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Inverse ETFs shine as stocks fall on disappointing retail sales data

The lackluster economic data from China on Monday also heightened fears of a slowdown in global growth. That iShares Semiconductor ETF (SOXX) was down over 2%, catalyzed by losses at Nvidia, which were about 3% lower, while Tesla and Boeing shares, which are also dependent on the growth market China, also declined.

Before falling on Tuesday, the Dow and S&P 500 closed record highs for their fifth green session on Monday. The move of the S&P 500 during Monday’s session also hit a milestone, making it the fastest bull market doubling since World War II, according to CNBC calculations.

While some analysts are concerned about Tuesday’s price decline, many are still optimistic about the future of the market, given the recent highs the benchmarks have hit.

“In the short term, there are many reasons for investor fear when looking at the delta variant, of course the inflation outlook given the uncertainty in US policy and the continued choppy economic data. We expect there will be short term consolidation here in the next month or two, ”Jon Adams, senior investment strategist at BMO Global Asset Management, told Yahoo! Finances.

“But in the medium term, we see the outlook as quite constructive,” he added. “The profit season was exceptional, the economy remains strong… We will get a lot more clarity about politics and the virus in the fall. We believe it is still time to be overweight equities and focus on US equities. “

Tuesday’s decline was also for short-term investors in inverse ETFs like the one ProShares Short S&P 500 (SH), Which gained nearly 1% on Monday while the other major indices lost ground. Another heavily leveraged ETF, the Direxion Daily S&P 500 Bear 3X Shares (SPXS) rose about 2% on Monday, catalyzed by its triple leverage.

In the meantime, investors and traders are waiting for the FOMC minutes on Wednesday for possible further market-moving news and deviations in direction.

“[We have] more than a few potential Fed policy-related catalysts for stocks on the horizon. We will receive the July FOMC minutes tomorrow, from which our economic team expects some guidance on the timing and extent of the reduction in front of the Jackson Hole by the end of next week and the FOMC in September, ”Maxwell Grinacoff, BNP Parisba’s equity derivatives strategist told Yahoo! Finances.

“We have already seen some increase in returns over the past few weeks with fairly strong jobs and inflation data,” he added. “We use this as a playbook for value and growth trading in equities when we actually see higher returns and the implementation of a fiscal adjustment package through the balance from Q3 to Q4. And in terms of value, we would focus more selectively on the quality side of value as well as on the commodity and cyclical parts of the market such as commodities and industrials. “

However, investors are generally pleased with recent stock performance, as second quarter earnings results were robust and the S&P 500’s earnings hit 89.3%, the highest annual growth since late 2009.

“It is almost indisputable that the second quarter has been a peak, not growth, but growth rates,” Liz Ann Sonders, Charles Schwab’s chief investment strategist, told Yahoo! Finances. “The profit will continue to grow. I think the consensus for the third quarter is close to 30%, but I don’t think we will beat the nearly 100% increase in the second quarter. “

“I think the most important thing for the future is the profit margin, which has been kept at a very high level so far,” she added. “But given the continued dispersion between input prices and retail prices, I think the profit margin story may become even more important than the headline earnings story in the next quarter.”

For traders who see stocks continue to rise and are looking for something out of the ordinary to trade, this is this ProShares Short VIX ETF (SVXY) rises when the VIX or CBOE volatility index falls.

According to the Fund’s Profile: “The investment aims to achieve daily investment results, before fees and charges, equal to half the reciprocal (-0.5x) of the performance of the S&P 500 VIX Short-Term Futures Index for a single day. The index seeks exposure to market volatility across publicly traded futures markets and is designed to measure the implied volatility of the S&P 500 over 30 days into the future. “

You can find more market trends under ETF trends.

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