Best Inverse/Leveraged ETF Areas of Last Week

Wall Street delivered an upbeat performance last week due to dovish Fed cues. The S&P 500 added 2.3%, the Dow Jones advanced 2% and the Nasdaq rose about 2.9%.  There was growing optimism that the Federal Reserve will soon start cutting rates as the U.S. central bank sticked to its previous projections of three rate cuts despite recently-released hot inflation data.

Inside Fed Meeting

On Wednesday, the Fed left its benchmark federal funds rate unchanged and projected three rate cuts this year. During the news conference, Chair Powell acknowledged that inflation had been more persistent than expected over the past two months but expressed hope that inflation was on a sustainable path back to 2%.

The central bank expects solid economic growth and the unemployment rate to remain at a low level. Powell noted that a strong job market wouldn’t deter the central bank from reducing rates. Stocks soared after the press conference.

Broadening of Wall Street Rally

While technology stocks – being high-growth in nature – continue to perform well, the rally has broadened, with a clear resurgence in mid- and small-cap stocks recently. The financials, industrials and energy sectors are also outperforming the S&P 500’s 9.7% year-to-date gain.

The Magnificent Seven - Apple, Nvidia, Alphabet, Tesla, Microsoft, Meta Platforms and Amazon.com - have been responsible for 40% of the S&P 500’s gain as of Thursday, according to S&P Dow Jones Indices. That compares with a share of over 60% last year, per a Reuters article.

BoJ Ends Negative Rate Era

BoJ (Bank of Japan) hiked its short-term interest rates to around 0% to 0.1% from -0.1%, according to its statement at the end of its two-day March policy meeting. It marked the first rate-hike in 17 years, putting an end to the world’s only negative rates regime on signs of robust wage gains this year. Japan’s negative rates regime had been in place since 2016 (read: BoJ Ends Negative Rate Era: ETFs to Win).

Woes in Apple

Apple shares fell 2% last week as the Justice Department filed an antitrust lawsuit alleging the iPhone giant used its power over app distribution to block innovations, resulting in higher prices for consumers.

Earlier this week, Google shares surged on reports that the company was in talks with Apple to bring its Generative AI engine, Gemini, to iPhones. Apple was also reportedly in negotiations with ChatGPT parent OpenAI. Alphabet shares gained 1.4% last week.

Investors have expressed concerns that Apple has fallen behind in the AI race. CEO Tim Cook announced that the iPhone maker would introduce new generative AI capabilities later this year.

Is Bitcoin Mania Losing Steam?

While the newly launched Bitcoin ETFs have continued to attract billions in inflows, Grayscale's GBTC has recorded outflows of more than $12 billion since it was converted into an ETF, mainly due to its high fees. Grayscale is now planning a "mini-me" version of GBTC, which will come with a lower expense ratio.

Meanwhile, bitcoin has logged a meaningful pullback last week, falling more than 10% from its all-time high, as interest in fledgling spot Bitcoin exchange-traded funds (ETFs) moderates. JPMorgan Chase and Co. strategists caution that the retreat may not be over yet, per Bloomberg (read: Is Bitcoin Euphoria Waning? ETFs to Gain).

Winning Inverse/Leveraged ETF Areas

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

Marijuana

AdvisorShares MSOS 2x Daily ETF MSOX – Up 16.7%

In a White House meeting, Vice President Kamala Harris last week urged the DEA to expedite the rescheduling of marijuana, criticizing its current Schedule 1 classification as "absurd" and "patently unfair." She put stress on the need for swift action and highlighted ongoing efforts toward rescheduling (read: Is Rescheduling a Certainty for Cannabis? ETFs That Surge).

Homebuilding

Direxion Daily Homebuilders & Supplies Bull 3X Shares NAIL – Up 16.1%

The homebuilding sector of the broad stock market has been an area to watch lately, given the likely decline in mortgage rates. The Fed also indicated about the possibility of 75 bps of rate cut in 2024, propelling the demand for rate-sensitive homebuilding sector. Moreover, despite higher rates and home prices, existing home sales surged in February.

Bull Nvidia

GraniteShares 2x Long NVDA Daily ETF NVDL – Up 14.5%

One highly anticipated event of the week was Nvidia’s GPU Technology Conference (GTC). CEO Jensen Huang unveiled the latest cutting-edge chips during the event, which was held in person for the first time since 2019. This has boosted the stock price. Nvidia stock was up 4.3% last week.

Bull Travel

MicroSectors Travel 3x Leveraged ETN FLYU – Up 13.8%

Airlines stocks that make up a considerable portion of the underlying index soared last week. Some of the buying activity probably was influenced by a fresh note from UBS analysts, who started positive coverage on the airline sector, per barrons.com.They see the industry’s steep cost pressures will ease later this year and margins may move higher.

Banks

MicroSectors U.S. Big Banks Index 3X Leveraged ETNs BNKU – Up 13.2%

The banking sector surged on dovish Fed cues. If the economic growth gains momentum, helping long-term rates to go higher and the Fed cuts short-term rates, the yield curve would steepen. This, in turn, would benefit bank stocks materially.

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Direxion Daily Homebuilders & Supplies Bull 3X Shares (NAIL): ETF Research Reports

MicroSectors U.S. Big Banks Index 3X Leveraged ETN (BNKU): ETF Research Reports

MicroSectors Travel 3X Leveraged ETNs (FLYU): ETF Research Reports

AdvisorShares MSOS 2x Daily ETF (MSOX): ETF Research Reports

GraniteShares 2x Long NVDA Daily ETF (NVDL): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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