ETFs
Tech Powers S&P 500, Nasdaq and Leveraged ETFs Win – June 6, 2024
Wall Street racked up solid gains during yesterday’s trading session, with the S&P 500 hitting its 25th record high this year and the Nasdaq Composite Index hitting another record high. The rally was fueled by technology stocks that bet on a Fed rate cut, supported by multiple reports of slowing growth in the world’s largest economy. Traders now see a nearly 69% chance of a rate cut in September, according to the CME’s FedWatch tool. Expectations hovered around 50% last week.
The uptrend has fueled a rally in the leveraged securities sector. We highlight a number of the best performing ETFs that led the way higher on the day. These include Direxion Daily Semiconductor Bull 3x Stock (SOXL – Free report) , Direxion Daily NVDA Bull 2X Stock (NVDU – Free report) , Direxion Daily S&P Biotech Bull 3x Stock (LABU – Free report) , MicroSectors Solactive FANG & Innovation 3X Leveraged ETN (BULZ – Free report) And GraniteShares 2x Long AMD Daily ETF (AMDL – Free report) . These funds will continue to see smooth trading, at least in the short term, provided sentiments remain bullish.
Technological boost
The continued AI frenzy, coupled with new bets on rising rates, has pushed tech stocks higher. NVIDIA (NVDA) provided the biggest boost to both indexes by rising more than 5% to a new record high and surpassing $3 trillion in market capitalization for the first time. The chipmaker has become the second most valuable company in the United States. Apple Inc. (AAPL) had the longest winning streak since March 2022, while Hewlett Packard Enterprise (HPE) rose 10.7% after reporting better-than-expected third-quarter revenue thanks to strong sales of AI servers (read: 5 Top-Ranked Sector ETFs to Buy in June).
Traders stepped up their bets on a rate cut last week, driven by a series of weaker-than-expected U.S. economic data. The latest report released by payroll manager ADP showed that private sector job growth in the United States slowed more than expected in May. Additionally, the Bank of Canada’s decision to ease monetary policy and a widely expected taper from the European Central Bank have also fueled optimism about accommodative monetary policy.
Leveraged ETF
Leveraged ETFs provide multiple exposures (2X or 3X) to the daily performance of the underlying index. These funds employ various investment strategies, such as the use of swaps, futures and other derivative instruments to achieve their objectives. Due to their cumulative effect, investors can enjoy higher returns over a short period of time, provided the trend remains favorable.
Since most of these ETFs seek to achieve their objectives on a daily basis, their performance could differ materially from the performance of their underlying index or benchmark over a longer period of time than over a shorter period of time (such as weeks, months). months or years) due to their cumulative effect (see: all leveraged stock ETFs here).
Investors should also note that leveraged ETFs carry more risk than traditional funds. They are often more expensive and less tax efficient because they can realize capital gains through the use of swaps and other derivative instruments.
Focus on ETFs
Direxion Daily Semiconductor Bull 3x Stock (SOXL – Free report) – Up 12.5%
Direxion Daily Semiconductor Bull 3x Shares targets the semiconductor sector of the technology sector with three times leveraged exposure to the NYSE Semiconductor Index. It amassed about $10.7 billion in assets while charging 72 basis points in fees annually.
Direxion Daily NVDA Bull 2X Stock (NVDU – Free report) – Up 10.4%
Direxion Daily NVDA Bull 2X Shares amplifies exposure to a single trade, seeking twice (200%) the daily percentage change in NVIDIA common stock. It has an expense ratio of 0.95% and has amassed $272.7 million in its asset base (read: ETFs will exploit NVIDIA’s 10-for-1 stock split retail frenzy).
Direxion Daily S&P Biotech Bull 3x Stock (LABU – Free report) – Up 9.8%
Direxion Daily S&P Biotech Bull 3x shares create a triple leveraged long position on the S&P Biotechnology Select Industry Index. It charges an annual fee of 0.92% and has assets under management of $1.1 billion.
MicroSectors Solactive FANG & Innovation 3X Leveraged ETN (BULZ – Free report) – Up 7.8%
MicroSectors Solactive FANG & Innovation 3X Leveraged ETN seeks leveraged exposure three times the performance of the Solactive FANG Innovation Index, which includes 15 highly liquid stocks focused on building tomorrow’s technology today. It has assets under management of $1.1 billion and charges 95 basis points in annual fees.
GraniteShares 2x Long AMD Daily ETF (AMDL – Free report) – Up 7.8%
GraniteShares 2x Long AMD Daily ETF is the newest entrant in the field, having accumulated $43 million in its asset base since March 2024. It targets twice (200%) the daily percentage change of Advanced Micro common stock Devices (AMD) and charges 1.18% annual fees to investors.
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