XLY Rises on Tesla, McDonalds

The Consumer Discretionary Select Sector SPDR Fund (XLY) rose 1.8%, benefiting from its 4.4% holding in McDonald’s shares, as well as its 17% allocation to Tesla stock, which jumped more than 5% on a bullish analyst call. The Global X Dow 30 Covered Call ETF (DJIA), with a 4.1% McDonald’s holding, increased 0.2%.

McDonald’s stock climbed 3.7% on Monday, even though its quarterly earnings and revenue fell short of Wall Street expectations. Investors appeared optimistic about the company’s $5 value meals strategy to attract budget-conscious consumers and its potential for improved results in the second half of the year. 

In the healthcare sector, the SPDR S&P Health Care Services ETF (XHS) edged up 0.2%. This gain was influenced by its 2.2% holding in Guardant Health Inc., whose stock surged nearly 6%.

The company announced FDA approval for its blood test for colon cancer screening in adults 45 and older at average risk. The test is notable for being the first of its kind to receive regulatory approval in the U.S. and meet Medicare coverage requirements.  

Tesla stock jumped more than 5% by midday trading as growth investors scooped up shares of the depressed electric vehicle manufacturer on news of a key analyst upgrade.

The Consumer Discretionary Select Sector SPDR ETF (XLY), which allocates nearly 17% of its assets to TSLA, was up 1.7% following news that Morgan Stanley named Tesla it’s top pick in the automotive industry.

The New York City-based multinational investment bank and financial services company is bullish on Tesla's energy focus and sees up to 40% upside potential for Tesla.

"We estimate Tesla may account for as much as half the credit sales in the market, supporting a 100% margin business for Tesla that may not be anticipated by the investment community at this time," Morgan Stanley analysts said, according to Teslarati, a media company specializing in news and content related to Tesla, SpaceX, and other ventures associated with Elon Musk.

TSLA stock started the day 20% lower than where it started 2024.

Markets rose in trading before noon, led by the tech sector, ahead of major tech companies reporting quarterly earnings this week. 

According to etf.com's Markets Monitor, XLK, the Technology Select Sector SPDR Fund was up by half a percentage point in early trading. Consumer discretionary led the market, as XLY, the Consumer Discretionary Select Sector SPDR Fund popped 1.2%.

The biggest holdings in XLY are Amazon and Tesla, two tech companies that are a part of the 'Magnificent Seven' of tech stocks that have carried markets this year. 

This week investors are awaiting earnings reports from Microsoft, Meta, Apple, and Amazon and will search for any clues that major tech companies will not be able to maintain the momentum of growth that has led markets higher over the past year. 

QQQ, the Invesco QQQ Trust which tracks the tech-heavy Nasdaq, shed earlier gains and was unchanged late morning.

Looking at the broad markets, SPY, the SPDR S&P 500 ETF Trust was incrementally higher.

Investors Await Fed Decision

In addition to tech earnings, investors will also be watching for clues on the future path of rate cuts during the next Fed policy meeting. While it's largely expected that the Fed will continue to hold rates steady until September, investors will be sensitive about the likelihood of rate cuts starting in the fall. 

Rate sensitive ETFs like those in fixed income and tech have experienced volatility in the "higher for longer" rate environment as the Fed has kept interest rates high to combat inflation. 

Ahead of potential rate cuts, interest-sensitive small caps had been moving higher. That didn't hold today as IWM, the IShares Russell 2000 ETF and CALF, the Pacer U.S. Small Cap Cash Cows 100 ETF were both in the red after the start of the trading day on Monday as investors piled into big tech names ahead of earnings.