U.S. stocks were super steady in August as investors rotated into the beaten-down segments of the year — cyclicals. The Nasdaq 100 rose nearly 11% in August compared to a gain of about 7% for the S&P 500, 6.6% advancement in the Dow Jones and 5.5% rise for the Russell 2000 (read: August Clocks Monster Gains: 5 ETF Areas Up At Least 20%).
However, things took a radical turn on Sep 3 after the S&P 500 posted its worst single-session drop in nearly three months. Some subdued economic datapoints and a monstrous rally in the high-profile tech names (that caused overvaluation concerns) caused the correction.
As a result, Wall Street gave a subdued performance last week. The S&P 500, the Dow Jones and the Nasdaq lost about 2.3%, 1.8% and 3.3%, respectively, past week (as of Sep 4). However, we don’t see the selloff as a sign of rising market fear. Selloffs were worse in tech stocks. The selling trend indicates that winners are emerging as the key losers now and vice versa (read: Don’t Fear Correction: ETF Laggards Are Emerging Leaders).
Against this backdrop, below we highlight a few top-performing leveraged ETFs of last week.
ETFs in Focus
ProShares Ultra VIX Short-Term Futures ETF (UVXY) – Up 19.9%
As the stock market turned topsy turvy, volatility-related products gained last week.The underlying S&P 500 VIX Short-Term Futures Index measures the returns of a portfolio of monthly VIX futures contracts that rolls positions from first-month contracts into second-month contracts on a daily basis.
ProShares Ultra Bloomberg Natural Gas (BOIL) – Up 5.1%
Natural gas prices moved higher on weather concerns. Temperatures in the United States are expected to be cooler than normal throughout the mid-west region, resulting in higher demand for heating. Two disturbances formed in the Atlantic that are headed toward the Caribbean that have a 20% probability of turning into a tropical cyclone according to NOAA, as quoted on FxEmpire.
Direxion Daily Regional Banks Bull 3X Shares DPST – Up 4.8%
Banking stocks were rather beaten down in the past few months as fears of higher defaults at the household and corporate levels hit the space hard. However, when laggards started emerging as leaders late last week, banking stocks began to soar higher. In fact, the yield on benchmark U.S. treasuries was 0.72% on Sep 4 versus 0.68% at the start of the month. The rise in long-term bond yields also favored bank stocks.
Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF – Up 3.4%
The underlying ICE (NYSE:ICE) U.S. Treasury 20+ Year Bond Index is a market value weighted index that includes publicly issued U.S. Treasury securities that have a remaining maturity of greater than 20 years. As the stock market started faltering from mid last week, some investors resorted to U.S. treasuries and U.S. leveraged treasury ETFs like TMF gained.
Direxion Daily MSCI Brazil Bull 2X Shares BRZU – Up 2.0%
The Brazilian real hovered at around a one-month high last week as investors braced for on a stable economic recovery following a slew of upbeat data points. Brazil's private sector economic activity grew in August at its quickest clip in over seven years. New auto sales jumped 5.1%, per Reuters.
The Reuters article noted that Brazil's government recently presented to congress a constitutional reform bill aimed at streamlining and lowering the cost of its public sector, which gives the president comprehensive powers to remove public sector jobs and bodies without congressional approval. No wonder, Brazilian leveraged ETF gained last week.
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