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Last week, Wall Street snapped its nine-week win streak, marking the end of their longest consecutive weekly run in the green since 2004. The Dow Jones and the S&P 500 had their worst start this year since 2016, per a Yahoo Finance article. The S&P 500 was off 1.5%, the Dow Jones was down 0.6% and the Nasdaq Composite lost about 0.6% last week.
Investors' optimism has waned due to stretched valuations and the uncertainty surrounding the timing of the Fed's rate cuts. Consequently, they are now more inclined to investigate diversified approaches that can safeguard their portfolios against potential losses.
The latest Fed minutes show that it wouldn’t cut rates as aggressively as expected for this year.The United States witnessed an addition of 216,000 new jobs in December 2023, surpassing projections of a decline from the previous month.
This triggered the fears about no imminent rate cuts as the economy seems to be on the solid footing. There is also a rising concern about the risks that an “overly restrictive” monetary policy may pose to the economy.
The disappointing manufacturing data also added to the chaos. The U.S. manufacturing sector slipped further into contraction during December, according to the latest PMI data from S&P Global, as output declined and the downturn in new orders gathered pace.
iPhone maker Apple (AAPL) is also facing difficulties at the start of the New Year, as its stock value dropped to the lowest point in eight weeks. This decline followed downgrades from two analysts, Piper Sandler and Barclays, who expressed concerns over the demand for iPhones.
Against this backdrop, below we highlight a few winning inverse/leveraged ETFs of last week.
Marijuana stocks spiked following the report that the US Drug Enforcement Administration (“DEA”) is reviewing the potential reclassification of cannabis from Schedule I to Schedule III. This development, initiated by a recommendation from the Department of Health and Human Services (HHS), could lead to substantial federal benefits for the U.S. cannabis industry if it goes through (read: Cannabis ETFs Spike on Marijuana Classification Review).
ProShares Ultra Bloomberg Natural Gas (BOIL - Free Report) ) – Up 24.4%
Weather forecasts for mid-January are predicting colder temperatures and the likelihood of winter storms throughout the United States, which may lead to an increase in natural gas demand as it would boost the heating demand. While this acted as a positive for the space, gains were restricted slightly by a smaller-than-expected storage draw of 14 billion cubic feet in the EIA’s weekly storage report.
Semiconductor stocks also saw rough trading after Dutch semiconductor manufacturing equipment maker ASML Holdings (ASML) said it would restrict shipments of some technology to China at the Dutch government’s behest. Plus, the broader market weakness added to the chaos.
MAX Auto Industry -3x Inverse Leveraged ETN (CARD - Free Report) ) – Up 18.4%
U.S. treasury yields jumped following better-than-expected jobs data. This weighed on the rate-sensitive areas like auto market. As of Jan 5, 2024, benchmark U.S. treasury yield jumped to 4.05% from 3.95% at the start of the week, which, in fact, dropped to 3.91% on the closing of Jan 3, 2024.
The rising rates also weighed on technology stocks. Tech stocks, which are high-growth in nature, tend to underperform when rates rise. Hence, the inverse leveraged technology ETF gained immensely.
The U.S. dollar posted its best weekly gain since July. Invesco DB US Dollar Index Bullish Fund (UUP - Free Report) was up 1.2% last week. As the gold is priced in the greenback, gold bullion ETF SPDR Gold Trust (GLD - Free Report) was off 0.8% last week. This, in turn, weighed on gold mining stocks and ETFs as mining stocks often act as leveraged plays of the underlying metal. The fundamentals clearly explain why this inverse leveraged gold mining ETN surged last week.
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6 Best Inverse/Leveraged ETFs of Last Week
Last week, Wall Street snapped its nine-week win streak, marking the end of their longest consecutive weekly run in the green since 2004. The Dow Jones and the S&P 500 had their worst start this year since 2016, per a Yahoo Finance article. The S&P 500 was off 1.5%, the Dow Jones was down 0.6% and the Nasdaq Composite lost about 0.6% last week.
Investors' optimism has waned due to stretched valuations and the uncertainty surrounding the timing of the Fed's rate cuts. Consequently, they are now more inclined to investigate diversified approaches that can safeguard their portfolios against potential losses.
The latest Fed minutes show that it wouldn’t cut rates as aggressively as expected for this year.The United States witnessed an addition of 216,000 new jobs in December 2023, surpassing projections of a decline from the previous month.
This triggered the fears about no imminent rate cuts as the economy seems to be on the solid footing. There is also a rising concern about the risks that an “overly restrictive” monetary policy may pose to the economy.
The disappointing manufacturing data also added to the chaos. The U.S. manufacturing sector slipped further into contraction during December, according to the latest PMI data from S&P Global, as output declined and the downturn in new orders gathered pace.
iPhone maker Apple (AAPL) is also facing difficulties at the start of the New Year, as its stock value dropped to the lowest point in eight weeks. This decline followed downgrades from two analysts, Piper Sandler and Barclays, who expressed concerns over the demand for iPhones.
Against this backdrop, below we highlight a few winning inverse/leveraged ETFs of last week.
ETFs in Focus
AdvisorShares MSOS 2x Daily ETF (MSOX - Free Report) ) – Up 27.1%
Marijuana stocks spiked following the report that the US Drug Enforcement Administration (“DEA”) is reviewing the potential reclassification of cannabis from Schedule I to Schedule III. This development, initiated by a recommendation from the Department of Health and Human Services (HHS), could lead to substantial federal benefits for the U.S. cannabis industry if it goes through (read: Cannabis ETFs Spike on Marijuana Classification Review).
ProShares Ultra Bloomberg Natural Gas (BOIL - Free Report) ) – Up 24.4%
Weather forecasts for mid-January are predicting colder temperatures and the likelihood of winter storms throughout the United States, which may lead to an increase in natural gas demand as it would boost the heating demand. While this acted as a positive for the space, gains were restricted slightly by a smaller-than-expected storage draw of 14 billion cubic feet in the EIA’s weekly storage report.
Direxion Daily Semiconductor Bear 3x Shares (SOXS - Free Report) ) – Up 18.9%
Semiconductor stocks also saw rough trading after Dutch semiconductor manufacturing equipment maker ASML Holdings (ASML) said it would restrict shipments of some technology to China at the Dutch government’s behest. Plus, the broader market weakness added to the chaos.
MAX Auto Industry -3x Inverse Leveraged ETN (CARD - Free Report) ) – Up 18.4%
U.S. treasury yields jumped following better-than-expected jobs data. This weighed on the rate-sensitive areas like auto market. As of Jan 5, 2024, benchmark U.S. treasury yield jumped to 4.05% from 3.95% at the start of the week, which, in fact, dropped to 3.91% on the closing of Jan 3, 2024.
Direxion Daily Technology Bear 3X Shares (TECS - Free Report) ) – Up 13.9%
The rising rates also weighed on technology stocks. Tech stocks, which are high-growth in nature, tend to underperform when rates rise. Hence, the inverse leveraged technology ETF gained immensely.
MicroSectors Gold Miners -3X Inverse Leveraged ETNs (GDXD - Free Report) ) – Up 13.1%
The U.S. dollar posted its best weekly gain since July. Invesco DB US Dollar Index Bullish Fund (UUP - Free Report) was up 1.2% last week. As the gold is priced in the greenback, gold bullion ETF SPDR Gold Trust (GLD - Free Report) was off 0.8% last week. This, in turn, weighed on gold mining stocks and ETFs as mining stocks often act as leveraged plays of the underlying metal. The fundamentals clearly explain why this inverse leveraged gold mining ETN surged last week.