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Wall Street was downbeat last week due to mounting inflationary pressure, rising rate worries and geopolitical tensions. The S&P 500, the Dow Jones, the Nasdaq Composite and the Russell 2000, declined 0.2%, 0.24%, 1.5% and 1.3%, respectively.
As far as rates are concerned, the benchmark treasury yield started the week with 2.99% and closed the week at 3.12%, hitting the highest level since 2018.
The Federal Reserve increased its benchmark interest rate by half a percentage point, matching market expectations. This marked the biggest hike in two decades in the United States. In addition, the central bank drew a program in which it will ultimately lower its bond holdings by $95 billion a month.
Fed Chairman Jerome Powell stressed on the commitment to tame inflation but indicated that raising rates by 75 basis points at a time “is not something the committee is actively considering,” per a CNBC article (read: Biggest U.S. Rate Hike Since 2000 in May: Sector ETFs to Win).
Meanwhile, the ISM Manufacturing PMI for the United States came in downbeat. It was 55.4 in April 2022, declining for the second month. This compares to 57.1 ISM Manufacturing PMI in March and the market forecast of 57.6. It marked the lowest reading since July 2020, as a slowdown was seen in production (53.6 versus 54.5 in March), new orders (53.5 versus 53.8), and employment (50.9 versus 56.3) (read: Manufacturing Slows Again in April: Sector ETFs at Better Spots).
Against this backdrop, below we highlight a few top-performing ETF areas of last week.
Energy prices are rallying this year as the geopolitical turmoil between Russian and Ukraine aggravated concerns over energy supply. Brent crude prices traded around $110-111 per barrel on Friday, while natural gas prices also jumped to a 14-year high.
The European Union’s (EU) proposal of an embargo on Russian oil and phasing it out in six months are wreaking havoc on the oil market. Also, the Organization of the Petroleum Exporting Countries (OPEC) and allies met on Thursday and are sticking to a 432,000 barrel per day increase for the month of June, implying no movement or change in OPEC stance.
The shipping crisis probably has flared up again as China doubled down on its “zero-Covid” policy. This may result in supply chain disruption and higher shipping rates. Contracted ocean freight rates surged for the third month in April, up double digits for the month and spiking year over year. With a strict Chinese strategy showing no signs of reversal, shipping rates should gain again.
As the benchmark yields topped the 3%-level, ETFs that give protection against rising rates won last week. The Simplify Interest Rate Hedge ETF seeks to hedge interest rate movements arising from rising long-term interest rates, and benefit from market stress when fixed income volatility increases, while offering income.
iPatha.B Platinum Subindex TR ETN – Up 7.4%
The Russian crisis has probably boosted the prices of platinum. Newly refined Russian platinum was suspended from trading in London last month. This has cut the access to the metals' biggest trade hub.
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4 Top-Performing ETF Areas of Last Week
Wall Street was downbeat last week due to mounting inflationary pressure, rising rate worries and geopolitical tensions. The S&P 500, the Dow Jones, the Nasdaq Composite and the Russell 2000, declined 0.2%, 0.24%, 1.5% and 1.3%, respectively.
As far as rates are concerned, the benchmark treasury yield started the week with 2.99% and closed the week at 3.12%, hitting the highest level since 2018.
The Federal Reserve increased its benchmark interest rate by half a percentage point, matching market expectations. This marked the biggest hike in two decades in the United States. In addition, the central bank drew a program in which it will ultimately lower its bond holdings by $95 billion a month.
Fed Chairman Jerome Powell stressed on the commitment to tame inflation but indicated that raising rates by 75 basis points at a time “is not something the committee is actively considering,” per a CNBC article (read: Biggest U.S. Rate Hike Since 2000 in May: Sector ETFs to Win).
Meanwhile, the ISM Manufacturing PMI for the United States came in downbeat. It was 55.4 in April 2022, declining for the second month. This compares to 57.1 ISM Manufacturing PMI in March and the market forecast of 57.6. It marked the lowest reading since July 2020, as a slowdown was seen in production (53.6 versus 54.5 in March), new orders (53.5 versus 53.8), and employment (50.9 versus 56.3) (read: Manufacturing Slows Again in April: Sector ETFs at Better Spots).
Against this backdrop, below we highlight a few top-performing ETF areas of last week.
ETFs in Focus
Energy
US Natural Gas Fund (UNG - Free Report) – Up 10.7%
S&P 500 EW Energy Invesco ETF – Up 10.7%
Energy prices are rallying this year as the geopolitical turmoil between Russian and Ukraine aggravated concerns over energy supply. Brent crude prices traded around $110-111 per barrel on Friday, while natural gas prices also jumped to a 14-year high.
The European Union’s (EU) proposal of an embargo on Russian oil and phasing it out in six months are wreaking havoc on the oil market. Also, the Organization of the Petroleum Exporting Countries (OPEC) and allies met on Thursday and are sticking to a 432,000 barrel per day increase for the month of June, implying no movement or change in OPEC stance.
Breakwave Dry Bulk Shipping ETF (BDRY - Free Report) – Up 10.6%
The shipping crisis probably has flared up again as China doubled down on its “zero-Covid” policy. This may result in supply chain disruption and higher shipping rates. Contracted ocean freight rates surged for the third month in April, up double digits for the month and spiking year over year. With a strict Chinese strategy showing no signs of reversal, shipping rates should gain again.
Simplify Interest Rate Hedge ETF (PFIX - Free Report) – UP 7.9%
As the benchmark yields topped the 3%-level, ETFs that give protection against rising rates won last week. The Simplify Interest Rate Hedge ETF seeks to hedge interest rate movements arising from rising long-term interest rates, and benefit from market stress when fixed income volatility increases, while offering income.
iPatha.B Platinum Subindex TR ETN – Up 7.4%
The Russian crisis has probably boosted the prices of platinum. Newly refined Russian platinum was suspended from trading in London last month. This has cut the access to the metals' biggest trade hub.