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Wall Street Loses Maximum Since October: Inverse ETFs to Play

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Wall Street was hit hard on Dec 2 by fresh trade tensions and downbeat U.S. manufacturing data. Each of the key U.S. indexes — The S&P 500, the Dow Jones and the Nasdaq — suffered their steepest single-day drop since mid-October. Overvaluation concerns probably played a role in dragging down the indexes.

SPDR S&P 500 ETF (SPY - Free Report) , SPDR Dow Jones Industrial Average ETF (DIA - Free Report) and Invesco QQQ Trust (QQQ - Free Report) lost about 0.8%, 0.9% and 1.02%, respectively, on the day.

President Donald Trump’s announcement that he would reimpose tariffs on Brazilian and Argentinian steel and aluminum” and possibilities of China intensifying retaliation over a supportive U.S. bill toward pro-democracy Hong Kong protestors flared up geopolitical tensions.

On top of it, the ISM manufacturing purchasing managers’ index came in at 48.1 for November, down from 48.3 in October and falling short of consensus economists’ expectation of 49.2, according to Bloomberg data. This marked the fourth successive month of ISM data below 50, reflecting a contraction in activity.

Also, U.S. construction spending declined 0.8% in October against expectation of a 0.4% increase.  Spending on private, residential and public construction projects declined for the month, leading to more than a 1.8% slump inReal Estate Select Sector SPDR Fund (XLRE) on Dec 2.

How to Profit

Given the upheaval, investors might want to go short on Wall Street as well as global equities, at least for the time being. Below we highlight a few of inverse ETFs.

Dow Jones

Investors intending to play against the tumbling Dow Jones, may tap ProShares Short Dow 30 (DOG - Free Report)  (up 1% on Dec 2), ProShares UltraShort Dow30 (DXD - Free Report)  (up 2%) and ProShares UltraPro Short Dow30 (SDOW - Free Report)  (up 2.9%).

China

China-related inverse play could be Direxion Daily CSI 300 China A Share Bear 1X Shares CHAD( up 0.5% on Dec 2).

S&P 500

Investors can go against the S&P 500 with ProShares Short S&P500 ETF (SH - Free Report)  (up 0.9%) and Direxion Daily S&P 500 Bear 1X Shares (SPDN - Free Report) (up 0.8%).

Technology

Technology stocks were hit hard on Monday. Thus, inverse ETF ProShares UltraShort Technology (REW) jumped about 2.8% on Dec 2.

Nasdaq

ProShares Short QQQ (PSQ - Free Report) (up 1.1%), ProShares UltraShort QQQ (QID - Free Report) (up 2.2%) and ProShares UltraPro Short QQQ (SQQQ - Free Report) (up 3.3%) are good to play against the Nasdaq.

Small-Cap

One can short small-cap U.S. equities with ProShares Short Russell2000 (RWM) (up 1%).

EAFE

ProShares Short MSCI EAFE (EFZ - Free Report) (up 0.6%) could be a good way to short stocks from the EAFE region and avoid the spillover effect of the global trade fear.

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