fund is a low-cost ETF that seeks to provide exposure to the large established U.S. companies and tracks the S&P 500 index.


It has AUM of $122.91 billion and charges a fee of 4 basis points a year. From a sector look, the fund has high exposures to Information Technology, Financials and Health Care with 22.88%, 14.60% and 14.22% allocation, respectively (as of August 4, 2017). The fund’s top three holdings are Apple Inc, Microsoft Corporation and Facebook Inc with 3.84%, 2.64% and 1.89% allocation, respectively (as of August 4, 2017). The fund has returned 13.72% in the last one year and 10.90% year to date (as of August 7, 2017). It currently has a Zacks ETF Rank 2 with a Medium risk outlook.


PowerShares QQQ ETF QQQ


This fund is a popular ETF that maintains a hefty exposure to U.S. tech companies and tracks the Nasdaq 100 index.


It has AUM of $50.26 billion and charges a fee of 20 basis points a year. From a sector look, the fund has high exposures to Information Technology, Consumer Discretionary and Health Care with 58.32%, 22.10% and 11.17% allocation, respectively (as of August 4, 2017). The fund’s top three holdings are Apple Inc, Microsoft Corporation, and Amazon.com Inc AMZN with 12.06%, 8.30% and 6.98% allocation, respectively (as of August 4, 2017). The fund has returned 23.64% in the last one year and 22.01% year to date (as of August 7, 2017). It currently has a Zacks ETF Rank 1 (Strong Buy) with a Medium risk outlook.


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Amazon.com, Inc. (AMZN): Free Stock Analysis Report
 
Facebook, Inc. (FB): Free Stock Analysis Report
 
Apple Inc. (AAPL): Free Stock Analysis Report
 
Microsoft Corporation (MSFT): Free Stock Analysis Report
 
NASDAQ-100 SHRS (QQQ): ETF Research Reports
 
SPDR-SP 500 TR (SPY): ETF Research Reports
 
ISHARS-SP500 (IVV): ETF Research Reports
 
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