Wall Street was downbeat last week due to mounting inflationary pressures, 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 inverse/leveraged ETF areas that won 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
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 the OPEC stance.
Microsectors U.S. Big Oil Index 3X ETN ( NRGU Quick Quote NRGU - Free Report) – Up 43.1% Microsectors Oil & Gas Exp. & Prod. 3X Leveraged ( OILU Quick Quote OILU - Free Report) – Up 33.4% Energy Bull 2X Direxion (ERX) – Up 21% Inverse Leveraged China
Chinese stocks slid last week as Beijing strengthened its commitment to maintaining a ‘zero COVID’ strategy. China has been witnessing a rise in COVID cases lately. Hence, such a policy will slow down its growth and cause several supply disruptions globally.
FTSE China Bear 3X Direxion ( YANG Quick Quote YANG - Free Report) – Up 17.9% Ultrashort FTSE China 50 ETF ( FXP Quick Quote FXP - Free Report) – Up 11.7% Inverse Leveraged U.S. Treasuries
As the benchmark yields topped the 3%-level, U.S. treasuries fell in value as bond prices are inversely related to the yields.
20+ Year Treasury Bear 3X Direxion ( TMV Quick Quote TMV - Free Report) – Up 14.6% Inverse Leveraged Technology
The rising rate trend is a negative for growth sectors like technology. No wonder, this inverse-leveraged tech and Internet fund was a winner last week.
Direxion Daily Cloud Computing Bear 2X Shares – Up 12.8% Dow Jones Internet Bear 3X Direxion (WEBS) – Up 11.9% Inverse Leveraged Real Estate
Real estate is a rate-sensitive sector. The sector underperforms in a rising rate environment. With treasury yields rising faster, real estate stocks declined.
Real Estate Bear 3X Direxion ( DRV Quick Quote DRV - Free Report) – Up 11.7%