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U.S. stocks suffered last week as the beginning of earnings season intensified concerns about a prolonged battle against inflation. The S&P 500, the tech-heavy Nasdaq Composite and the Dow Jones slipped 1.6%, 0.5% and 2.4% last week, respectively. Notably, the Dow Jones has had its worst week of 2024.
Inflation fears were sparked by a robust consumer price index reading. These dashed hopes of a near-term rate cut by the Fed. Also, investor sentiment soured following lackluster performances from the banking sector.
Hot Inflation
U.S. inflation jumped in March, surpassing expectations primarily due to higher petrol and shelter costs, dashing hopes of a June interest rate cut by the Fed. The U.S. consumer price index (CPI) rose by 0.4% sequentially, exceeding estimates from Wall Street. Over the 12-month period ending March, the CPI recorded a 3.5% year-over-year increase, marking the largest gain in six months since September 2023. This follows a 3.2% rise in February 2024.
Decline in Bank Shares on Friday
Wall Street closely monitored earnings from major banks to gauge the potential ramifications if interest rates remain higher than anticipated. JPMorgan (JPM) experienced a decline in its shares on Friday despite surpassing profit expectations as CEO Jamie Dimon highlighted "inflationary pressures" and the Fed’s tight monetary policy as causes for concern. Other financial institutions such as Wells Fargo (WFC - Free Report) , Citigroup (C - Free Report) and BlackRock (BLK - Free Report) , the largest asset manager globally, also saw declines following their respective earnings releases.
Rising Rate Concerns
Thanks to the sticky inflation, interest rates are likely to be higher for longer. A jump in oil prices is likely to push up inflation in the medium term. This scenario and the resultant higher rates are not great for growth stocks like technology and some consumer discretionary companies. Notably, the 10-year benchmark U.S. Treasury yield started the week at around 4.42%, dived to 4.36% on Apr 9, jumped to 4.56% on Apr 11, 2024 and closed the week at 4.50%.
Precious Metal Seesaws
The shine of precious metals, which brightened earlier in the week on rising safe-haven demand, dulled slightly to close the week as higher rates and a stronger greenback are not good for gold and silver investing.
The demand for these metals is deemed to be driven by investors seeking refuge amidst escalating tensions in the Middle East but avoiding U.S. government bonds due to inflation apprehensions. Gold set a new record at $2,400, but settled around $2,300 at the end of the week. Silver reached its highest level since early 2021.
Winning Inverse/Leveraged ETF Areas of Last Week
Against this backdrop, below we highlight a few winning inverse/leveraged ETFs of last week.
Inverse/Leveraged Banking
MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETNs (BNKD - Free Report) – Up 12.3%
As financial stocks underperformed last week due to weak earnings and non-impressive commentaries from the banking sector, inverse/leveraged financial ETFs gained.
Inverse/Leveraged Mid-Cap Stocks
ProShares UltraPro Short MidCap400 (SMDD - Free Report) – Up 9.6%
ProShares UltraPro Short Russell2000 (SRTY - Free Report) – Up 8.8%
The small-cap ETF iShares Russell 2000 ETF (IWM - Free Report) was off 3.5% last week due to the turmoil in the market.
Inverse/Leveraged Real Estate
Direxion Daily Real Estate Bear 3X Shares (DRV - Free Report) – Up 8.7%
Interest rates spurted higher last week, which weighed on rate-sensitive sectors like real estate.
Shares of Apple Inc. have underperformed this year due to a lack of vision of where its future growth will come from. However, Apple's decision to overhaul its Mac computer line to focus on artificial intelligence, as reported by Bloomberg, impressed investors, sending the stock up 4.4% last week.
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4 Best Inverse/Leveraged ETF Areas of Last Week
U.S. stocks suffered last week as the beginning of earnings season intensified concerns about a prolonged battle against inflation. The S&P 500, the tech-heavy Nasdaq Composite and the Dow Jones slipped 1.6%, 0.5% and 2.4% last week, respectively. Notably, the Dow Jones has had its worst week of 2024.
Inflation fears were sparked by a robust consumer price index reading. These dashed hopes of a near-term rate cut by the Fed. Also, investor sentiment soured following lackluster performances from the banking sector.
Hot Inflation
U.S. inflation jumped in March, surpassing expectations primarily due to higher petrol and shelter costs, dashing hopes of a June interest rate cut by the Fed. The U.S. consumer price index (CPI) rose by 0.4% sequentially, exceeding estimates from Wall Street. Over the 12-month period ending March, the CPI recorded a 3.5% year-over-year increase, marking the largest gain in six months since September 2023. This follows a 3.2% rise in February 2024.
Decline in Bank Shares on Friday
Wall Street closely monitored earnings from major banks to gauge the potential ramifications if interest rates remain higher than anticipated. JPMorgan (JPM) experienced a decline in its shares on Friday despite surpassing profit expectations as CEO Jamie Dimon highlighted "inflationary pressures" and the Fed’s tight monetary policy as causes for concern. Other financial institutions such as Wells Fargo (WFC - Free Report) , Citigroup (C - Free Report) and BlackRock (BLK - Free Report) , the largest asset manager globally, also saw declines following their respective earnings releases.
Rising Rate Concerns
Thanks to the sticky inflation, interest rates are likely to be higher for longer. A jump in oil prices is likely to push up inflation in the medium term. This scenario and the resultant higher rates are not great for growth stocks like technology and some consumer discretionary companies. Notably, the 10-year benchmark U.S. Treasury yield started the week at around 4.42%, dived to 4.36% on Apr 9, jumped to 4.56% on Apr 11, 2024 and closed the week at 4.50%.
Precious Metal Seesaws
The shine of precious metals, which brightened earlier in the week on rising safe-haven demand, dulled slightly to close the week as higher rates and a stronger greenback are not good for gold and silver investing.
The demand for these metals is deemed to be driven by investors seeking refuge amidst escalating tensions in the Middle East but avoiding U.S. government bonds due to inflation apprehensions. Gold set a new record at $2,400, but settled around $2,300 at the end of the week. Silver reached its highest level since early 2021.
Winning Inverse/Leveraged ETF Areas of Last Week
Against this backdrop, below we highlight a few winning inverse/leveraged ETFs of last week.
Inverse/Leveraged Banking
MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETNs (BNKD - Free Report) – Up 12.3%
Direxion Daily Financial Bear 3X Shares (FAZ - Free Report) – Up 11.4%
As financial stocks underperformed last week due to weak earnings and non-impressive commentaries from the banking sector, inverse/leveraged financial ETFs gained.
Inverse/Leveraged Mid-Cap Stocks
ProShares UltraPro Short MidCap400 (SMDD - Free Report) – Up 9.6%
ProShares UltraPro Short Russell2000 (SRTY - Free Report) – Up 8.8%
The small-cap ETF iShares Russell 2000 ETF (IWM - Free Report) was off 3.5% last week due to the turmoil in the market.
Inverse/Leveraged Real Estate
Direxion Daily Real Estate Bear 3X Shares (DRV - Free Report) – Up 8.7%
Interest rates spurted higher last week, which weighed on rate-sensitive sectors like real estate.
Leveraged Apple
Direxion Daily AAPL Bull 2X Shares (AAPU - Free Report) – Up 7.9%
Shares of Apple Inc. have underperformed this year due to a lack of vision of where its future growth will come from. However, Apple's decision to overhaul its Mac computer line to focus on artificial intelligence, as reported by Bloomberg, impressed investors, sending the stock up 4.4% last week.