Wall Street put up a moderate show last week with the S&P 500 (up 1.6%), the Dow Jones (up 1.1%), the Nasdaq Composite (up 2.4%) and the Russell 2000 (up 1.7%) all yielding positive results despite a few headwinds.
Last week was all about the FAANGs as a trio of trillion-dollar giants —
Meta Platforms
FB
,
Alphabet
GOOGL
and
Amazon
AMZN
— came up with earnings results. Strong reports from Alphabet and Amazon helped tech recover from the recent sluggishness, while a disappointing release from Meta led to one of the worst trading days for the Nasdaq since March 2020.
On a positive note, the jobs report came in super upbeat. The U.S. economy added 467,000 jobs in January 2021, beating market expectations of a rise of 150,000 thanks to easing business restrictions amid the reopening of economies and vaccine distribution from multiple makers. January figures came as a huge surprise as the Omicron coronavirus variant weighed on the jobs market.
The crude oil rally is another key event in the market. Rising geopolitical uncertainty in the Middle East and Europe may cause supply disruptions. The demand, however, is likely to return to the pre-pandemic levels in the coming months. Crude inventories and spare capacity remain low and increasing supply is difficult at the current level.
Against this backdrop, below we highlight a few winning leveraged ETF areas of last week.
Energy
Microsectors U.S. Big Oil Index 3X ETN
NRGU
– Up 18.1%
Microsectors Oil & Gas Exp. & Prod. 3X Leveraged
OILU
– Up 15.8%
The above explanation clearly points out why leveraged energy ETFs won last week. The OPEC+ group met recently and decided to continue its existing policies of moderate output increases. The group has ignored Biden administration’s requests to raise output at a faster pace. Moreover, the recent emergence and popularity of green energy led to declining investments in oil and natural gas. Per WSJ, U.S. shale drillers may never return to pre-pandemic production growth levels, thanks to increasing input and labor costs as well as lack of financing.
Cloud Computing
Ultra Nasdaq Cloud Computing ETF
SKYU
– Up 15.6%
The space and the ETF benefited last week mainly from Amazon’s gain. Post earnings, Amazon recorded the
greatest single-day gains in value
. Shares of the online retail and cloud computing giant jumped 13.5% on Friday due to its blowout earnings report. “Amazon is uniquely positioned to exit this crisis as one of the biggest beneficiaries of accelerated digital transformation,” Monness Crespi Hardt analyst Brian White wrote in a research note.
Metal Miners
Direxion Daily Metal Miners Bull 2X
MNM
– Up 14.8%
The fund measures the leveraged performance of the equity securities of companies hailing from the metals and mining industry. Metals’ prices have been on an uphill ride in recent trading. Investments in metals are normally considered a hedging tool against inflation. Probably this is why, metals have been exhibiting rally lately.
China
FTSE China Bull 3X Direxion
YINN
– Up 14.7%
China’s economy expanded 4.0% year over year in Q4 of 2021, easing from a 4.9% expansion in the previous period but exceeding the market consensus of 3.6%, per tradingeconomics. According to Citigroup analyst Peng, China is likely to see easing for both monetary and fiscal policy, as
published on CNBC
. As against the developed economies that are considering tightening of policies, China has slashed interest rates recently to boost its economy. This policy differential is probably steering investors toward China, which probably offers value now (read:
What Lies Ahead for China ETFs in the Year of Tiger?
).
China Internet
CSI China Internet Index Bull 2X Direxion
CWEB
– Up 13.4%
China’s Internet stocks appear cheap. Although more regulatory stringencies are on the way, hurting Internet companies’ growth prospects, bargain-hunting probably offered China’s Internet stocks a lift. For example, Alibaba Group Holding (BABA) is trading at a high-teens price to earnings multiples, which is far cheaper than its global peers, and drew some bargain hunters in recent weeks,
per an article published on barrons.com
.
Semiconductors
Semiconductor Bull 3X Direxion
SOXL
– Up 13.2%
Per the Semiconductor Industry Association, global sales of semiconductors totaled $144.8 billion during the third quarter of 2021, marking an increase of 27.6% over the third quarter of 2020 and 7.4% from the second quarter of 2021. Although the industry is grappling with a chip crunch, the ever-increasing demand is a plus for the space (read:
Be Choosy In Tech Investing: ETFs to Buy/Sell
).
“Semiconductor shipments reached all-time highs in the third quarter of 2021, demonstrating both the ongoing high global demand for chips and the industry’s extraordinary efforts to ramp up production to meet that demand,” said John Neuffer, SIA president and CEO. The latest upbeat earnings from Nvidia (NVDA) and Advanced Micro Devices (AMD) also point to the industry’s wellbeing.
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