S&P500 Logs Worst Month Since February: 5 Top Stocks in ETF

The S&P 500 had its worst month since February, losing 1.4% in August. Fresh concerns over the banking sector, a weakening Chinese economy and fears of higher rates for a longer-than-expected period took a toll on investors’ sentiment. SPDR S&P 500 ETF Trust SPY, the proxy version of the S&P 500 Index, shed 1.4% last month.

Despite the losses, some stocks in the ETF stood tall. We have highlighted five stocks that have gained in double digits or close to double digits and have a Zacks Rank #1 (Strong Buy) or #2 (Buy). These include Broadridge Financial Solutions BR, Arista Networks ANET, Nvidia NVDA, Eaton Corporation plc ETN and Ross Stores Inc. ROST.

An analyst from Fitch Ratings slashed the outlook for the entire U.S. banking industry, possibly affecting the credit ratings of more than 70 banks, including giants JPMorgan Chase (JPM) and Bank of America (BAC). The move came following multiple bank downgrades by fellow credit agency Moody’s and thus deepened worries for the sector. Additionally, retail sales and industrial production in the world’s second-biggest economy grew less than expected in July, thus intensifying worries over the health of the China economy (read: The New ETF That Protects Against All Market Losses).

On the other hand, a raft of strong economic data kept alive fears of higher interest rates for a longer period. U.S. retail sales came in better than expected, rising 0.7% in July. Additionally, inflation rose for the first time in July after 12 straight months of decline.

The Federal Reserve Chair Jerome Powell, at the Jackson Hole Economic Symposium, expressed confidence in continued economic growth in the United States, citing “robust” consumer spending and early signs of a recovery in the housing market. However, the Fed warned that inflation is still too high and that the central bank is prepared to raise interest rates further and keep the borrowing costs high until inflation comes down to the target range of 2%.

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 7.5% 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 $413.4 billion and charges 9 bps in fees per year. The product trades in a heavy volume of around 64 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 (see: all the Large Cap Blend ETFs here).

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

Best-Performing Stocks of SPY

Broadridge is a global financial technology company that offers investor communications and technology-driven solutions to banks, broker-dealers, asset managers and corporate issuers. The stock rose more than 13% last month. It saw a positive earnings estimate revision of 26 cents over the past 30 days for the fiscal year ending June 2024, with an estimated growth of 8.8%.

Broadridge makes up for 0.06% of the assets in SPY and has a Zacks Rank #2.

Arista Networks is engaged in providing cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks. The stock gained about 10% last month and accounts for 0.13% of the total assets (read: 5 Sector ETFs That Outperformed in Turbulent August).

Arista Networks saw a positive earnings estimate revision of a couple of cents for this year with an expected earnings growth rate of 34.5%. It has a Zacks Rank #2.

Nvidia is the worldwide leader in visual computing technologies and the inventor of graphic processing unit or GPU. The stock gained 8.6% last month. It saw a positive earnings estimate revision of $2.67 over the past 30 days for the fiscal year ending January 2024, with an estimated growth of 213.2%.

Nvidia makes up for 3.2% of the assets in SPY and has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Eaton Corporation is a diversified power management company and a global technology leader in electrical components and systems. It sells products in more than 175 countries and has 92,000 employees. Eaton has risen about 8% and makes up for 0.2% of the SPY portfolio.

Eaton saw a positive earnings estimate revision of 4 cents over the past 30 days for this year and has an estimated growth rate of 16.2%. It has a Zacks Rank #2.

Ross Stores operates as an off-price retailer of apparel and home accessories, primarily in the United States. The company operates its stores under the Ross Dress for Less (Ross) and dd’s DISCOUNTS names. The stock was up 8% last month and accounts for a 0.11% share in the SPY portfolio.

Ross Stores saw a positive earnings estimate revision of 28 cents over the past 30 days for the fiscal year ending January 2024, with an estimated growth of 19.4%. It has a Zacks Rank #2.

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