Wall Street staged a rally last week with the S&P 500, the Dow Jones, the Nasdaq Composite and the Russell 2000 adding 4.3%, 3%, 4.7% and 4.3%, respectively. Some upbeat earnings and expectations of a slower Federal Reserve monetary tightening went in favor of Wall Street.
Investors’ hope that slowing inflation and slowing growth may keep the Fed to ease plans to push up interest rates boosted equities. Though the Fed hiked rates by 75 bps last week, the Fed indicated that the pace of rate hikes would likely be slower in the coming days.
The Fed’s July move marked four consecutive rate hikes in the U.S. this year. Short-term borrowing rates are now between 2.25% and 2.50%, comparable to levels in 2019 (read:
Fed Hikes Rates by 0.75%: ETFs to Win).
"Nonetheless, job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures," the Fed indicated,
as quoted on Yahoo Finance. Big earnings from the likes of Apple and Amazon came in favorable. Some earnings from the European market too came in upbeat.
Against this backdrop, below we highlight a few leveraged ETF investing areas that offered stellar returns last week.
ETFs in Focus Oil & Energy
Oil prices gained last week as hopes about OPEC+ supply boost faded,
per Reuters. Analysts said it would be tough for OPEC+ to increase supply as many producers are already struggling to meet output quotas. Stronger stock markets as well as a weaker greenback supported commodities like oil. MicroSectors Oil & Gas Exp. & Prod. 3x Leveraged ETN ( OILU Quick Quote OILU - Free Report) – Up 33.7% Direxion Daily Oil Services Bull 2X Shares ( ONG Quick Quote ONG - Free Report) – Up 30.1% Clean Energy
Clean-energy shares jumped in July as Sen. Joe Manchin agreed to favor a roughly $370 billion climate and energy spending package that would include tax credits for electric vehicles, renewable energy projects and clean hydrogen,
per a Wall Street Journal article. Solar and hydrogen stocks that are seen as particularly sensitive to changes in tax credits and incentives gained materially. Direxion Daily Global Clean Energy Bull 2X Shares ETF ( KLNE Quick Quote KLNE - Free Report) – Up 30.2% Brazil
Rally in commodity stocks and strong corporate earnings were tailwinds for Brazil shares. Domestic unemployment in Brazil for the three months leading to June dropped to 9.3% to their lowest since 2015, beating estimates and strengthening recent bets that the central bank may extend the Selic rate beyond the current level of 13.25%, per tradingeconomics.
ProShares Ultra MSCI Brazil Capped ( UBR Quick Quote UBR - Free Report) – Up 24.8% Direxion Daily MSCI Brazil Bull 2X Shares ( BRZU Quick Quote BRZU - Free Report) – Up 23.9% Junior Silver Miners
As the Fed indicated to go slow on policy tightening front, demand for gold and silver increased. This is because a less hawkish Fed means moderate strength in the greenback. This in turn boosts the prices of metals like gold and silver. Since mining companies act as leveraged plays of the underlying metal, SILX gained strength.
ETFMG Prime 2X Daily Junior Silver Miners ETF ( SILX Quick Quote SILX - Free Report) – Up 21.9%