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U.S. stocks rallied in February, with the S&P 500 and the Nasdaq Composite Index recording the best month in nearly a decade. Meanwhile, the Dow Jones Industrial Average logged a four-month winning streak for the first time since May 2021. For the month, the Nasdaq gained 6.1%, while the S&P 500 added 5.2%. The Dow Jones was up 2.1%.

Here, we highlight a bunch of the best-performing leveraged equity ETFs from different corners of the market that are leaders in their segments. These include MAX Auto Industry 3X Leveraged ETN (CARU - Free Report), ProShares Ultra Semiconductors (USD - Free Report), Direxion Daily S&P Biotech Bull 3x Shares (LABU - Free Report), Direxion Daily Retail Bull 3X Shares (RETL - Free Report), and Direxion Daily Homebuilders & Supplies Bull 3X Shares (NAIL - Free Report). These funds will continue to be investors’ darlings, at least in the near-term, provided sentiments remain bullish.

The prospects of significant earnings growth, as well as the artificial intelligence boom, led to a strong rally during the month. With 97% of the S&P 500 reporting earnings for the fourth quarter, year-over-year earnings growth is expected to be 4%, per new FactSet data. This marks the second consecutive quarter of earnings growth for the index.

Consumer discretionary was the top-performing sector of February, driven by the wide-ranging appeal of stocks geared toward consumer services. Industrials was the second-best-performing sector, with nearly half of its components in the S&P 500 hitting all-time highs. The addition of Uber Technologies (UBER - Free Report), which replaced JetBlue (JBLU - Free Report) in the Dow Jones Transportation Average, buoyed the sector's performance.

In particular, Walmart (WMT - Free Report) injected strong optimism after reporting solid earnings, boosting its annual dividend and unveiling the $2.3 billion takeover of smart TV maker Vizio (VZIO - Free Report). This was followed by Nvidia’s (NVDA - Free Report) blockbuster results, which not only showcased the company’s robust position in the AI chip market, but also signaled promising prospects for the semiconductor industry in 2025 and beyond.

In the latest data, consumer prices increased at their slowest rate in nearly three years, according to the Federal Reserve’s preferred measure of inflation.

Another major achievement in the last month was Bitcoin’s biggest monthly gain since December 2020. Bitcoin gained 45% to reach $62,000 amid surging optimism. Demand for the token is widening beyond committed digital-asset enthusiasts.

Leveraged ETFs

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 contracts, and other derivative instruments to accomplish their objectives. Due to their compounding effect, investors can enjoy higher returns in a short period, provided the trend remains a friend.

Since most of these ETFs seek to attain their goals on a daily basis, their performances could vary significantly from the performance of their underlying index or benchmark over a longer period compared with a shorter period (such as weeks, months or years) due to their compounding effect.

Investors should also note that leveraged ETFs involve more risk than traditional funds. They are often more costly and can be less tax-efficient, as they can see capital gains through the use of swaps and other derivative instruments.

MAX Auto Industry 3X Leveraged ETN (CARU - Free Report) – Up 33.4%

This fund is linked to a three-times leveraged participation in the daily performance of the Prime Auto Industry Index. It charges 95 bps in annual fees, and it has accumulated $3.3 million in its asset base since its inception in June. The fund trades under 1,000 shares a day on average.

ProShares Ultra Semiconductors (USD - Free Report) – Up 32.8%

This next fund offers two times exposure to the daily performance of the Dow Jones U.S. Semiconductors Index. It has gathered $630 million in its asset base, and it charges 95 bps in fees per year from investors. The fund trades in an average daily volume of 283,000 shares.

Direxion Daily S&P Biotech Bull 3x Shares (LABU - Free Report) – Up 32.3%

This fund creates a three-times leveraged long position on the S&P Biotechnology Select Industry Index. It charges an annual fee of 0.95%, and it trades in a heavy average daily volume of about 3 million shares. The fund has AUM of $1.4 billion.

Direxion Daily Retail Bull 3X Shares (RETL - Free Report) – Up 26.8%

The following fund offers three times leveraged exposure to the S&P Retail Select Industry Index. The fund has amassed about $65.3 million in its asset base, while charging 95 bps in fees per year. It exchanges around 604,000 shares a day on average.

Direxion Daily Homebuilders & Supplies Bull 3X Shares (NAIL - Free Report) - Up 23.9%

This final fund provides leveraged exposure to homebuilders. It creates a three-times-long position in the Dow Jones U.S. Select Home Construction Index, charging an annual fee of 93 bps. The fund trades in a good average daily volume of about 229,000 shares, and it has accumulated $279.4 million in its asset base.

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