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Top Inverse/Leveraged ETF Areas of Last Week

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Wall Street delivered downbeat performances last week due to rising rates. The S&P 500 (down 2.1%), the Dow Jones (down 2.2%), the Nasdaq (down 2.6%) and the Russell 2000 (down 3.1%) – all slumped last week.

The latest Fed minutes last week shed light on the discussions surrounding inflation and the need for further rate hikes. A significant division among members was evident, with various viewpoints on the appropriate course of action. However, the majority of members see "significant upside risks" to inflation (read: More Rate Hikes in Cards On Sticky Inflation? ETFs to Buy).

This has raised the Treasury bond yields. The benchmark U.S. Treasury yields started the week at 4.19%, hit a high of 4.30% and ended the week at 4.26%. The U.S. dollar ETF (UUP - Free Report) added 0.7% last week. Niche ETFs like Global X Interest Rate Hedge ETF (RATE), which offer protection against rising rates, rose 5.3% in the week (read: ETF Strategies to Fight Rising Rates).

Meanwhile, the pain in China’s real estate sector seems to be intensifying with back-to-back bad news coming from the space. While default fears of bond payments by developer Country Garden are mounting, China’s property giant Evergrande filed for U.S. bankruptcy protection.

Notably, Evergrande defaulted on its huge debts in 2021, which sent shockwaves through the global financial markets. In fact, the news from China has boosted the risk-off trade sentiments to some extent to close out the week (read: China's Country Garden Contagion: ETFs to Lose/Win).

Meanwhile, Japan's economy demonstrated remarkable resilience in Q2, defying projections with robust growth of 6.0% on an annualized basis. This translated into a striking quarterly gain of 1.5%, far surpassing median estimates of 0.8% in a Reuters poll, as quoted on CNN. However, the growth was bolstered by export strength, which seems unsustainable (read: Japan's GDP Growth Beats Expectations: ETFs to Play).

Coming to the United States, corporate earnings releases appear in good shape. Retail giant Walmart (WMT) reported robust second-quarter fiscal 2024 results last week, wherein it surpassed both earnings and revenue estimates and raised its outlook for the full year. Cisco Systems (CSCO - Free Report) ,  too, beat on both lines and issued an optimistic guidance.

Against this backdrop, below, we highlight a few best-performing inverse/leveraged ETF areas of last week.

ETF Areas in Focus

Inverse Leveraged Gold Miners

MicroSectors Gold Miners -3X Inverse Leveraged ETNs (GDXD - Free Report) – Up 21.6%

Direxion Daily Gold Miners Index Bear 2x Shares (DUST) – Up 15.1%

Last week, gold bullion ETF GLD lost 1.3% due to higher rates and the rising greenback. As the underlying metal underperformed, gold miners slumped even more. This gave a push to inverse/leveraged gold mining ETFs.

Inverse/Leveraged China

Direxion Daily FTSE China Bear 3X Shares (YANG - Free Report) – Up 21.1%

ProShares UltraShort FTSE China 50 (FXP) – Up 13.3%

The economic situation in China is in the doldrums. Even a surprise monetary policy easing is failing to settle the problem. No wonder, inverse/China ETFs have surged.

Inverse/Leveraged Banks

MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETNs (BNKD - Free Report) – Up 18.4%

A Fitch Ratings’ analyst has alerted a higher risk of significant credit rating downgrades across the U.S. banking sector, including major players like JPMorgan Chase, as quoted on CNBC. This signifies potential turbulence ahead in the banking sector, causing many to sell off banks and the inverse/leveraged bank ETF to jump.

Leveraged Volatility

2x Long VIX Futures ETF (UVIX - Free Report) – Up 15.9%

Such tumultuous situations of the border market caused the equity volatility to surge. iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) soared 8.1% last week.

Inverse Tesla

Direxion Daily TSLA Bear 1X Shares (TSLS - Free Report) – Up 12.6%

Tesla shares lost 8.5% last week. Tesla made further price cuts in China, as it looks to boost sales amid rising competition in one of its key markets. Investors probably feared margin pressure with this move and punished the stock.


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