One of the biggest tech exchange-traded funds plans to quadruple its holdings in Nvidia, one of the market's hottest tech stocks, while sharply reducing its holdings in Apple, another big name. The $70 billion Technology Select Sector SPDR ETF has returned 17% this year, underperforming the big tech stocks by nearly 7%.
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.
Email Ian Salisbury at ian.salisbury@barrons.com
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last week
market
The S&P 500 started the week with its 30th record of the year. Nvidia rose another 3.5% on Tuesday, just before the June 19 holiday, surpassing Apple and Microsoft in market cap, but fell later in the week. Government bonds are close to breaking even this year. The UK met its 2% inflation target in May and the Bank of England kept interest rates unchanged. For the week, the Dow Jones Industrial Average rose 1.45%, the S&P 500 added 0.6% and the Nasdaq Composite was unchanged.
Enterprise
Apple is winding down its buy now, pay later service that it launched last year. Apple's battery supplier TDK claimed it had made major advances in solid-state batteries. The Federal Trade Commission sued Adobe for making it too difficult to cancel subscriptions. Electric-vehicle startup Fisker filed for bankruptcy for the second time. Banking regulators said Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs Group Inc. had weaknesses in their plans to unwind derivative positions during the crisis. Walt Disney's “Inside Out 2” became the year's first big hit, grossing $155 million in the U.S. and $295 million worldwide on its opening day.
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
Three big 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
The Census Bureau released new home sales data for May, and economists expect seasonally adjusted annual new single-family home sales to be 650,000, up 16,000 from April.
Friday, June 28th
The Bureau of Economic 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 in April. Core PCE, which excludes volatile food and energy prices, is also expected to rise 2.6%, 0.2 percentage point lower than the previous reading. 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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The Institute for Supply Management released its Chicago Business Barometer for June. The consensus forecast was 40, up about 5 points from May. The index has now declined 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.
Contact Robert Teitelman at bob.teitelman@dowjones.com.
