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Best Inverse/Leveraged ETFs of Last Week

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Wall Street was upbeat last week, with all key U.S. equity gauges, including the S&P 500 (up 4%), the Dow Jones (up 5.7%), the Nasdaq (up 2.2%) and the Russell 2000 (up 6%), gaining substantially. Notably, the Dow Jones recorded the fourth successive week of gains. The 30-stock index marked its best performance since May. It’s also on track for its best month since January 1976, per CNBC.

However, tech shares again failed to score big gains last week as investors dumped technology shares following weak results and outlooks from Microsoft, Alphabet and Meta and rotated into economically sensitive stocks that will benefit if the U.S. economy can avoid a recession. Apple was the lone star in the big tech batch. There is also hope that the Fed may stop its 75-bps rate hike trail in December.

The earnings picture so far this season has been decent, with inflation data not going out of control. For the 170 S&P 500 members that have reported Q3 results already, total earnings are down -3.2% from the same period last year on +9.7% higher revenues, with 76.5% beating EPS estimates and 67.6% beating revenue estimates, per Zacks Earnings Trends issued on Oct 26, 2022.

Plus, the core personal consumption expenditures price index in September increased 0.5% from the previous month and 5.1% from a year ago, still high but mostly in line with expectations. This is the preferred gauge of inflation for the Federal Reserve. Personal spending rose 0.6%, more than expected, the data showed. This has probably helped the U.S. equity market.

The week started with the benchmark U.S. treasury yield being 4.25%, hit a weekly low of 3.96% and ended the week at 4.02%. Against this backdrop, we highlight a few inverse/leveraged ETFs that won last week.

ETFs in Focus

Homebuilders & Suppliers Bull 3X Direxion (NAIL - Free Report) – Up 27.6%

As rates dived last week and home prices weakened, chances of home sales increased and homebuilding stocks and ETFs gained. The Direxion Daily Homebuilders & Supplies Bull 3X Shares seeks daily investment results, before fees and expenses, of 300% of the performance of the Dow Jones U.S. Select Home Construction Index.

FTSE China Bear 3X Direxion (YANG - Free Report) – Up 27.5%

The Shanghai Composite slumped 2.25% to close at 2,916 while the Shenzhen Component plunged 3.24% to 10,402 on Friday, hitting their lowest levels in six months, with both benchmarks finishing the week at least 4% lower as foreign investors dumped a record amount of mainland stocks during the period.

Markets feared about president Xi Jinping’s securing third term in office which may lead to the continuation of zero-Covid policy, more sectorial crackdowns and greater geopolitical tensions with the United States.

Retail Bull 3X Direxion (RETL - Free Report) – Up 21.9%

Americans are gaining optimism as evident from the data released by the University of Michigan. Consumer sentiment for the United States increased to 59.8 in October 2022, the highest in six months, up from 58.6 in the previous month and above market expectations of 59, a preliminary estimate showed.

The late October-December period embraces the key holiday season, which puts the spotlight on the performance of retailers. As loads of sales-boosting events — Halloween, Thanksgiving, Cyber Monday, Black Friday and Christmas — fall in this quartile, the sector generally sees a sales boost.

Industrials Bull 3X Direxion (DUSL - Free Report) – Up 21.1%

Production levels at U.S. factories rose for the third straight month in September, driven by growth in manufacturing activity, which has been bolstered by higher demand for consumer goods. Steady growth in industrial production and output also indicates that the manufacturing sector still hasn’t crumbled in the face of soaring inflation.

The Direxion Daily Industrials Bull 3X Shares seeks daily investment results, before fees and expenses, of 300% of the performance of the Industrial Select Sector Index.

Utilities Bull 3X Direxion (UTSL - Free Report) – Up 19.9%

This is yet another beneficiary of the decline in rates last week. The utilities sector is debt-heavy and rate-sensitive. The sector fares better in a low-rate environment. Direxion Daily Utilities Bull 3X Shares offers three times exposure to the performance of the Utilities Select Sector Index.

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