Macro Overview
U.S. equities finished Tuesday on a positive note, shaking off early weakness as investors looked past political headlines and toward key corporate earnings. The S&P 500 (IVV) climbed 0.41%, closing near its all-time high. The day’s leadership came from cyclical areas, with the Industrials sector (XLI) posting a strong 1.03% gain, signaling renewed investor confidence in economic growth. In contrast, the cryptocurrency market showed signs of stabilization after recent weakness, with Ethereum (ETHA) surging 4.10%, while broad-based commodities (DJP) slipped 0.29%, weighed down by a sharp drop in oil prices.
U.S. Size & Style
Gains were seen across all market capitalizations, with growth-oriented stocks leading the charge. Large-Cap Growth (IVW) advanced 0.61%, continuing its strong year-to-date performance of nearly 14%. While small-caps also gained, with the Small Cap Blend (IJR) up 0.34%, they have seen significant outflows over the past three months, totaling over $7.3B. Interestingly, investor appetite for value remains, as U.S. Large-Cap Value ETFs attracted the most significant 1-week inflows of any style category, pulling in over $2.09B.
U.S. Sectors & Industries
The Industrials sector (XLI) was the standout performer, gaining 1.03%, driven by a powerful rally in Aerospace & Defense ETFs (XAR), which jumped 1.92%. Financials (XLF) also had a solid day, rising 0.77%. On the other end of the spectrum, defensive sectors lagged, with Consumer Staples (XLP) falling 0.65%, making it the worst-performing sector. Despite a mixed session for the tech sector, Technology ETFs saw the largest 1-week inflows, with Vanguard’s Information Technology ETF (VGT) alone attracting $3.22B.
Global Thematic
Thematic ETFs saw significant divergence, with high-beta and speculative areas outperforming. The Procure Space ETF (UFO) soared 6.58%, and cannabis-focused funds like AdvisorShares Pure US Cannabis ETF (MSOS) jumped 4.56%. This risk-on sentiment did not extend to all growth themes, as cloud computing funds like the Global X Cloud Computing ETF (CLOU) fell nearly 1%. In a sign of investor preference for more tangible assets, Infrastructure was the leading thematic category for inflows, attracting $415M over the past week, suggesting a rotation toward real-asset-linked growth stories.
Developed Markets ex-U.S.
International developed markets were mixed, with the broad iShares MSCI EAFE ETF (EFA) declining a slight 0.11%. Canadian equities were a bright spot, as the iShares MSCI Canada ETF (EWC) rose 0.99%, bringing its 1-year return to over 21%. European markets generally lagged, with the iShares MSCI France ETF (EWQ) falling 0.88% on the day.
Emerging Markets
Emerging market equities posted a modest decline, with the iShares MSCI Emerging Markets ETF (EEM) down 0.26%. Performance was varied across regions, with Chinese equities showing strength; the iShares MSCI China ETF (MCHI) gained 0.13% and is now up over 52% in the past year. Conversely, South Asian markets struggled, with the iShares MSCI India ETF (INDA) falling 1.28% and the iShares MSCI Malaysia ETF (EWM) dropping 1.45%.
Fixed Income
The bond market saw modest gains as investors sought yield. The iShares Core U.S. Aggregate Bond ETF (AGG) ticked up 0.12%, while credit-sensitive assets performed well, with the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) gaining 0.22%. Inflation-protected Treasuries (TIP) also rose 0.23%. Despite the positive performance in high yield, the category saw outflows of $165M over the past week, while core bond funds saw the largest inflows of any fixed income category, attracting over $1.4B.
Commodities
Commodities were a tale of two markets. Precious metals rallied, with the SPDR Gold Shares (GLD) rising 0.73% as the dollar softened. In stark contrast, energy prices tumbled, with the United States Oil Fund (USO) falling 2.24% ahead of weekly inventory data. Agriculture (DBA) also saw losses, declining 0.58% on the day.
Cryptocurrency
Digital assets showed renewed strength, particularly in altcoins. The iShares Ethereum Trust (ETHA) surged 4.10%, significantly outpacing the iShares Bitcoin Trust (IBIT), which rose a more modest 0.35%. This rally comes after a period of profit-taking, which saw Bitcoin-focused funds experience over $1.1B in outflows over the last trading week.
What to Watch Today
All eyes will be on the energy market today with the release of the weekly EIA Petroleum Status Report. This report provides a detailed look at crude oil and gasoline inventories in the U.S. Investors will be watching the headline crude inventory number closely. A larger-than-expected drawdown could signal robust demand, potentially reversing the recent slide in oil prices and boosting energy stocks. Conversely, a surprise build in inventories could heighten concerns about a slowing economy, putting further pressure on energy prices and potentially weighing on broader market sentiment.
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This report is for informational purposes only and should not be considered investment advice. This report was generated with assistance from AI.
