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Wall Street was downbeat last week, with the S&P 500 losing 1.1%, the Dow Jones retreating 0.2%, the Nasdaq Composite slipping 2.4% and the Russell 2000 sliding 3.4%, respectively. The S&P 500 and the Nasdaq recorded the worst week since December.
Investors analyzed the recent commentary from Federal Reserve and mixed-to-upbeat economic data points. This has resulted in a rise in rates as the Fed is now believed to be hiking rates more than expected before.
The U.S. benchmark treasury yield started the week at 3.63% and ended the week at 3.74%, while the two-year U.S. treasury yield started the week at 4.44% and ended the week at 4.50%. Such an uptick in rates caused a decline in Wall Street.
As far as earnings are concerned, about 70% S&P 500 companies have reported so far and around 70% of those companies have surpassed analyst expectations for fourth-quarter 2022. That’s a smaller share of companies beating expectations than the three-year historical average of 79%, according to The Earnings Scout, as quoted on CNBC.
Against this backdrop, below, we highlight a few inverse/leveraged ETF areas that won last week.
Leveraged Energy
Microsectors U.S. Big Oil Index 3X ETN (NRGU - Free Report) – Up 18.1%
Oil prices jumped after Russia announced 5% oil output cut in March. Russia will cut oil production by 500,000 barrels per day in March, Deputy Prime Minister Alexander Novak said on Friday, as the West enacted price caps on Russian oil and oil products. The G7, the European Union and Australia agreed to ban the use of Western-supplied maritime insurance, finance and brokering for seaborne Russian oil priced above $60 per barrel from Dec 5 as part of Western sanctions on Moscow over its actions in Ukraine.
After years of easy money and healthy growth, the biotech industry is feeling the pinch of a funding crunch. But biotechs have cut thousands of jobs lately. The ebbing pandemic resulted in lower demand for COVID-19 vaccines and treatments. The biotech stock index has underperformed due to research failures, slowing M&A and rising interest rates.
Inverse Leveraged Internet
Dow Jones Internet Bear -3X Direxion (WEBS - Free Report) – Up 16.5%
The underlying Dow Jones Internet Composite Index includes only companies whose primary focus is Internet-related. As the benchmark U.S. treasury yield spiked last week, Internet stocks plunged and benefited the inverse/leveraged internet ETFs like WEBS. Investors should note that Internet stocks perform better in a falling rate environment.
The MerQube MicroSectors U.S. Travel Index is a total return index that tracks the stock prices of U.S. domiciled and listed securities that are materially engaged in specified segments of the travel industry. Disappointing earnings results from ride-hailing service provider Lyft and the online travel platform provider Expedia have probably weighed on the travel industry and boosted this inverse leveraged ETF.
The Direxion Daily Small Cap Bear 3x Shares seeks daily investment results, before fees and expenses, of 300% of the inverse (or opposite) of the performance of the Russell 2000. This is yet another loser of the rising rate trend.
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Best Inverse/Leveraged ETF Areas of Last Week
Wall Street was downbeat last week, with the S&P 500 losing 1.1%, the Dow Jones retreating 0.2%, the Nasdaq Composite slipping 2.4% and the Russell 2000 sliding 3.4%, respectively. The S&P 500 and the Nasdaq recorded the worst week since December.
Investors analyzed the recent commentary from Federal Reserve and mixed-to-upbeat economic data points. This has resulted in a rise in rates as the Fed is now believed to be hiking rates more than expected before.
The U.S. benchmark treasury yield started the week at 3.63% and ended the week at 3.74%, while the two-year U.S. treasury yield started the week at 4.44% and ended the week at 4.50%. Such an uptick in rates caused a decline in Wall Street.
As far as earnings are concerned, about 70% S&P 500 companies have reported so far and around 70% of those companies have surpassed analyst expectations for fourth-quarter 2022. That’s a smaller share of companies beating expectations than the three-year historical average of 79%, according to The Earnings Scout, as quoted on CNBC.
Against this backdrop, below, we highlight a few inverse/leveraged ETF areas that won last week.
Leveraged Energy
Microsectors U.S. Big Oil Index 3X ETN (NRGU - Free Report) – Up 18.1%
Ultra Bloomberg Crude Oil 2X ETF (UCO - Free Report) – Up 16.6%
Oil prices jumped after Russia announced 5% oil output cut in March. Russia will cut oil production by 500,000 barrels per day in March, Deputy Prime Minister Alexander Novak said on Friday, as the West enacted price caps on Russian oil and oil products. The G7, the European Union and Australia agreed to ban the use of Western-supplied maritime insurance, finance and brokering for seaborne Russian oil priced above $60 per barrel from Dec 5 as part of Western sanctions on Moscow over its actions in Ukraine.
Inverse Leveraged Biotech
S&P Biotech Bear -3X Direxion (LABD - Free Report) – Up 17.2%
After years of easy money and healthy growth, the biotech industry is feeling the pinch of a funding crunch. But biotechs have cut thousands of jobs lately. The ebbing pandemic resulted in lower demand for COVID-19 vaccines and treatments. The biotech stock index has underperformed due to research failures, slowing M&A and rising interest rates.
Inverse Leveraged Internet
Dow Jones Internet Bear -3X Direxion (WEBS - Free Report) – Up 16.5%
The underlying Dow Jones Internet Composite Index includes only companies whose primary focus is Internet-related. As the benchmark U.S. treasury yield spiked last week, Internet stocks plunged and benefited the inverse/leveraged internet ETFs like WEBS. Investors should note that Internet stocks perform better in a falling rate environment.
Inverse Leveraged Travel
Microsectors Travel -3X ETN (FLYD - Free Report) – Up 11.4%
The MerQube MicroSectors U.S. Travel Index is a total return index that tracks the stock prices of U.S. domiciled and listed securities that are materially engaged in specified segments of the travel industry. Disappointing earnings results from ride-hailing service provider Lyft and the online travel platform provider Expedia have probably weighed on the travel industry and boosted this inverse leveraged ETF.
Inverse Leveraged Small-Cap
Smallcap Bear -3X Direxion (TZA - Free Report) – Up 10.9%
The Direxion Daily Small Cap Bear 3x Shares seeks daily investment results, before fees and expenses, of 300% of the inverse (or opposite) of the performance of the Russell 2000. This is yet another loser of the rising rate trend.