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Wall Street put up a mixed show in the holiday-shortened last week, with the S&P 500 (up 1.3%), the Dow Jones (up 1.9%) and the Nasdaq Composite (up 0.6%) remaining in positive territory and the Russell 2000 (down 0.8%) being in the red.
Recessionary fears were rife in the United States last week. This is especially true given that OPEC+ announced a surprise output early last week. This, in turn, triggered chances of further price inflation worldwide, which may result in further interest rate hikes in various economies like the United States. Such relentless rate hikes may tip economies into a slowdown or recession.
Meanwhile, the ISM Manufacturing PMI fell to 46.3 in March 2023, the lowest since May 2020, and compared to 47.7 in February and a consensus of 47.5, indicating that rising interest rates and growing recession fears have started impacting businesses adversely.
The reading marked the fifth straight month of shrinkage in factory activity, as companies continue to slow output to keep pace with falling demand for the first half of 2023 and prepare for growth in the late summer/early fall period, per tradingeconomics.
As far as U.S. treasury yields are concerned, the benchmark U.S. treasury yields ended the week at 3.39% on Apr 7, while it started the week at 3.35% and hit a low of 3.30%. Against this backdrop, below we highlight a few inverse/leveraged ETFs that gained meaningfully last week.
After wild swings, gold showed a strong rebound lately on U.S. recessionary threats as the metal is considered a safe haven. The subdued U.S. dollar and a decline in U.S. treasury bond yields bolstered the demand for the yellow metal. Additionally, the demand for inflation hedge is also driving investors toward gold.
Chip stocks pulled back last week due to the weaker-than-expected PMI reports. Industry survey for Electrical Equipment, Appliances & Components revealed that new orders are have started to ease in March. The supply chain disruption — particularly in electronics — is still massive compared to pre-pandemic conditions. Survey for Transportation Equipment mentioned that “sales are slowing at an increasing rate.”
There was strong performance of healthcare stocks last week. Johnson & Johnson (J&J) gained considerably as traders reacted favorably to the $8.9 billion talc settlement. UnitedHealth, Merck, and Amgen also gained in line with J&J.
Oil prices remain in a sweet spot as OPEC+ producers agreed a surprise oil output cut in last-to-last Sunday. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, decided to cut production targets by about 1.16 million barrels per day from May. The cut will run until the end of 2023. The output cut is in addition to the 2 million barrels per day cut announced last October by the oil cartel (read: Sector ETFs to Benefit/Lose on Surprise OPEC+ Output Cut).
As U.S. treasury yields were at the subdued levels last week due to recessionary fears, utilities stocks – that perform better in a low-rate environment, outperformed last week. Nevertheless, utilities are often seen as a safe investment during recessions or periods of weak economic growth because demand for electricity, gas, and water services remains stable.
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Best Inverse/Leveraged ETFs of Last Week
Wall Street put up a mixed show in the holiday-shortened last week, with the S&P 500 (up 1.3%), the Dow Jones (up 1.9%) and the Nasdaq Composite (up 0.6%) remaining in positive territory and the Russell 2000 (down 0.8%) being in the red.
Recessionary fears were rife in the United States last week. This is especially true given that OPEC+ announced a surprise output early last week. This, in turn, triggered chances of further price inflation worldwide, which may result in further interest rate hikes in various economies like the United States. Such relentless rate hikes may tip economies into a slowdown or recession.
Meanwhile, the ISM Manufacturing PMI fell to 46.3 in March 2023, the lowest since May 2020, and compared to 47.7 in February and a consensus of 47.5, indicating that rising interest rates and growing recession fears have started impacting businesses adversely.
The reading marked the fifth straight month of shrinkage in factory activity, as companies continue to slow output to keep pace with falling demand for the first half of 2023 and prepare for growth in the late summer/early fall period, per tradingeconomics.
As far as U.S. treasury yields are concerned, the benchmark U.S. treasury yields ended the week at 3.39% on Apr 7, while it started the week at 3.35% and hit a low of 3.30%. Against this backdrop, below we highlight a few inverse/leveraged ETFs that gained meaningfully last week.
ETFs in Focus
Microsectors Gold Miners 3X ETN (GDXU - Free Report) – Up 16.1%
After wild swings, gold showed a strong rebound lately on U.S. recessionary threats as the metal is considered a safe haven. The subdued U.S. dollar and a decline in U.S. treasury bond yields bolstered the demand for the yellow metal. Additionally, the demand for inflation hedge is also driving investors toward gold.
Semiconductor Bear -3X Direxion (SOXS - Free Report) – Up 13.4%
Chip stocks pulled back last week due to the weaker-than-expected PMI reports. Industry survey for Electrical Equipment, Appliances & Components revealed that new orders are have started to ease in March. The supply chain disruption — particularly in electronics — is still massive compared to pre-pandemic conditions. Survey for Transportation Equipment mentioned that “sales are slowing at an increasing rate.”
Healthcare Bull 3X ETF Direxion (CURE - Free Report) – Up 12.7%
There was strong performance of healthcare stocks last week. Johnson & Johnson (J&J) gained considerably as traders reacted favorably to the $8.9 billion talc settlement. UnitedHealth, Merck, and Amgen also gained in line with J&J.
Ultra Bloomberg Crude Oil 2X ETF (UCO - Free Report) – Up 12.5%
Oil prices remain in a sweet spot as OPEC+ producers agreed a surprise oil output cut in last-to-last Sunday. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, decided to cut production targets by about 1.16 million barrels per day from May. The cut will run until the end of 2023. The output cut is in addition to the 2 million barrels per day cut announced last October by the oil cartel (read: Sector ETFs to Benefit/Lose on Surprise OPEC+ Output Cut).
Utilities Bull 3X Direxion (UTSL - Free Report) – Up 11.6%
As U.S. treasury yields were at the subdued levels last week due to recessionary fears, utilities stocks – that perform better in a low-rate environment, outperformed last week. Nevertheless, utilities are often seen as a safe investment during recessions or periods of weak economic growth because demand for electricity, gas, and water services remains stable.