After reversing course in early April and rebounding around 33% as of Sept. 18, the S&P 500 has gained about 3.40% so far in September. With the Fed delivering its first rate cut of 2025, signaling two more this year and raising its GDP forecast, the moderate market momentum is likely to continue.
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According to the CME FedWatch tool, markets are anticipating a 91.9% likelihood of interest rates being lowered to 3.75-4% in October and a 78.6% likelihood of interest rates being cut to 3.5-3.75% in December.
The central bank upgraded its year-end economic growth projections while keeping inflation and unemployment forecasts unchanged, as quoted on Yahoo Finance. The Fed upgraded its U.S. economic growth outlook, expecting GDP to rise 1.6% in 2025, before accelerating to 1.8% in 2026 and 1.9% in 2027.
According to the abovementioned article, the Fed’s dovish stance has boosted Wall Street optimism, with strategists at Wells Fargo, Barclays and Deutsche Bank recently raising their S&P 500 targets, citing resilient earnings, the AI investment cycle and the prospect of lower rates as key drivers.
Per S&P Global, the S&P Global US PMI data for August supported recent S&P 500 gains, reflecting improved momentum in corporate profits, with optimism over hopes of lower interest rates and improved trade relations boosting US equities further.
The S&P Global US PMI Composite Output Index was at 54.6 in August, down from July’s 55.1. However, it was still the second-highest reading of 2025, signaling solid U.S. growth. The detailed US Sector PMI data highlighted financials and technology as the top-performing sectors in August.
Lower interest rates typically reduce borrowing costs, making it easier for companies to expand their business and increase profitability, which, in turn, boosts economic growth and the stock market.
While underlying uncertainties remain and investors should stay vigilant, the funds mentioned below, with a Zacks ETF Rank #1 (Strong Buy), could be strong options for those looking to capitalize on the current moderate market momentum without taking on unnecessary risk.
The Dow Jones U.S. Technology Index has gained 34.04% over the past year and 5.93% month to date. The tech sector, driven in part by AI, has strengthened market sentiment, with PMI data showing real growth in US technology output.
Technology Select Sector SPDR ETF the performance of the Technology Select Sector Index with a basket of 68 securities. The fund has amassed an asset base of $87.15 billion and charges an annual fee of 0.08%.
XLK has double-digit exposure to NVIDIA NVDA, Microsoft MSFT and Apple AAPL, with allocation of 15.07%, 13.25% and 12.46%, respectively. The fund has a one-month average trading volume of about 9.1 million shares.
Technology Select Sector SPDR ETF has gained 13.73% over the past three months and 19.87% over the past year.
The Dow Jones U.S. Financial Services Index has gained 28.29% over the past year and 0.88% month to date. According to the sector PMI report, as quoted on S&P Global, financial services are benefiting from higher demand, easing borrowing costs and rising asset prices.
Financial Select Sector SPDR ETF tracks the performance of the Financial Select Sector Index with a basket of 75 securities. The fund has amassed an asset base of $54.44 billion and charges an annual fee of 0.08%.
XLF has top allocations to Berkshire Hathaway (BRK.B) and JPMorgan Chase & Co. JPM, with an exposure of 11.72% and 11.34%, respectively. The fund has a one-month average trading volume of about 35.55 million shares.
Financial Select Sector SPDR ETF has gained 6.34% over the past three months and 19.81% over the past year.
The Dow Jones U.S. Industrials Index has gained 12.92% over the past year and 0.53% month to date.
Industrial Select Sector SPDR ETF tracks the performance of the Industrial Select Sector Index. It has a basket of 78 securities. The fund has amassed an asset base of $23.22 billion and charges an annual fee of 0.08%.
XLI has the highest allocation to General Electric, Caterpillar CAT and RTX Corporation RTX, with an exposure of 6.80%, 4.71% and 4.54%, respectively. The fund has a one-month average trading volume of about 10.42 million shares.
Industrial Select Sector SPDR ETF has gained 6.67% over the past three months and 17.23% over the past year.
The Dow Jones U.S. Health Care Index has fallen 10.55% over the past year but has rebounded, gaining 2.54% quarter to date and 0.27% month to date.
Health Care Select Sector SPDR ETF seeks to track the performance of the Health Care Select Sector Index with a basket of 60 securities. The fund has amassed an asset base of $33.76 billion and charges an annual fee of 0.08%.
XLV has top allocation to Eli Lilly LLY, Johnson & Johnson JNJ and AbbVie ABBV, with an allocation of 12.04%, 8.41% and 7.87%, respectively. The fund has a one-month average trading volume of about 12.37 million shares.
Health Care Select Sector SPDR ETF has gained 4.02% over the past three months but has fallen 11.12% over the past year.
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JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Caterpillar Inc. (CAT) : Free Stock Analysis Report
Johnson & Johnson (JNJ) : Free Stock Analysis Report
Eli Lilly and Company (LLY) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
AbbVie Inc. (ABBV) : Free Stock Analysis Report
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
Technology Select Sector SPDR ETF (XLK): ETF Research Reports
Industrial Select Sector SPDR ETF (XLI): ETF Research Reports
Health Care Select Sector SPDR ETF (XLV): ETF Research Reports
RTX Corporation (RTX) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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