Rising interest rates, inflation concerns, and the recent collapse of yet another financial lender have led to a volatile stock market. Moreover, despite a strong start this year, macroeconomic issues are likely to impact the growth and momentum of the tech industry.
So, in this article, I’ll discuss ETFs, VanEck Digital Transformation ETF (DAPP), SPDR S&P Internet ETF (XWEB), and Direxion Daily Cloud Computing Bull 2X Shares (CLDL), which are currently struggling and might remain under pressure in the near term.
US stocks dropped on Tuesday in anticipation of another interest rate hike by the Federal Reserve at its May FOMC meeting.
Investors will be looking at Chairman Jerome Powell's press conference for signs of a future rate hike pause, but even the possibility of the Fed holding off on interest rate hikes after the meeting might not prevent the potential impact of high inflation and banking sector concerns from being felt in the near future.
Moreover, concerns over the banking sector have also weighed heavily on the markets, with regional bank stocks falling over 6% amid fears that another lender could collapse. The recent collapse of First Republic Bank (FRC), the third in recent months, added to these concerns.
Additionally, the tech industry is facing challenges due to rising interest rates, which have resulted in restrained consumer spending and a decline in demand. The tech companies heavily reliant on advertising revenue are also struggling as digital advertisers reduce their spending amidst inflation.
Let’s take a look at the ETFs mentioned above:
VanEck Digital Transformation ETF (DAPP)
DAPP is a non-diversified fund that generally invests at least 80% of its total assets in securities of Digital Transformation Companies.
With $32.40 million in assets under management (AUM), DAPP’s top holdings include- Marathon Digital Holdings Inc (MARA) with 9.72% weightage in the fund, Riot Platforms, Inc (RIOT) with 8.57%, TeraWulf Inc. (WULF) with 7.73%, and MicroStrategy Incorporated Class A (MSTR) with 6.86% of the fund. It has a total of 20 holdings.
The fund has an expense ratio of 0.50%. It has a beta of 2.9.
DAPP’s fund outflows came in at $1.04 million over the past three months. Its NAV was $5.19 as of May 2, 2023.
DAPP has declined 49.9% over the past year to close the last trading session at $5.22.
DAPP’s POWR Ratings reflect its bleak prospects. It has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
DAPP has an F grade for Buy & Hold and a D for Trade and Peer. It is ranked #90 out of 118 ETFs in the Technology Equities ETFs group.
Click here to access all ratings of DAPP.
SPDR S&P Internet ETF (XWEB)
XWEB tracks an equal-weighted index of US internet retail, software, and services companies, as defined by GICS. It seeks to provide exposure to the internet segment of the S&P TMI, comprising the following sub-industries: Internet Services & Infrastructure and Interactive Media & Services.
The fund has $19.42 million in AUM. Its top holdings include Meta Platforms Inc. Class A (META) with a 4.95% weighting, followed by Alphabet Inc. Class C (GOOG) at 4.33%, MongoDB, Inc. Class A (MDB) with a 4.25% weighting, and VeriSign, Inc. (VRSN) at 4.19%. It has a total of 32 holdings.
XWEB has a beta of 1.39 and its expense ratio is 0.35%.
XWEB’s fund outflows came in at $693.03 thousand over the past month and $3.39 million over the past six months. Its NAV was $64.72 as of May 2, 2023.
XWEB has slumped 33.7% over the past year and 22.3% over the past three months to close the last trading session at $64.73.
XWEB’s poor performance is reflected in its POWR Ratings. The ETF has an overall D rating, equating to Sell in our POWR Ratings system.
XWEB also has an F grade for Trade and a D for Buy & Hold and Peer. It is ranked #92 in the same group.
To access XWEB’s ratings, click here.
Direxion Daily Cloud Computing Bull 2X Shares (CLDL)
CLDL is a non-diversified fund provided by Indxx, LLC, and includes domestic companies that deliver cloud computing infrastructure, platforms, or services. The fund invests at least 80% of its net assets in financial instruments, such as swap agreements, securities of the index, etc.
CLDL has an AUM of $6 million. While the fund has a total of 53 holdings, its top holdings include the U.S. Dollar with an 11.14% weighting, SAP SE Sponsored ADR (SAP) with a 4.66% weighting, Snowflake, Inc. Class A (SNOW) with 4.61% weighting, and Oracle Corporation (ORCL) with a 4.57% weight.
CLDL has a beta of 2.04 and an expense ratio of 0.99%.
Its fund outflows were $855.13 thousand over the past six months. It had a NAV of $6.35 as of May 1, 2023.
The ETF has tumbled 29.6% over the past nine months to close the last trading session at $6.14.
CLDL’s POWR Ratings reflect its bleak outlook. The ETF has an overall POWR Rating of D, which equates to a Sell in our proprietary rating system.
It also has an F grade for Trade and a D for Peer and Buy & Hold. CLDL is ranked #93 in the same group.
Click here to view all ratings of CLDL.
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DAPP shares were unchanged in premarket trading Wednesday. Year-to-date, DAPP has gained 95.51%, versus a 7.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
Tech Stocks Take a Hit: 3 ETFs Struggling in the Current Market StockNews.com
