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Best Inverse/Leveraged ETFs of Last Week

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Wall Street remains typically upbeat in Thanksgiving week, marking the start of a year-end Santa rally. This year isn’t any different. Stocks offered moderate gains last week, with the S&P 500 adding 2%, the Dow Jones advancing about 2.4% and the Nasdaq inching up just 0.7%.  

Minutes from the FOMC's latest meeting showed that Federal Reserve officials expect to shift to smaller interest rate increases “soon,” as quoted on CNBC. Markets widely expect the rate-setting FOMC to settle for a 0.5 percentage point increase in December, following four successive 0.75 percentage point hikes.

Some committee members even expressed concerns about risks to the financial system if the Fed remains equally aggressive on policy tightening. Following such statements, interest rates went downhill last week, favoring the equity market rally.

Benchmark U.S. treasury yield started the week at 3.82%, while it ended the week at 3.68%. The two-year U.S. treasury yield slipped to 4.42% on Nov 25 from 4.51% on Nov 18. Markets expect a few more rate hikes in 2023, taking the funds rate to around 5%, per CNBC.

Meanwhile, retailers were splurging on early promotions and discounts as well as free shipping on online purchases to lure customers on Black Friday. According to the National Retail Federation (“NRF”), about 166.3 million Americans likely to shop either in-store or online during the Thanksgiving weekend (spanning five days from Thanksgiving Day through Cyber Monday).

The figure was up almost 8 million from last year and the highest since NRF began tracking this data in 2017. Of them, 32.9 million had planned to shop on Thanksgiving Day, 114.9 million on Black Friday, 60.4 million on Small Business Saturday, 31.4 million on Sunday and 63.9 million on Cyber Monday (read: 4 ETFs That Are the Best Deals on Black Friday Bonanza).

Against this backdrop, below we highlight a few top-performing inverse/leveraged ETFs of last week.

ETFs in Focus

Ultra Bloomberg Natural Gas ETF BOIL – Up 20.4%

US natural gas futures jumped to above $7.2/MMBtu last week, approaching the 2-month high of $7.3, boosted by concerns of potential coal supply disruptions. Uncertainty over the supply and demand of natural gas over the coming months prevailed as investors kept track of cold weather and news regarding the restart of the Freeport LNG export terminal.

FTSE China Bear 3X Direxion (YANG - Free Report) – Up 19.4%

China’s economy was fraught with a record-high jump in daily COVID-19 cases last week, which saw the reinstatement of strict Covid curbs in several major cities. The continuous surge in Covid cases has renewed traders' concern about the reintroduction of China’s zero-Covid policy, strict lockdowns, the slowing economy and doubts about whether more monetary easing policies would at all be able to boost growth. As a result, inverse leveraged China ETFs gained last week.

Utilities Bull 3X Direxion (UTSL - Free Report) – Up 16.2%

As rates fell last week, rate-sensitive utilities stocks jumped. Utilities stocks outperform in a falling rate environment. Plus, the utilities sector is non-cyclical in nature. Hence, the sector fares better in a tough economic condition.

Microsectors Gold Miners 3X ETN (GDXU - Free Report) – Up 15.2%

As the chances of steeper rate hikes fell, the greenback dropped last week. Invesco DB US Dollar Index Bullish Fund (UUP - Free Report) dropped about 1.5% last week. As gold prices are inversely related to the greenback, gold bullion ETF GLD gained about 0.6%. This, in turn, boosted gold mining ETF as mining stocks often act as a leveraged play of the underlying metal. This explains the gains in GDXU.

Retail Bull 3X Direxion (RETL - Free Report) – Up 10.2%

The holiday season had kicked off last week — one of the busiest shopping days of the year. The attractive offers are likely to boost retail sales and lead to a surge in stock prices in the days to follow. The Black Friday online sales bonanza was in full swing as a number of retailers had already perked up their deals several weeks before. No wonder, leveraged retail ETF gained massively last week.

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