Wall Street delivered a downbeat performance last week. The S&P 500 Index fell 1.6%, the Dow Jones fell 0.9%, the Nasdaq Composite plunged about 2.9% and the Russell 2000 retreated 0.5% last week.
The renewed geopolitical tensions in the Middle East and the tech slump mainly led to the slump. Oil prices jumped last week, with the United States Oil Fund LP USO gaining 10.7% due to the flare-up in tensions between the United States and Iran.
Hormuz Tensions Deepen
President Trump announced last week that the United States would reimpose a blockade of the Strait of Hormuz and levy a 20% fee on cargo passing through the strategic waterway, escalating tensions in the Middle East.
The blockade was set to begin at 4 P.M. ET on Tuesday, July 14, with U.S. Central Command saying it would enforce restrictions on vessels traveling to or from Iranian ports and coastal areas (read: Leveraged Oil ETFs Likely to Surge as Hormuz Tensions Deepen).
Meanwhile, the U.S. military said a service member was killed after an Iranian attack in northern Iraq on Saturday, a day after an attack on a base in Jordan killed two U.S. soldiers, as quoted on BBC.
Inside the Tech Selloffs
Investors are becoming increasingly cautious about the AI trade as concerns over the sustainability of corporate spending on AI weigh on sentiment. The technology sector, particularly semiconductor stocks, has led the recent market weakness as rising concerns over AI-related capital expenditures and rich valuations dampen investor sentiment.
AI Inflation Fears Intensify
Rising expectations that AI could fuel inflation are expected to keep investors on edge. Goldman Sachs cautions that the rapid adoption of AI is likely to fuel inflation globally as supply struggles to keep pace with soaring demand for critical AI components, including memory chips and semiconductors. The United States is likely to be hit the hardest, as quoted on Business Insider.
SK Hynix’s Shares Flat
SK Hynix's recent U.S. debut has sparked a wave of new leveraged ETFs likeDirexion Daily SK Hynix Bull 2X ETF (SKHL). However, SK Hynix Inc – ADR (SKHY) shares remained flat (read: Tap SK Hynix's Memory Leadership With These New Leveraged ETFs).
SpaceX Nosedives
Shares of another recent IPO hot-star,SpaceX SPCX, also slumped 14% last week. On July 16, SpaceX's Starship rocket triggered a last-second abort before liftoff ???for its 13th flight test from Texas, which wiped off about $100 billion from the company's market ???value, per Reuters, as quoted on Yahoo Finance.
Leveraged ETF Winners
Against this backdrop, below we highlight a few winning leveraged ETFs of last week.
Tradr 2X Short SNDK Daily ETF SNDQ – Up 76.4%
SanDisk SNDK — the memory and AI-chip manufacturer — has been bogged down (down 25% last week) by a broad semiconductor selloff and general volatility in the NAND memory market. Valuation corrections could be a reason behind the move. As a result, the inverse leveraged ETF on SNDK surged last week.
Tradr 2X Short CBRS Daily ETF CBRZ – Up 48.0%
The AI infrastructure companyCerebras Systems CBRS shares were hit hard last week, having lost about 16.6%. We can see that it is another tech selloff candidate, which is why its inverse leveraged ETF jumped last week.
Direxion Daily PYPL Bull 2X ETF PYPU – Up 45.4%
PayPal Holdings PYPL shares advanced 20.4% last week amid buyout talks. Stripe and private equity firm Advent International have reportedly jointly offered to acquire PayPal Holdings in a deal valued at more than $53 billion, according to Reuters, as quoted on Yahoo Finance. The proposal marks one of the biggest potential transactions in the digital payments industry in recent years (read: Stripe, Advent to Buy PayPal in a $53B Deal? ETFs in Focus).
Defiance Daily Target 2x Short IONQ ETF IONZ – Up 44.8%
IONQ Inc (IONQ) shares lost 17.3% last week as options markets turned cautious on the quantum-computing specialist. Trading data showed unusually heavy options activity, with put contracts outpacing calls and the put/call ratio rising well above typical levels, as quoted on Tip Ranks. Investors reassessed the broader quantum computing theme, where earlier hype is increasingly being tested against slow, real-world commercialization.
Tradr 2X Short IREN Daily ETF IREZ – Up 44.6%
IREN Ltd. IREN, which operates renewable-powered data centers for Bitcoin mining and AI cloud computing, fell 16.8% amid the broader selloff in AI and technology stocks. The weakness translated into strong gains for its double-leveraged inverse ETF.
Boost Your Portfolio with Our Top ETF Insights
Zacks' exclusive Fund Newsletter delivers actionable information, top news and analysis, as well as top-performing ETFs, straight to your inbox every week.
Don’t miss out on this valuable resource. It’s free!
Get it now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Sandisk Corporation (SNDK): Free Stock Analysis Report
United States Oil ETF (USO): ETF Research Reports
PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report
Space Exploration Technologies Corp. (SPCX): Free Stock Analysis Report
IREN Limited (IREN): Free Stock Analysis Report
Cerebras Systems Inc. (CBRS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).