One of the largest tech exchange-traded funds was set to quadruple its holdings of Nvidia, one of the market’s hottest tech stocks.
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While drastically cutting back on another giant, Apple
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$70 billion
Technology Select Sector SPDR
The ETF has returned 17% this year, underperforming the big tech stocks by nearly 7 percentage points.
The fund has had problems with the IRS, which says that no individual position worth more than 5% of a fund’s assets can account for more than 50% of its holdings. The ETF recently had 22% of its assets invested in Microsoft and 22% in Apple, which have market caps of about $3.3 trillion each. But Nvidia, which has a market cap roughly comparable to its rival, had just 5.7%. That put the fund below the 50% concentration threshold.
But on June 14, a key index rebalancing date, Nvida’s market cap surpassed Apple’s, forcing the fund to sell Apple shares and buy Nvidia shares, even though Nvidia shares had fallen last week and are now below Apple in market cap.
Will investors benefit? That depends on how stocks perform and how concentrated the market is. The best approach may be to just wait and see, says Rob Anderson, U.S. sector strategist at Ned Davis. Sector ETFs are more convenient than buying individual stocks to track a sector. And the difference often evens out. Over a 15-year period, tech ETFs returned an average of 19.9% annually, compared with tech stocks’ 20.3%, according to Morningstar.
Write Ian Salisbury ian.salisbury@barrons.com
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last week
market
of
S&P 500
The company started the week with its 30th record this year. Nvidia rose another 3.5% on Tuesday, just before the June 19 holiday, overtaking Apple and Microsoft in market capitalization, before falling back later in the week. Government bonds are close to breaking even this year. The UK hit its 2% inflation target in May and the Bank of England kept interest rates unchanged.
Dow Jones Industrial Average
It rose 1.45%, while the S&P 500 rose 0.6%.
Nasdaq Composite Index
It went in without any changes.
Enterprise
Apple is scaling back a buy now, pay later service it launched last year. Apple battery supplier TDK claims it has made breakthroughs in solid-state batteries. The Federal Trade Commission has filed a lawsuit against Adobe.
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They argued that subscriptions were too difficult to cancel. Electric vehicle startup Fisker filed for bankruptcy for the second time. Banking regulators say Citigroup
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JPMorgan Chase, Bank of America and Goldman Sachs Group had weaknesses in their plans for unwinding derivatives positions during the crisis. Walt Disney
of
Inside Out 2 On its first day of release, the film grossed $155 million in the United States and $295 million worldwide, making it the year’s first blockbuster.
Bargain Deals
Poland Spring Water’s parent company, Blue Triton Brands, has agreed to merge with Primo Water in an all-stock deal…Shell will buy liquefied natural gas trader Pavilion Energy from Singapore’s government-backed fund Temasek…Honeywell has agreed to buy defense technology company CAES Systems from private equity firm Advent International for $2 billion.
next week
June 25th Tuesday
3 large cap companies Companies are reporting earnings this week. FedEx reports quarterly results on Tuesday, Micron Technology on Wednesday and Nike on Wednesday.
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On Thursday.
Wednesday, June 26th
Census Bureau New home sales data for May is out. Economists expect seasonally adjusted annual new single-family home sales to be 650,000, up 16,000 from April.
Friday, June 28th
Economic Affairs Bureau The analysis released the Personal Consumption Expenditures Price Index for May. The consensus forecast is for the PCE price index to rise 2.6% year-over-year, 0.1 percentage point lower than April. Core PCE, which excludes volatile food and energy prices, is also expected to rise 2.6%, 0.2 percentage point lower than last time. Core PCE, the Federal Reserve’s preferred inflation measure, rose 2.8% year-over-year in April, the lowest since March 2021.
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Supply Research Institute Management released the Chicago Business Barometer for June. The consensus forecast is 40, up about 5 points from May. The index has now fallen for six consecutive months and is at its lowest level since May 2020.
Numbers
33%
The IMF estimates that global investment inflows to the US since the COVID-19 outbreak have fallen by 18% compared to pre-pandemic levels.
$12 billion
Increasing annual economic costs due to increasingly resistant mosquito-borne diseases.
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106%
The CBO projects that the U.S. government debt-to-GDP ratio will hit a record high in fiscal year 2027 and rise to 122% of GDP by 2034.
3.6
The number of hours it takes an average worker to buy a week’s worth of groceries, down from a 2023 high of 3.8 hours.
Write Robert Teitelman bob.teitelman@dowjones.com
