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Best Inverse/Leveraged ETFs in the Worst Week of 2023
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Wall Street was downbeat, with the S&P 500, the Dow Jones, the Nasdaq Composite and the Russell 2000 losing about 2.7%, 3%, 3.3% and 2.9%, respectively, last week, due to rising rate worries. It was the worst week of 2023. A round of upbeat economic data points indicated a longer-than-expected Fed rate hike plan. However, the Fed minutes infused some optimism once again as almost all officials supported a slower pace of interest rate increases.
Fed Minutes in Focus
Per the minutes, interest rates will continue moving higher amid the ongoing inflation concerns but at a slower pace, which the Fed officials think is the best way to manage the risks of raising rates. At the same time, they were also concerned about stopping or slowing their inflation-fighting campaign too soon. The central bank raised interest rates by 25 bps last month, after hiking the same by 475 bps last year in the fastest hike since the 1980s.
PCE Price Index Data in Focus
Meanwhile, the Fed's preferred inflation measure increased last month at its fastest clip since June, an ominous sign that price pressure remains deep-rooted in the U.S. economy and could lead the Fed to further hike interest rates well into this year. Consumer prices rose 0.6% sequentially in January, up sharply from a 0.2% sequential increase in December. On a year-over-year basis, prices rose 5.4%, up from a 5.3% annual increase in December.
Uptick in U.S. Treasury Yields
The overall impact of upbeat data points and high inflation was the uptick in bond yields. The benchmark U.S. treasury yield was 3.82% at the start of the week, while it ended the week at 3.95%. The six-month U.S. treasury yield was 4.99% at the start of the week while it ended the week at 5.06%.
Key Earnings Mixed to Upbeat
Apart from economic events, earnings were mixed to upbeat last week. Chinese e-commerce giant Alibaba Group (BABA) reported robust third-quarter fiscal 2023 before the opening bell on Feb 23, wherein it beat the Zacks Consensus Estimate for both earnings and revenues. Nvidia (NVDA) cheered investors with its solid fourth-quarter fiscal 2023 results, wherein it topped both earnings and revenue estimates. It also offered a bullish revenue outlook for the current quarter.
Walmart (WMT) reported fourth-quarter fiscal 2023 results, wherein it surpassed both earnings and revenue estimates but issued a weaker-than-expected outlook for the full year. Deere & Co (DE) reported robust first-quarter fiscal 2023 results, beating estimates on both the top and bottom lines. The company offered a bullish outlook for the fiscal year.
Against this backdrop, below we have highlighted a few winning inverse/leveraged ETFs of last week.
ETFs in Focus
FTSE China Bear -3X Direxion (YANG - Free Report) – Up 25.5%
Shares of Chinese companies were under pressure last week as reports that Washington was looking to increase the number of troops, helping train Taiwanese forces contributed to rising Sino-U.S. tensions, per a Reuters article. In any case, relations between America and China deteriorated in February over the shooting down of the apparent Chinese spy balloon.
Dow Jones Internet Bear -3X Direxion (WEBS - Free Report) – Up 20.9%
The underlying Dow Jones Internet Composite Index includes only companies whose primary focus is Internet-related. As Internet and tech stocks underperform in a rising rate environment, inverse leveraged internet ETF emerged a winner last week.
Gold bullion ETF SPDR Gold Shares (GLD - Free Report) was off 1.7% last week, thanks to a stronger greenback. The U.S. dollar ETF (UUP - Free Report) was up 1.4% last week on cues of a further hawkish Fed. Since most commodities are priced in the greenback, non-yielding gold bullion has every reason to lose value amid Fed rate hike worries. Investors should note that gold mining stocks act as leveraged play of the underlying metal. Hence, gold mining ETFs like GDX shed even more last week. This, in turn, made the inverse/leveraged gold mining ETF GDXD a winner.
Fears of recession and the impact of inflation on consumer budgets could act as a drag on the recovery in travel demand. Hotel Hilton management said it expects demand to slow down as the economy will likely turn sluggish in the second half of 2023, as quoted on investing.com. Group bookings are down 15% compared to the pre-pandemic levels, while headwinds in several industries continue to affect business travel, per Truist Securities, quoted on the same source.
S&P 500 High Beta Bear -3X Direxion (HIBS - Free Report) – Up 16.6%
As rising rate worries and recessionary fears were the key concerns last week, stock market tumbled. His has triggered a flight to safety and wreaked havoc on high beta assets. HIBS follows the S&P 500 High Beta Index, which selects 100 securities from the S&P 500 Index that have the highest sensitivity to beta over the past 12 months.
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Best Inverse/Leveraged ETFs in the Worst Week of 2023
Wall Street was downbeat, with the S&P 500, the Dow Jones, the Nasdaq Composite and the Russell 2000 losing about 2.7%, 3%, 3.3% and 2.9%, respectively, last week, due to rising rate worries. It was the worst week of 2023. A round of upbeat economic data points indicated a longer-than-expected Fed rate hike plan. However, the Fed minutes infused some optimism once again as almost all officials supported a slower pace of interest rate increases.
Fed Minutes in Focus
Per the minutes, interest rates will continue moving higher amid the ongoing inflation concerns but at a slower pace, which the Fed officials think is the best way to manage the risks of raising rates. At the same time, they were also concerned about stopping or slowing their inflation-fighting campaign too soon. The central bank raised interest rates by 25 bps last month, after hiking the same by 475 bps last year in the fastest hike since the 1980s.
PCE Price Index Data in Focus
Meanwhile, the Fed's preferred inflation measure increased last month at its fastest clip since June, an ominous sign that price pressure remains deep-rooted in the U.S. economy and could lead the Fed to further hike interest rates well into this year. Consumer prices rose 0.6% sequentially in January, up sharply from a 0.2% sequential increase in December. On a year-over-year basis, prices rose 5.4%, up from a 5.3% annual increase in December.
Uptick in U.S. Treasury Yields
The overall impact of upbeat data points and high inflation was the uptick in bond yields. The benchmark U.S. treasury yield was 3.82% at the start of the week, while it ended the week at 3.95%. The six-month U.S. treasury yield was 4.99% at the start of the week while it ended the week at 5.06%.
Key Earnings Mixed to Upbeat
Apart from economic events, earnings were mixed to upbeat last week. Chinese e-commerce giant Alibaba Group (BABA) reported robust third-quarter fiscal 2023 before the opening bell on Feb 23, wherein it beat the Zacks Consensus Estimate for both earnings and revenues. Nvidia (NVDA) cheered investors with its solid fourth-quarter fiscal 2023 results, wherein it topped both earnings and revenue estimates. It also offered a bullish revenue outlook for the current quarter.
Walmart (WMT) reported fourth-quarter fiscal 2023 results, wherein it surpassed both earnings and revenue estimates but issued a weaker-than-expected outlook for the full year. Deere & Co (DE) reported robust first-quarter fiscal 2023 results, beating estimates on both the top and bottom lines. The company offered a bullish outlook for the fiscal year.
Against this backdrop, below we have highlighted a few winning inverse/leveraged ETFs of last week.
ETFs in Focus
FTSE China Bear -3X Direxion (YANG - Free Report) – Up 25.5%
Shares of Chinese companies were under pressure last week as reports that Washington was looking to increase the number of troops, helping train Taiwanese forces contributed to rising Sino-U.S. tensions, per a Reuters article. In any case, relations between America and China deteriorated in February over the shooting down of the apparent Chinese spy balloon.
Dow Jones Internet Bear -3X Direxion (WEBS - Free Report) – Up 20.9%
The underlying Dow Jones Internet Composite Index includes only companies whose primary focus is Internet-related. As Internet and tech stocks underperform in a rising rate environment, inverse leveraged internet ETF emerged a winner last week.
Microsectors Gold Miners -3X ETN (GDXD - Free Report) – Up 18.6%
Gold bullion ETF SPDR Gold Shares (GLD - Free Report) was off 1.7% last week, thanks to a stronger greenback. The U.S. dollar ETF (UUP - Free Report) was up 1.4% last week on cues of a further hawkish Fed. Since most commodities are priced in the greenback, non-yielding gold bullion has every reason to lose value amid Fed rate hike worries. Investors should note that gold mining stocks act as leveraged play of the underlying metal. Hence, gold mining ETFs like GDX shed even more last week. This, in turn, made the inverse/leveraged gold mining ETF GDXD a winner.
Microsectors Travel -3X ETN (FLYD - Free Report) – Up 17.6%
Fears of recession and the impact of inflation on consumer budgets could act as a drag on the recovery in travel demand. Hotel Hilton management said it expects demand to slow down as the economy will likely turn sluggish in the second half of 2023, as quoted on investing.com. Group bookings are down 15% compared to the pre-pandemic levels, while headwinds in several industries continue to affect business travel, per Truist Securities, quoted on the same source.
S&P 500 High Beta Bear -3X Direxion (HIBS - Free Report) – Up 16.6%
As rising rate worries and recessionary fears were the key concerns last week, stock market tumbled. His has triggered a flight to safety and wreaked havoc on high beta assets. HIBS follows the S&P 500 High Beta Index, which selects 100 securities from the S&P 500 Index that have the highest sensitivity to beta over the past 12 months.