S&P 500 Logs Best Quarter Since Q4 2021: 5 Top Stocks in ETF
Amid huge volatility and uncertainty, the S&P 500 emerged stronger in the third quarter, touching a series of new record highs. The broad market index wrapped up its best quarter since the fourth quarter of 2021, rising 5.5%, and recorded its best year-to-date performance at September end since 1997. The S&P 500 also notched its best September since 2013 and the fifth consecutive month of increase.
SPDR S&P 500 ETF Trust SPY, the proxy version of the S&P 500 Index, gained 5.5% in the third quarter. While many stocks powered the ETF, we have highlighted five that led the portfolio. These stocks have a solid Zacks Rank #1 (Strong Buy) or #2 (Buy). These are Mohawk Industries Inc. MHK, Kellanova K, CBRE Group Inc. CBRE, Stanley Black & Decker, Inc. SWK and PulteGroup Inc. PHM. You can see the complete list of today’s Zacks #1 Rank stocks here.
While recession fears, geopolitical tensions, the fading AI craze, and looming elections led to some of the worst declines in July and August, rate-cut optimism buoyed the stock market. Investors shunned technology stocks in favor of smaller companies and other sectors, which are bigger beneficiaries of Fed rate cuts.
The Federal Reserve kicked off the easing monetary era last month by slashing key interest rates by 50 bps to 4.75%-5% after holding it at a 23-year high for 14 consecutive months since July 2023. This marked the first rate cut since 2020 to address slowing economic growth and showed greater confidence in the fact that inflation is moving sustainably toward the 2% target level.
The central bank projects two more rate cuts of another 50 bps in its final two meetings this year, due in November and December. It indicates another 100-bps rate cut next year and 50-bps in 2026, which means four rate cuts in 2025 and two in 2026 (read: Fed Initiates Rate Cuts: Top-Ranked Growth ETFs to Buy).
Lower rates lead to reduced borrowing costs for mortgages, credit cards and other consumer and business loans. This helps businesses to expand their operations more easily, resulting in increased profitability. This, in turn, stimulates economic growth and boosts the stock market.
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% 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, financials, healthcare and consumer discretionary accounting for a double-digit allocation each.
SPDR S&P 500 ETF Trust has an AUM of $585.5 billion and charges 9 bps in fees per year. It trades in an average daily volume of 46 million shares and has a Zacks ETF Rank #2 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
Mohawk Industries is a leading global manufacturer of flooring products that enhance residential and commercial space. The company manufactures carpets, rugs, ceramic tile, laminate, wood, stone and vinyl flooring. The stock soared about 46% last quarter and accounts for a 0.02% share in the SPY portfolio.
Mohawk Industries has an estimated earnings growth rate of 8.8% for this year and a Zacks Rank #2. It has a Value Score of A.
Kellanova provides snacking, cereal and noodles, as well as frozen foods. The company's brands include Pringles(R), Cheez-It(R), Pop-Tarts(R), Kellogg's Rice Krispies Treats(R), RXBAR(R), Eggo(R), MorningStar Farms(R), Special K(R)and Coco Pops(R). The stock jumped 43.3% in the third quarter. It has an estimated growth of 14.5% for this year.
Kellanova makes up 0.04% of the assets in SPY and currently has a Zacks Rank #2.
CBRE Group is a commercial real estate services and investment firm. It offers a wide range of services to tenants, owners, lenders and investors in office, retail, industrial, multi-family and other types of commercial real estate in all major metropolitan areas across the globe. The stock jumped 41.2% in the last three months. It makes up 0.08% of the assets in the SPY portfolio.
CBRE Group has an expected earnings growth rate of 23.7% for this year and a Zacks Rank #2 (read: 5 Best-Performing Sector ETFs of the Third Quarter).
Stanley Black & Decker manufactures and provides tools (power and hand tools) and related accessories, engineered fastening systems, and several other items and services. The stock rose 37.8% last quarter and has an estimated earnings growth of 191% for this year.
Stanley Black & Decker accounts for 0.03% of SPY's assets. It currently has a Zacks Rank #2 and a Momentum Score of A.
PulteGroup engages in homebuilding and financial services businesses, primarily in the United States. The stock gained 37.7% in the third quarter and accounts for a 0.06% share in the SPY portfolio.
PulteGroup has an estimated earnings growth rate of 14% for this year and a Zacks Rank #2 at present. It has a Value Score of A.
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Stanley Black & Decker, Inc. (SWK) : Free Stock Analysis Report
PulteGroup, Inc. (PHM) : Free Stock Analysis Report
Kellanova (K) : Free Stock Analysis Report
SPDR S&P 500 ETF (SPY): ETF Research Reports
Mohawk Industries, Inc. (MHK) : Free Stock Analysis Report
CBRE Group, Inc. (CBRE) : Free Stock Analysis Report