Macro Overview
U.S. equities started September on a negative note, as rising bond yields put broad pressure on the market. The S&P 500, tracked by IVV, fell by -0.76% to start the month. While most of the market saw declines, the Energy sector (XLE) managed to post a modest gain of +0.14%. The pressure from higher rates was most acute in interest-rate sensitive sectors, with Real Estate (XLRE) being the session’s biggest laggard, dropping -1.70%. The market decline was largely attributed to concerns over rising government debt and the subsequent increase in Treasury yields, which makes equities less attractive by comparison and weighs heavily on high-growth technology and consumer-oriented stocks.
U.S. Size & Style
Across the U.S. market, there was a clear risk-off sentiment. Large-caps (IVV, -0.76%) slightly underperformed their mid-cap (IJH, -0.38%) and small-cap (IJR, -0.75%) counterparts. Growth-oriented stocks saw the steepest declines, with Large Growth (IVW) falling -0.90%. Mid-cap growth (IJK) was the relative outperformer on the day, down only -0.27%. The IPO-focused ETF (IPO) was the most significant laggard in this category, falling -2.13%. From a flows perspective, the iShares Russell 2000 ETF (IWM) saw a notable inflow of $1.51 billion over the past week, even as the Invesco QQQ Trust (QQQ) experienced outflows of $2.24 billion.
U.S. Sectors & Industries
Sector performance was a mixed bag, with defensive sectors generally holding up better than cyclical ones. Energy (XLE) was the only sector to finish in positive territory, gaining +0.14%, followed closely by Health Care (XLV) with a +0.09% gain. On the other end of the spectrum, Real Estate (XLRE) was the clear laggard with a -1.70% drop, followed by Technology (XLK) at -1.01% and Industrials (XLI) at -0.95%. The standout industry of the day was Biotechnology, with the SPDR S&P Biotech ETF (XBI) surging an impressive +3.37%. Financials (XLF) saw the largest inflows over the past week, pulling in $1.50 billion.
Global Thematic
Thematic ETFs saw a wide dispersion in performance. Precious metals and crypto-related themes were the day’s winners, with Crypto Miners (WGMI) jumping +3.33% and Gold Miners (GDX) rising +2.58%. In contrast, themes tied to cannabis and clean energy struggled significantly. The Amplify Alternative Harvest ETF (MJ) plummeted -8.77%, and the AdvisorShares Pure US Cannabis ETF (MSOS) fell -7.36%. In terms of fund flows, the First Trust Dow Jones Internet Index Fund (FDN) led the pack with $560 million in inflows over the past week, while the ARK Innovation ETF (ARKK) saw outflows of $44 million.
Developed Markets ex-U.S.
International developed markets broadly followed the U.S. lower, with the iShares MSCI EAFE ETF (EFA) declining by -0.98%. European markets were particularly weak, with Germany (EWG) falling -2.01% and the Netherlands (EWN) down -2.00%. The UK (EWU) also saw a notable drop of -1.35%. Bucking the trend was Hong Kong (EWH), which managed a gain of +0.61%, while Japan (EWJ) posted a smaller loss of just -0.17%.
Emerging Markets
Emerging markets were relatively flat, with the iShares MSCI Emerging Markets ETF (EEM) down a mere -0.08%. Performance was highly divergent by country. Mexico (EWW) was a standout performer, rallying +1.57%, and China (MCHI) also posted a solid gain of +0.54%. However, these gains were offset by weakness in other regions, particularly Brazil (EWZ), which fell -1.69%, and Taiwan (EWT), which dropped -1.31%.
Fixed Income
The rise in longer-term government bond yields pushed most fixed income categories into negative territory. The iShares Core U.S. Aggregate Bond ETF (AGG) fell by -0.26%. Longer-duration assets were hit the hardest, with the Government Long category (SPTL) declining by -0.64%. In contrast, ultra-short-term taxable bonds (BIL) managed a slight gain of +0.02%. The Simplify Interest Rate Hedge ETF (PFIX) was the top performer in the fixed income space, gaining +3.54% as it is designed to profit from rising rates. Corporate bonds saw the largest inflows over the past week, attracting over $1 billion.
Commodities
Commodities had a strong session, largely driven by gains in energy and precious metals. The broad-based Invesco DB Commodity Index Tracking Fund (DJP) rose +0.96%. Energy (DBE) was a significant driver, up +2.51%, with WTI Crude Oil (USO) gaining +2.57%. Precious Metals (DBP) also rallied, climbing +2.30% as Gold (GLD) rose +2.36% and Silver (SLV) jumped +2.65%. Agriculture (DBA) was the only major category to decline, falling -1.15%. Precious metals have seen massive inflows, with over $2.7 billion flowing into the category in the last week alone, led by SPDR Gold Shares (GLD).
Cryptocurrency
The digital asset space saw a split in performance between the two largest assets. Bitcoin-related ETFs had a strong day, with the iShares Bitcoin Trust (IBIT) gaining +2.49%. In contrast, Ethereum-focused products pulled back after a recent run-up, with the iShares Ethereum Trust (ETHA) falling -1.58%. Despite the one-day decline for Ethereum ETFs, they have attracted significant inflows recently, pulling in over $1.5 billion in the past week, more than double the inflows into Bitcoin ETFs.
What to Watch Today
Investors will be closely watching a trio of economic releases today for further clues on the health of the U.S. economy. The July report for Factory Orders will provide insight into the manufacturing sector’s durability. Additionally, the JOLTS Job Openings data for July will be a key focus, as it offers a detailed look at labor market tightness, a critical input for the Federal Reserve’s monetary policy decisions. Finally, the afternoon release of the Fed’s Beige Book will give a qualitative assessment of economic conditions across the twelve Federal Reserve districts, providing anecdotal evidence and color beyond the hard data.
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This material is for informational purposes only and should not be considered investment advice. All investments, including ETFs, involve risk, including the possible loss of principal. Investors should consider their investment objectives, risks, charges, and expenses carefully before investing.
This analysis was developed by the team at ETF Action. We leverage advanced AI tools to assist in the drafting and refinement of our content, based on our expert prompts, direction, and final review.
