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Best Inverse/Leveraged ETFs of Last Week

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Wall Street delivered a mixed performance last week with the S&P 500 (up 1.6%), the Nasdaq Composite (up 3.31%) and the Russell 2000 (up 3.88%) returning positively and the Dow Jones (down 0.15%) losing a little.

As expected, the Federal Reserve on Wednesday hiked its benchmark interest rate by 25 bps and gave an indication that more rate hikes are in the cards as inflation remains high. However, as inflation is showing signs of cooling, future rate hikes are likely to be smaller in magnitude. The latest hike takes rates to a target range of 4.5%-4.75%, the highest since October 2007. The move also marked the eighth increase in rates since March 2022.

The last week was marked with key tech earnings. Among these, Apple Inc. (AAPL - Free Report) reported dismal first-quarter fiscal 2023 results as it missed the Zacks Consensus Estimate for earnings for the first time since 2016. The tech giant posted its largest year-over-year quarterly revenue decline since 2019 (read: ETFs in Focus on Apple's First Earnings Miss Since 2016).

After the closing bell on Thursday, Amazon (AMZN - Free Report) disappointed investors following its fourth-quarter results. Though the e-commerce giant beat earnings and revenue estimates, it posted the least profitable holiday quarter since 2014 and the biggest-ever annual loss as a public company (read: ETFs in Focus Posts Amazon's Biggest Annual Loss Ever).

After the closing bell on Feb 1, Facebook’s parent company Meta Platforms (META - Free Report) reported solid fourth-quarter 2022 results, which outpaced revenue and earnings estimates. Though the social media giant reported its third consecutive quarterly drop in revenues, it provided an upbeat revenue forecast, signaling a rebound in demand for digital ads after months of weak sales.

In terms of economic data points, ISM manufacturing data came in weaker. The ISM Manufacturing PMI dropped to 47.4 in January, the lowest since May 2020 at the height of the covid pandemic and below market forecasts of 48. The reading pointed to the third successive contraction in factory activity as companies slowed outputs to better match demand in the first half of 2023 and prepare for growth in the second half of the year.

Against this backdrop, below, we highlight a few inverse/leveraged ETF areas that won last week. 

Inverse Leveraged Energy

Ultrashort Bloomberg Natural Gas -2X ETF (KOLD - Free Report) – Up 40%

Microsectors U.S. Big Oil Index -3X ETN (NRGD) – Up 26.6%

Oil and gas prices were under pressure following a set of bearish news coming out of the United States last week. A much smaller-than-usual inventory draw and forecasts of warmer weather in the United States till mid-Februarycaused natural gas prices to fall. An article also indicated that activists attacked Shell for Greenwashing.

Leveraged Meta

Graniteshares Meta 1.5X Daily ETF (FBL - Free Report) – Up 34.5%

Meta Platforms (META - Free Report) reported fourth-quarter 2022 earnings of $3 per share, which beat the Zacks Consensus Estimate by 41.51%. Revenues of $32.17 billion beat the Zacks Consensus Estimate by 2.74%. This caused a shoot-up in Meta shares last week. Meta gained a whopping 26.9% last week. Zuckerberg gained a record $12.5 billion in a day as Meta bounced back.

Leveraged Retail

Retail Bull 3X Direxion (RETL - Free Report) – Up 21.5%

Although U.S. retail sales for the month of December came in downbeat, a less-hawkish Fed and a decline in rates as well as energy prices this year went in favor of retail stocks and ETFs. This is because both factors are likely to boost consumers’ savings and their ability to shell out more on discretionary items.

Inverse/Leveraged China

FTSE China Bear -3X Direxion (YANG - Free Report) – Up 20.1%

Mainland China share market gained as investors chose to book profit after China's stock benchmark soared 7.4% last month on China’s economic reopening.

Leveraged Regional Banks

Regional Banks Bull 3X Direxion (DPST - Free Report) – Up 19.4%

The benchmark U.S. treasury yield started the week at 3.55% and ended the week at 3.53%. The three-month U.S. treasury yield started the week at 4.72% and ended the week at 4.70%. This has steepened the yield curve a bit. A less hawkish Fed has resulted in this trend. This is a winning scenario for bank stocks as a steepening yield curve increased banks’ net interest margin.

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