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Wall Street was downbeat last week, with the S&P 500 losing about 3.4%, the Dow Jones shedding 1.4%, the Nasdaq retreating 5.7% and the Russell 2000 falling about 2.6%. Notably, the Dow Jones broke a four-week winning streak on rising rate fears, while the S&P and Nasdaq snapped the two-week winning streaks.
October’s nonfarm payrolls report on Friday stirred some confusion among market watchers. The U.S. economy added 261,000 jobs in October 2022, above market forecasts of 200,000. Such an upbeat report fueled some concerns that the Fed would continue with its rate hike momentum. However, since the unemployment rate rose to 3.7%, some investors viewed the latest jobs report as a moderate one. They found a sign that the labor market has started to cool.
As expected, the Federal Reserve boosted its benchmark interest rate last week by three-quarters of a point for the fourth time but indicated that it could soon reduce the size of its rate hikes. Fed Chair Jerome Powell reiterated the central bank's commitment to hike rates further in order to tame multi-decade highs in inflation (read: How to Play Fed's Fourth 75-Bp Rate Hike With ETFs?).
The Fed’s latest move raised its key short-term rate to the range of 3.75% to 4%, its highest level in 15 years. November’s move marked the U.S. central bank’s sixth rate hike this year. The central bank also signaled that future increases in borrowing costs could be made in smaller steps to account for the “cumulative tightening of monetary policy” it has enacted so far.
A future move was also anticipated. Market watchers believe that the Fed’s next expected rate hike in December may be only by half a point rather than three quarters. Per CME FedWatch Tool, the likelihood of a 50-bp rate hike in December is 52% now, while the rest expects a 75-bp rate hike. U.S. benchmark treasury yield was 4.17% on Nov 4.
Meanwhile, ISM manufacturing data came in soft. The ISM Manufacturing PMI in the United States declined to 50.2 in October 2022 from 50.9 in September, beating market forecasts of 50.0 by a whisker. The reading marked the weakest growth in factory activity since mid-2020 (read: 3 Sector ETFs Looks Decent Despite Soft Manufacturing Data).
New orders shrank less (49.2 versus 47.1) and employment was little changed (50 versus 48.7), while backlogs of orders fell (45.3 versus 50.9). Companies are continuing to manage headcounts through hiring freezes and attrition to lower levels, with medium- and long-term demand still dubious.
Against this backdrop, below, we highlight a few inverse/leveraged ETF areas that have gained the most.
Inverse QQQ
Rising rates are negative for growth stocks. Since the Nasdaq-100 (QQQ) is filled with growth stocks, QQQ underperformed last week. QQQ was off 4.8% past week. As a result, inverse/leveraged QQQ gained last week.
Image: Bigstock
Best Inverse/Leveraged ETF Areas of Last Week
Wall Street was downbeat last week, with the S&P 500 losing about 3.4%, the Dow Jones shedding 1.4%, the Nasdaq retreating 5.7% and the Russell 2000 falling about 2.6%. Notably, the Dow Jones broke a four-week winning streak on rising rate fears, while the S&P and Nasdaq snapped the two-week winning streaks.
October’s nonfarm payrolls report on Friday stirred some confusion among market watchers. The U.S. economy added 261,000 jobs in October 2022, above market forecasts of 200,000. Such an upbeat report fueled some concerns that the Fed would continue with its rate hike momentum. However, since the unemployment rate rose to 3.7%, some investors viewed the latest jobs report as a moderate one. They found a sign that the labor market has started to cool.
As expected, the Federal Reserve boosted its benchmark interest rate last week by three-quarters of a point for the fourth time but indicated that it could soon reduce the size of its rate hikes. Fed Chair Jerome Powell reiterated the central bank's commitment to hike rates further in order to tame multi-decade highs in inflation (read: How to Play Fed's Fourth 75-Bp Rate Hike With ETFs?).
The Fed’s latest move raised its key short-term rate to the range of 3.75% to 4%, its highest level in 15 years. November’s move marked the U.S. central bank’s sixth rate hike this year. The central bank also signaled that future increases in borrowing costs could be made in smaller steps to account for the “cumulative tightening of monetary policy” it has enacted so far.
A future move was also anticipated. Market watchers believe that the Fed’s next expected rate hike in December may be only by half a point rather than three quarters. Per CME FedWatch Tool, the likelihood of a 50-bp rate hike in December is 52% now, while the rest expects a 75-bp rate hike. U.S. benchmark treasury yield was 4.17% on Nov 4.
Meanwhile, ISM manufacturing data came in soft. The ISM Manufacturing PMI in the United States declined to 50.2 in October 2022 from 50.9 in September, beating market forecasts of 50.0 by a whisker. The reading marked the weakest growth in factory activity since mid-2020 (read: 3 Sector ETFs Looks Decent Despite Soft Manufacturing Data).
New orders shrank less (49.2 versus 47.1) and employment was little changed (50 versus 48.7), while backlogs of orders fell (45.3 versus 50.9). Companies are continuing to manage headcounts through hiring freezes and attrition to lower levels, with medium- and long-term demand still dubious.
Against this backdrop, below, we highlight a few inverse/leveraged ETF areas that have gained the most.
Inverse QQQ
Rising rates are negative for growth stocks. Since the Nasdaq-100 (QQQ) is filled with growth stocks, QQQ underperformed last week. QQQ was off 4.8% past week. As a result, inverse/leveraged QQQ gained last week.
Ultrapro Short QQQ ETF (SQQQ - Free Report) – Up 16.7%
Microsectors Fang+ -3X ETN (FNGD - Free Report) – Up 17.1%
Ultrashort QQQ ETF (QID) – Up 12.4%
Energy
Oil prices jumped last week on hopes that China could ease its COVID-control measures. A weaker dollar has also lent its share of support.
Direxion Daily Oil Services Bull 2X Shares – Up 11.7%
Ultra Oil & Gas ETF (DIG - Free Report) – Up 5.0%
Inverse Treasury
Benchmark U.S. treasury was shot up last week. It was 4.07% on Nov 1, while it increased to 4.17% at the end of the week.
Ultrapro Short 20 Year Treasury ETF (TTT - Free Report) – Up 7.3%
20+ Year Treasury Bear 3X Direxion (TMV - Free Report) – Up 7.2%
Ultrashort Lehman 20 Year Treasury ETF (TBT - Free Report) – Up 4.8%