The SPDR S&P 500 ETF Trust (SPY), a proxy version of the S&P 500 Index, has experienced significant growth this year, rising by 8.3% as of the current date. This surge in the S&P 500 has been driven by reassuring comments regarding potential interest rate declines from Federal Reserve Chair Jerome Powell.
Against this backdrop, several individual stocks within the S&P 500 have also posted impressive gains, with five notable examples achieving double-digit growth so far this year. These stocks include Nvidia Corporation (NVDA), Constellation Energy Corporation (CEG), Meta Platforms (META), Advanced Micro Devices (AMD), and Eli Lilly and Company (LLY).
Powell’s comments before a U.S. Senate committee signaled that the Federal Reserve is nearing confidence that inflation is declining toward the targeted 2%, potentially paving the way for rate cuts. However, Powell emphasized the need for greater confidence in the sustained decline of inflation before any rate adjustments. He also highlighted the risks of maintaining tight monetary policy for too long, potentially endangering the ongoing economic expansion, which has maintained a below 4% unemployment rate for two consecutive years.
The recent release of weak economic data, including a continued decline in the U.S. manufacturing sector, a slight drop in consumer confidence according to the University of Michigan’s index, and the weakest reading in U.S. personal spending data in three years, has further fueled expectations of a rate cut. Traders now estimate a 72.7% chance of the first rate cut occurring in June, according to CME Group’s FedWatch tool. Additionally, the European Central Bank might also consider rate cuts in June due to a softer outlook for inflation and economic growth.
Given these developments, it’s essential to examine the fundamentals of the SPDR S&P 500 ETF Trust (SPY) to understand its performance and outlook in the current economic environment.
SPY in Focus
The SPDR S&P 500 ETF Trust (SPY) provides investors with exposure to a diversified portfolio of 503 stocks, each accounting for no more than 7% of the fund’s assets. This approach ensures a balanced allocation across securities and mitigates the risk of heavy concentration in any single holding. Additionally, the fund maintains broad sector diversification, with significant allocations to information technology, financials, healthcare, and consumer discretionary sectors, each representing a double-digit percentage of the portfolio.
With an impressive asset under management (AUM) of $497.7 billion, the SPDR S&P 500 ETF Trust is one of the largest and most widely traded ETFs in the market. It boasts a low expense ratio of 0.09% per year, making it a cost-effective option for investors seeking broad exposure to the S&P 500 Index. The fund trades actively, with an average daily volume of 65 million shares, ensuring ample liquidity for investors.
From a qualitative standpoint, the SPDR S&P 500 ETF Trust holds a Zacks ETF Rank #3 (Hold) with a Medium-risk outlook. This ranking suggests a neutral stance on the fund’s performance and risk profile. Investors interested in large-cap blend ETFs may consider exploring other options in this category.
Now, let’s delve into the five best-performing stocks held within the SPDR S&P 500 ETF Trust to better understand their individual contributions to the fund’s performance.
Best-Performing Stocks of SPY
Let’s break down the performance and key attributes of each of the five top-performing stocks held within the SPDR S&P 500 ETF Trust (SPY):
- Nvidia Corporation (NVDA):
- Nvidia is a global leader in visual computing technologies and the inventor of the graphic processing unit (GPU).
- The stock has surged 87% year-to-date and is estimated to have a remarkable growth rate of 79.2% for the fiscal year ending January 2025.
- With a weighting of 5.1% in the SPY portfolio, Nvidia contributes significantly to the fund’s performance.
- Nvidia currently holds a Zacks Rank #1 (Strong Buy) and boasts a Growth Score of A, reflecting favorable growth prospects.
- Constellation Energy Corporation (CEG):
- Constellation Energy is engaged in the generation and marketing of electricity, natural gas, and renewable energy products.
- The stock has seen a robust gain of 53.6% year-to-date and is projected to have an earnings growth rate of 42.7% for this year.
- Despite comprising a smaller portion (0.13%) of the SPY portfolio, Constellation Energy’s strong performance adds value to the fund.
- Constellation Energy currently holds a Zacks Rank #3 (Hold) and possesses a Momentum Score of A.
- Meta Platforms, Inc. (META):
- Formerly known as Facebook, Meta Platforms operates the world’s largest social media platform, encompassing various apps such as Instagram and WhatsApp.
- The stock has surged 44.7% year-to-date and is expected to achieve an earnings growth rate of 34.1% for this year.
- With a weighting of 2.6% in the SPY portfolio, Meta Platforms is a significant contributor to the fund’s performance.
- Meta Platforms currently holds a Zacks Rank #1 and has a Growth Score of B, indicating solid growth potential.
- Advanced Micro Devices, Inc. (AMD):
- Advanced Micro Devices is a prominent player in the semiconductor market, focusing on consumer and enterprise computing solutions.
- The stock has rallied 43.4% year-to-date and is forecasted to achieve an earnings growth rate of 30.6% for this year.
- Despite constituting a smaller share (0.79%) of the SPY portfolio, Advanced Micro Devices’ strong performance adds value to the fund.
- Advanced Micro Devices currently holds a Zacks Rank #3, reflecting moderate expectations.
- Eli Lilly and Company (LLY):
- Eli Lilly is a leading pharmaceutical company with a diverse product portfolio, including successful drugs across various therapeutic areas.
- The stock has gained 33.8% year-to-date and is anticipated to achieve an earnings growth rate of 96.8% for this year.
- Accounting for 1.4% of the SPY portfolio, Eli Lilly contributes to the fund’s performance.
- Eli Lilly currently holds a Zacks Rank #3, indicating neutral expectations for the stock’s performance.
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