The S&P 500 wrapped up its worst quarter since March 2020 and the first monthly drop since January. After hitting a peak in early September, the U.S. stocks were caught in brutal trading thanks to a string of woes.

These included concerns over accelerating coronavirus infections, renewed inflation fears, signs of a slowdown in China, potential for high corporate tax rates and fading fiscal stimulus. Concerns over the financial contagion of the potential failure of China’s Evergrande property group and the debates over the debt limit in Washington also made investors jittery. But these worries eased with China Evergrande’s deal for some of its looming debt payments as well as the House passing a bill to avert government shutdown.

In the FOMC meeting that concluded on Sep 22, the Federal Reserve Chair Jerome Powell signaled the tapering of bond buying as soon as November, followed by interest rate hikes as early as next year. Meanwhile, Powell warned of higher inflation that will likely remain in the coming months (read: ETFs to Bet On as Fed Turns Hawkish, Signals Tapering).

The benchmark was down 4.8% and is now 5.1% below its all-time high set on Sep. 2. Of the 11 sectors, 10 suffered losses in September, thanks to a 7.4% monthly drop in materials stocks. Energy was the best performer of the month, gaining more than 9%.

Against such a backdrop, the proxy version of the S&P 500 Index, SPDR S&P 500 ETF Trust SPY plunged 5% last month. Let’s take a closer look at the fundamentals of SPY and its best stocks:

Inside the SPY

The ETF holds 505 stocks in its basket with each accounting for no more than 6.1% of the assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, healthcare, consumer discretionary, financials and communication services accounting for a double-digit allocation each. It has AUM of $399.3 billion and charges 9 bps in fees per year (see: all the Large Cap Blend ETFs here).

The product trades in heavy volume of around 54.3 million shares a day on average, ensuring higher liquidity with a tight bid/ask spread, leading to lower trading costs for investors. SPY has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. Though most stocks in the fund’s portfolio also plunged last month, we have highlighted six stocks from different sectors that are in deep green and have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold):

Best-Performing Stocks of SPY

CF Industries Holdings Inc. CF: It is the global leader in transforming natural gas into nitrogen products. The stock rallied 24.6% last month and has an estimated earnings growth rate of 25.2% for this year. It has a Zacks Rank #3 (read: ETFs to Tap on Soaring Natural Gas Price).

SVB Financial Group SIVB: This diversified financial services company offers a diverse set of banking and financial products and services to clients across the United States. The stock has risen 15.6% and has an estimated earnings growth rate of 34.6% for this year. It has a Zacks Rank #3.

Expedia Group Inc. EXPE: It is an online travel company, empowering business and leisure travelers through technology with the tools and information they need to efficiently research, plan, book and experience travel. The stock climbed 13.7% last month and has an estimated earnings growth rate of 91.9% for this year. It has a Zacks Rank #3 (read: 5 Top ETF Stories of Nine Months of 2021).

The Mosaic Company MOS: It is one of the world's leading crop nutrition companies with a focus on potash and phosphate, two of three most vital nutrients. It jumped 10.6% in September and has an estimated earnings growth rate of 471.8% for this year. Mosaic has a Zacks Rank #1.

Quanta Services Inc. PWR: This is a leading specialized contracting services company, delivering infrastructure solutions to the electric power, oil and gas and communications industries. It has gained 10.1% and has an estimated earnings growth rate of 19.9% for this year. The stock has a Zacks ETF Rank #2.

Caesars Entertainment Inc. CZR: This casino-entertainment company is engaged in development of new resorts, expansions and acquisitions. The stock was up 10% last month and has an estimated earnings growth rate of 87.9% for this year. The stock has a Zacks ETF Rank #3.

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