Wall Street took a huge beating last week following the bank stock meltdown, with the major bourses capping off the week with losses. The Dow Jones wrapped its worst weekly performance since June, falling 4.4%. The S&P 500 dropped 4.5%, while the Nasdaq lost 4.7%.
The tech-focused lender Silicon Valley Bank shut down following losses in its bond portfolio, prompting the biggest bank failure since the global financial crisis and sending shockwaves not only through the banking sector but across the globe.
Additionally, rounds of strong economic data and the prevalent inflation have put a steeper-than-expected rate hike back on the table. Fed Chair Jerome Powell turned hawkish during his testimony to the Senate Banking Committee and opened the door to a half-point rate hike in March. The central bank would likely raise its key interest rate higher than anticipated and could resume larger hikes, citing a recent surge in job growth and inflation after slowing the pace in recent months (read: 4 Top Sector ETFs to Gain as Fed Signals Faster Rate Hikes).
The bank stocks turmoil overshadowed the February jobs report, which signals that inflation might be slowing. Though the U.S. economy added robust 311,000 jobs in February, the unemployment rate rose to 3.6% from 3.4%. Average hourly earnings rose 4.6% from a year ago, below the estimated 4.8%. The monthly increase of 0.2% was also below the 0.4% market expectations.
Given this, we have highlighted three ETFs, each from the best and worst-performing zones, of last week:
Best Zones
Volatility
Volatility increased last week with the collapse of the bank and its contagion fears. As such, volatility products have been the biggest winners. In particular, iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) has soared 21.4%. It focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility in the S&P 500 Index at various points along the volatility forward curve. The note gives investors exposure to a daily rolling long position in the first and second months of VIX futures contracts.
iPath Series B S&P 500 VIX Short-Term Futures ETN is popular and liquid with AUM of $227 million and charges 89 bps in annual fees.
Low Risk
The banking stocks carnage raised the appeal for the lower-risk securities. Simplify Tail Risk Strategy ETF climbed 37.2%. It seeks to provide income and capital appreciation while protecting against significant downside risk to investors by hedging diversified portfolios against severe equity market sell-offs. Simplify Tail Risk Strategy ETF deploys advanced options strategies that are designed to handle multiple types of market dislocations (read: Low-Risk ETFs Roar Amid Bank-Led Market Sell-Off).
Simplify Tail Risk Strategy ETF has amassed $17 million in its asset base and charges 84 bps in annual fees from investors. It trades in volume of 23,000 shares a day on average.
Shipping
The dry bulk shipping market has gained momentum due to a rise in demand across all vessel segments. Breakwave Dry Bulk Shipping ETF (BDRY - Free Report) has gained 8.5%. It is the only freight futures ETF exclusively focused on the dry bulk shipping market through a portfolio of near-dated freight futures contracts on dry bulk indices. Breakwave Dry Bulk Shipping ETF holds freight futures with a weighted average of approximately three months to expiration, using a mix of one-to-six-month freight futures based on the prevailing calendar schedule.
Breakwave Dry Bulk Shipping ETF has accumulated about $108.6 million in AUM and trades in a good volume of about 406,000 shares per day on average. It charges a higher annual fee of 3.50%.
Worst Zones
Natural Gas
Natural gas prices fell last week owing to mild weather and lower-than-previously expected heating demand over the next two weeks. As such, the United States Natural Gas Fund (UNG - Free Report) tumbled 18.6% last week. It provides direct exposure to the price of natural gas on a daily basis through futures contracts. If the near-month contract is within two weeks of expiration, the benchmark will be the next month's contract to expire. The natural gas contract is natural gas delivered at the Henry Hub, LA.
The United States Natural Gas Fund has an AUM of $1.1 billion and trades in a volume of around 21.1 million shares per day. UNG has a 1.11% expense ratio.
Banks
U.S. bank stocks suffered the steepest decline following the implosions at Silicon Valley Bank and Silvergate Capital that sent shock waves across the sector. While all the bank ETFs suffered major loses, iShares U.S. Regional Banks ETF (IAT - Free Report) slumped the most, plunging 17%. iShares U.S. Regional Banks ETF offers exposure to 37 small and mid-cap regional bank stocks by tracking the Dow Jones U.S. Select Regional Banks Index. It is largely concentrated on the top three firms with a double-digit allocation each (read: Bank ETFs Tumble on Silicon Valley Bank Carnage).
iShares U.S. Regional Banks ETF has amassed $666.5 million in its asset base while seeing a good volume of 106,000 shares a day. The product charges 39 bps in annual fees and has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
Technology
The technology sector has borne the brunt of the banking sector sell-off, leading to risk-off trade resulting in a spike in yields. As the sector relies on borrowing for superior growth, it becomes expensive to borrow more money for further initiatives when interest rates rise. VanEck Vectors Digital Transformation ETF (DAPP - Free Report) shed 16.4% last week. It aims to offer exposure to companies that are at the forefront of the digital asset transformation, such as digital asset exchanges, payment gateways, digital asset mining operations, software services, equipment and technology or services to the digital asset operations, digital asset infrastructure businesses or companies facilitating commerce with the use of digital assets.
VanEck Vectors Digital Transformation ETF tracks the MVIS Global Digital Assets Equity Index and holds 20 securities in its basket. It charges 50 bps in annual fees and trades in an average daily volume of 101,000. DAPP has accumulated $25.3 million in its asset base.
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Wall Street took a huge beating last week following the bank stock meltdown, with the major bourses capping off the week with losses. The Dow Jones wrapped its worst weekly performance since June, falling 4.4%. The S&P 500 dropped 4.5%, while the Nasdaq lost 4.7%.
The tech-focused lender Silicon Valley Bank shut down following losses in its bond portfolio, prompting the biggest bank failure since the global financial crisis and sending shockwaves not only through the banking sector but across the globe.
Additionally, rounds of strong economic data and the prevalent inflation have put a steeper-than-expected rate hike back on the table. Fed Chair Jerome Powell turned hawkish during his testimony to the Senate Banking Committee and opened the door to a half-point rate hike in March. The central bank would likely raise its key interest rate higher than anticipated and could resume larger hikes, citing a recent surge in job growth and inflation after slowing the pace in recent months (read: 4 Top Sector ETFs to Gain as Fed Signals Faster Rate Hikes).
The bank stocks turmoil overshadowed the February jobs report, which signals that inflation might be slowing. Though the U.S. economy added robust 311,000 jobs in February, the unemployment rate rose to 3.6% from 3.4%. Average hourly earnings rose 4.6% from a year ago, below the estimated 4.8%. The monthly increase of 0.2% was also below the 0.4% market expectations.
Given this, we have highlighted three ETFs, each from the best and worst-performing zones, of last week:
Best Zones
Volatility
Volatility increased last week with the collapse of the bank and its contagion fears. As such, volatility products have been the biggest winners. In particular, iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) has soared 21.4%. It focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility in the S&P 500 Index at various points along the volatility forward curve. The note gives investors exposure to a daily rolling long position in the first and second months of VIX futures contracts.
iPath Series B S&P 500 VIX Short-Term Futures ETN is popular and liquid with AUM of $227 million and charges 89 bps in annual fees.
Low Risk
The banking stocks carnage raised the appeal for the lower-risk securities. Simplify Tail Risk Strategy ETF climbed 37.2%. It seeks to provide income and capital appreciation while protecting against significant downside risk to investors by hedging diversified portfolios against severe equity market sell-offs. Simplify Tail Risk Strategy ETF deploys advanced options strategies that are designed to handle multiple types of market dislocations (read: Low-Risk ETFs Roar Amid Bank-Led Market Sell-Off).
Simplify Tail Risk Strategy ETF has amassed $17 million in its asset base and charges 84 bps in annual fees from investors. It trades in volume of 23,000 shares a day on average.
Shipping
The dry bulk shipping market has gained momentum due to a rise in demand across all vessel segments. Breakwave Dry Bulk Shipping ETF (BDRY - Free Report) has gained 8.5%. It is the only freight futures ETF exclusively focused on the dry bulk shipping market through a portfolio of near-dated freight futures contracts on dry bulk indices. Breakwave Dry Bulk Shipping ETF holds freight futures with a weighted average of approximately three months to expiration, using a mix of one-to-six-month freight futures based on the prevailing calendar schedule.
Breakwave Dry Bulk Shipping ETF has accumulated about $108.6 million in AUM and trades in a good volume of about 406,000 shares per day on average. It charges a higher annual fee of 3.50%.
Worst Zones
Natural Gas
Natural gas prices fell last week owing to mild weather and lower-than-previously expected heating demand over the next two weeks. As such, the United States Natural Gas Fund (UNG - Free Report) tumbled 18.6% last week. It provides direct exposure to the price of natural gas on a daily basis through futures contracts. If the near-month contract is within two weeks of expiration, the benchmark will be the next month's contract to expire. The natural gas contract is natural gas delivered at the Henry Hub, LA.
The United States Natural Gas Fund has an AUM of $1.1 billion and trades in a volume of around 21.1 million shares per day. UNG has a 1.11% expense ratio.
Banks
U.S. bank stocks suffered the steepest decline following the implosions at Silicon Valley Bank and Silvergate Capital that sent shock waves across the sector. While all the bank ETFs suffered major loses, iShares U.S. Regional Banks ETF (IAT - Free Report) slumped the most, plunging 17%. iShares U.S. Regional Banks ETF offers exposure to 37 small and mid-cap regional bank stocks by tracking the Dow Jones U.S. Select Regional Banks Index. It is largely concentrated on the top three firms with a double-digit allocation each (read: Bank ETFs Tumble on Silicon Valley Bank Carnage).
iShares U.S. Regional Banks ETF has amassed $666.5 million in its asset base while seeing a good volume of 106,000 shares a day. The product charges 39 bps in annual fees and has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
Technology
The technology sector has borne the brunt of the banking sector sell-off, leading to risk-off trade resulting in a spike in yields. As the sector relies on borrowing for superior growth, it becomes expensive to borrow more money for further initiatives when interest rates rise. VanEck Vectors Digital Transformation ETF (DAPP - Free Report) shed 16.4% last week. It aims to offer exposure to companies that are at the forefront of the digital asset transformation, such as digital asset exchanges, payment gateways, digital asset mining operations, software services, equipment and technology or services to the digital asset operations, digital asset infrastructure businesses or companies facilitating commerce with the use of digital assets.
VanEck Vectors Digital Transformation ETF tracks the MVIS Global Digital Assets Equity Index and holds 20 securities in its basket. It charges 50 bps in annual fees and trades in an average daily volume of 101,000. DAPP has accumulated $25.3 million in its asset base.
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