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5 Inverse/Leveraged ETF Areas of Last Week

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Wall Street was upbeat last week with the S&P 500 (up 1.64%), the Dow Jones (up 1.08%), the Nasdaq Composite (up 1.29%) and the Russell 2000 (up 1.13%) returning decently mainly on earnings strength. Key U.S. indexes like the S&P 500 and the Dow Jones hovered around the all-time highs. The oil rally continued last week with United States Oil Fund, LP (USO - Free Report) gaining about 1.9%.

The ongoing earnings season looks upbeat with big banks deserving a special mention. For the 69 S&P 500 members that have reported Q3 results through Oct 20, total earnings and revenues are up 35.3% and 12.9%, respectively, from the same period last year, with 87.0% beating EPS estimates and 72.5% beating revenue estimates. The Q3 earnings and revenue growth rates, and the EPS and revenue beats percentages for these 69 index members are above historical averages (read: Dow Jones Sets New All-Time High: More Upside for ETFs?).

The benchmark U.S. treasury yield hit as high as 1.68% on Oct 21 while it started the week on 1.59% yield. No wonder, rising rates boosted financial ETFs last week, most of which are hitting a new 52-week high.

Against this backdrop, below we highlight a few leveraged ETF areas that gained handsomely last week.

Brazil    

Ultrashort MSCI Brazil Capped ETF (BZQ – Up 20.3%

Brazil’s stocks are on their way to enter a bear market. They recorded their worst week since the early days of the pandemic due to concerns over the country’s fiscal outlook and growing bets on higher interest rates, per Bloomberg.

Transportation 

Transportation Bull 3X Direxion (TPOR - Free Report) – Up 11.84%

As economic reopening is speeding up with a massive vaccine drive and chances of the launch of more antiviral treatments, the risk-on sectors are gaining momentum. Sectors that are highly related to economic reopening benefited. Moreover, with the holiday season approaching, transportation stocks have every reason to cheer as even online deliveries will need the assistance of faster and efficient transportation.      

China

FTSE China Bull 3X Direxion (YINN - Free Report) – Up 11.16%

China’s stocks surged lately after many weeks of sell-off. Investors used the buy-the-dip strategy for these stocks.  China’s Evergrande is on its way to avert default as property developer reportedly paid off bond interest. Evergrande reportedly remitted $83.5 million interest payment on Evergrande’s March 2022 offshore bond to a trustee account at Citibank on Thursday — as reported earlier on Friday by state-backed Securities Times — allowing it to pay all bondholders before the payment grace period expires on Oct 23. The news boosted investors’ confidence in Chinese stocks.

Regional Banks

Regional Banks Bull 3X Direxion (DPST - Free Report) – Up 10.34%

Financial ETFs are currently trading at a 52-week high. The vaccine drive, the return of global growth and the resultant inflationary pressure, rising oil demand and consumers’ savings on fiscal and monetary stimulus and the latest Fed taper talks boosted the treasury yields and made the space a winner (read: Financial ETFs at a 52-Week High: Further Rally Looks Likely).

Homebuilders   

Homebuilders & Suppliers Bull 3X Direxion (NAIL - Free Report) – Up 9.52%   

Homebuilder sentiment rebounded despite the ongoing supply chain issues. Builder confidence in the single-family home construction market increased 4 points to 80 in October on the National Association of Home Builders/Wells Fargo Housing Market Index, as quoted on CNBC. Though the data is short of the figure 85 recorded in October 2020, it gained from the record-high 90 in November last year.