ETFs on the Move Post U.S.-China Trade Deal

The U.S.-China trade deal has infused fresh optimism into the stock market. The S&P 500 rose about 3% in the early hours of trading, while the Dow Jones gained around 1000 points. The tech-heavy Nasdaq Composite Index skyrocketed 3.8%. With this rally, Wall Street is on the way to record another banner day.

The United States and China have agreed to substantially roll back tariffs on each other’s goods for an initial 90-day period. Under the agreement, the United States will reduce tariffs on Chinese goods from 145% to 30%, while China will lower its tariffs on American imports from 125% to 10% (read: 5 Sector ETFs to Make the Most of the U.S.-China Trade Deal). 

Tech Soars

Technology stocks and ETFs are expected to benefit most from the move. AI chip leader NVIDIA (NVDA) jumped nearly 5%, while Amazon (AMZN), Apple (AAPL) and Tesla (TSLA) also posted strong gains. 

Roundhill Magnificent Seven ETF MAGS jumped 4.8% in early trading while MicroSectors FANG+ ETN FNGS climbed 3%. Roundhill Magnificent Seven ETF is the first-ever ETF that offers investors equal-weight exposure to the “Magnificent Seven” stocks. MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar-weighted index designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies.

Dollar Climbs

The trade deal boosts the U.S. dollar against a basket of currencies. The U.S. Dollar Index rose about 1%. Invesco DB US Dollar Index Bullish Fund UUP is the prime beneficiary of the rising dollar as it offers exposure against a basket of six world currencies. It has a Zacks ETF Rank #3 (Hold).

Gold Falls

Gold tumbled nearly 3% as the United States and China's temporary trade truce bolstered risk appetite, diminishing the demand for the yellow metal. The ultra-popular SPDR Gold Trust ETF GLD also declined. It has a Zacks ETF Rank #3 (read: How to Play the Gold Rush With ETFs).

The bearish plays on gold like ProShares UltraShort Gold ETF GLL, DB Gold Short ETN DGZ and DB Gold Double Short ETN DZZ and gold stocks like Direxion Daily Gold Miners Index Bear 2x Shares DUST, Direxion Daily Junior Gold Miners Index Bearl 2x Shares JDST and MicroSectors Gold Miners 3X Inverse ETN GDXD are rising. 

Oil Rises

Oil prices jumped about 4% as U.S.-China tariff reductions lifted hopes of stronger demand from the world’s top two oil consumers. United States Oil Fund USO and United States Brent Oil Fund (BNO) gained more than 3% in early trading hours (read: Oil Slumps to Below $60: ETFs to Gain).

Drug Pricing Overhaul

President Donald Trump announced plans to sign an executive order aimed at significantly reducing U.S. prescription drug prices by 30% to 80%. The initiative, known as the "most favored nation" policy, seeks to align U.S. drug prices with those of the lowest-paying countries globally. 

Despite the new pricing overhaul, pharma ETFs like iShares U.S. Pharmaceuticals ETF IHE, VanEck Vectors Pharmaceutical ETF PPH, Invesco Pharmaceuticals ETF PJP, and SPDR S&P Pharmaceuticals ETF XPH are in green. IHE and PPH are up around 1% each, while PJP and XPH have gained more than 2% each. 

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This article originally published on Zacks Investment Research (zacks.com).

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