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Hello! This week\u2019s ETF Wrap digs into the jump in biotech funds, as well as an \u201cunusual\u201d trend in U.S. small-cap stocks versus small-cap tech equities.<\/p>\n
Please send feedback and tips to christine.idzelis@marketwatch.com or isabel.wang@marketwatch.com. You can also follow me on X at\u00a0@cidzelis<\/a>\u00a0and find me on\u00a0LinkedIn<\/a>. Isabel Wang is at\u00a0@Isabelxwang<\/a>.<\/p>\n Sign up\u00a0<\/strong>here<\/strong><\/a>\u00a0for our weekly ETF Wrap.<\/strong><\/p>\n Some exchange-traded funds that buy biotech stocks are rallying in 2024.<\/p>\n The SPDR S&P Biotech ETF While the SPDR S&P Biotech ETF has seen \u201cfairly strong flows\u201d in the past month, they\u2019re \u201cnot off the charts\u201d despite its surging performance this month, said Ullal. Shares of the fund have soared 12.6% in February for year-to-date gains of more than 10%, according to FactSet data.\u00a0<\/p>\n \u201cWe\u2019re now seeing major components\u201d within small-cap stocks like biotech and retail \u201cbreakout to two-year highs, which we think is a prelude to the small-cap index itself,\u201d said Jeff deGraaf, head of technical research at Renaissance Macro Research, in a note Thursday.\u00a0<\/p>\n The SPDR S&P Biotech ETF and SPDR S&P Retail ETF The Russell 2000 index, a gauge of U.S. small-cap stocks, has gained 1.4% this year through Thursday. Small-cap stocks are broadly lagging U.S. large-cap equities measured by the S&P 500 index Meanwhile, shares of the Virtus LifeSci Biotech Clinical Trials ETF, with $12 million of assets under management, have soared 18.5% in February, bringing their year-to-date gain to 23%. The ALPS Medical Breakthroughs ETF, which has $125 million of assets, has jumped 11.6% this month for an increase of 12.5% so far in 2024.<\/p>\n The much larger SPDR S&P Biotech ETF seeks to track an equal-weighted index of U.S. biotechnology stocks, with its largest holdings as of Feb. 28 being\u00a0Viking Therapeutics Inc. Read<\/strong>: Viking Therapeutics\u2019 stock more than doubles as investors cheer cheap entry to weight-loss-drug craze<\/a><\/p>\n The fund has \u201cbroken out above its January high, resuming its long-term turnaround phase after a healthy period of digestion,\u201d Fairlead Strategies analysts, led by the firm\u2019s founder Katie Stockton, said in a note dated Feb. 27. \u201cNext resistance is near $105.\u201d<\/p>\n Shares of SPDR S&P Biotech ETF fell 3.1% on Thursday, to $98.42.<\/p>\n As for fund flows, the SPDR S&P Biotech ETF has attracted more than $337 million in the past month as of Feb. 28, bringing its inflows this year to more than $92 million, FactSet data show.<\/p>\n Meanwhile, shares of the iShares Biotechnology ETF But the iShares Biotechnology ETF tracks a market-cap-weighted index of biotech stocks listed in the U.S. Its top three holdings as of Feb. 28 were Vertex Pharmaceuticals Inc. The SPDR S&P Biotech ETF has more of\u00a0\u201ca small-cap tilt\u201d because it tracks an equal-weighted index of U.S. biotech stocks, said Ullal.<\/p>\n Small-cap stocks in information technology usually outperform small-cap equities overall, but they have \u201cdone the opposite by a statistically significant amount over the last 100 days,\u201d said Jessica Rabe, co-founder of DataTrek Research, in a note emailed Thursday.\u00a0<\/p>\n That may mean a shift is coming.<\/p>\n \u201cHistory says small-cap tech should therefore revert to the mean and outperform small caps generally over the next roughly four calendar months\u201d said Rabe. \u201cIt\u2019s important to remember, however, that this is a relative, not an absolute return, analysis.\u201d<\/p>\n DataTrek found that the Invesco S&P SmallCap Information Technology ETF Shares of the Invesco S&P SmallCap Information Technology ETF rose 0.9% in February, but they\u2019re still down 3.6% so far in 2024, according to FactSet data.<\/p>\n The fund\u2019s performance is trailing the year-to-date gains of the iShares Core S&P Small Cap ETF, whose shares jumped 3.2% in February to pare its year-to-date\u00a0losses to 0.8%, FactSet data show.<\/p>\n U.S. small-cap tech stocks are broadly lagging large-cap tech stocks, \u201cbut not by enough to flash a buy signal,\u201d according to DataTrek\u2019s Rabe.<\/p>\n The Technology Select Sector SPDR Fund DataTrek continues to favor large-cap tech \u2014 and U.S. large-cap equities generally over small-cap counterparts \u2014 in the \u201ccurrent mid-cycle market environment given their global scale and superior competitive advantages,\u201d according to the firm\u2019s note. \u201cAlso, large-cap tech is better positioned to keep leveraging structural growth trends like gen AI<\/a>,\u201d said Rabe.<\/p>\n As usual, here\u2019s your look at the top- and bottom-performing ETFs over the past week through Wednesday, according to FactSet data.<\/p>\n\n
\n ,<\/span><\/a>
\n with $8 billion of assets under management, as well as two much smaller ETFs in the biotech category, Virtus LifeSci Biotech Clinical Trials ETF
\n
\n and the ALPS Medical Breakthroughs ETF
\n ,<\/span><\/a>
\n have all seen big gains both in February and this year to date, said Aniket Ullal, head of ETF data and analytics at CFRA Research, in a phone interview on Thursday.<\/p>\n
\n
\n are \u201dbreaking out of big bases\u201d with \u201cinternal momentum,\u201d said deGraaf. \u201cBoth groups are among the top performers at this zone in our Russell 2000 market cycle clock.\u201d<\/p>\n
\n ,<\/span><\/a>
\n which is up 6.8% so far in 2024, according to FactSet data.<\/p>\n
\n VKTX,<\/span><\/a>
\n Iovance Biotherapeutics Inc.
\n IOVA
\n and Cytokinetics Inc.
\n CYTK,<\/span><\/a>
\n according to data on the website of State Street Global Advisors.\u00a0<\/p>\n
\n ,<\/span><\/a>
\n which also has $8 billion of assets under management, has gained just 0.7% in 2024.<\/p>\n
\n VRTX,<\/span><\/a>
\n Regeneron Pharmaceuticals Inc.
\n REGN
\n and Amgen Inc.
\n AMGN,<\/span><\/a>
\n according to the fund\u2019s data on BlackRock\u2019s website.<\/p>\nInformation Technology<\/strong><\/h2>\n
\n
\n has lagged the iShares Core S&P Small Cap ETF
\n ,<\/span><\/a>
\n which tracks the S&P Small Cap 600 index
\n ,<\/span><\/a>
\n by nine percentage points over the past 100 days. \u201cThis is very unusual,\u201d said Rabe.<\/p>\nSmall-cap vs large-cap in tech<\/strong><\/h2>\n
\n ,<\/span><\/a>
\n an ETF tracking the S&P 500\u2019s tech stocks, climbed 4.7% this month for a year-to-date gain of 7.5%. By contrast, the Invesco S&P SmallCap Information Technology ETF is down 3.6% this year after edging 0.9% higher in February, FactSet data show.<\/p>\nThe good\u2026<\/h2>\n