5 ETF Areas Up At Least 6% Last Week Amid Bloodbath

The first week of 2022 turned somber for Wall Street as the S&P 500 (SPY) lost 1.9%, the Dow Jones (DIA) skidded 0.3%, the Nasdaq Composite (QQQ) slipped 4.5% and the Russell 2000 (IWM) was off 2.9%. Notably, the Nasdaq closed out the worst week since February 2021 as rising rate worries took the markets in its grip. Also, soft jobs data played foul in Wall Street.

However, ETFs like Vaneck Oil Services ETF (OIH), Tuttle Capital Short Innovation ETF (SARK), Nasdaq Bank ETF First Trust (FTXO), Northshore Global Uranium Mining ETF (URNM) and Equities For Rising Rates ETF (EQRR) emerged winners last week despite the somber equity environment.

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Inside the Headlines

The latest Fed minutes came across as pretty hawkish and revealed policymakers’ concerns about worsening inflation. The members said that the jobs market is nearing full employment. The probabilities of a March interest rate hike of 0.25% surged to 72%, according to fed futures trading contracts. If enacted, this will mark the Fed’s first rate hike in three years to counter inflation.

The U.S. central bank has already paced up QE tapering. The central bank plans to buy $60 billion per month of bonds in combined Treasuries and agency mortgage-backed securities starting in January, down from $90 billion in December and $120 billion from the start of the pandemic through November. Plus, the bank upped its economic growth projections, raised its inflation outlook and cut unemployment rate projections

If this was not enough, the U.S. economy added only 199,000 jobs in December 2021, well below market forecasts of 400,000. Nonfarm employment has increased by 18.8 million since April 2020 but is still down by 2.3% from its pre-pandemic level in February 2020.

Against this backdrop, below we highlight a few ETF areas that gained considerably last week.

ETFs in Focus

Vaneck Oil Services ETF (OIH)

The energy sector remains the outperformer to start the New Year as oil prices gained momentum on supply disruptions. Global benchmark Brent crude jumped on Jan 7, 2021 to $80 a barrel, its highest since November, as OPEC+ agreed to stick to its planned increase for February instead of further raising it. Fears that the Omicron coronavirus variant could weigh on demand led the OPEC to go for such a decision.

Plus, the escalating unrest in Kazakhstan has fanned supply concerns. Kazakhstan is currently producing 1.6 million barrels of oil per day. The supply outages in Libya added to the chaos and boosted oil prices.

Tuttle Capital Short Innovation ETF (SARK)

The Tuttle Capital Short Innovation ETF is an actively managed exchange traded fund that attempts to achieve the inverse of the return of the ARK Innovation ETF for a single day. As Wall Street registered a slump last week, this inverse equity ETF recorded gains.

Nasdaq Bank ETF First Trust (FTXO)

The benchmark U.S. treasury yield was 1.76% on Jan 7, 2022 versus 1.63% yield at the start of the year due to a hawkish Fed. Banks are beneficiaries of rising rates. As banks seek to borrow money at short-term rates and lend at long-term rates, a steepening yield curve earns more on lending and pays less on deposits, thereby leading to a wider spread. This expands net margins and increases banks’ profits. 

Northshore Global Uranium Mining ETF (URNM)

Uranium stocks were gainers last week as protests in Kazakhstan endangered global supply. The threat from increasing political unrest in the key producer Kazakhstan is sending ripples through the global uranium market and boosting shares of Canadian uranium producers too. Kazakhstan makes up about 40% of the global supply. The country recently experienced violent protests in response to rising fuel prices, which threated uranium production.

The underlying North Shore Global Uranium Mining Index seeks to track the performance of companies that are involved in the mining, exploration, development, and production of uranium, as well as companies that hold physical uranium or other non-mining assets.

Equities For Rising Rates ETF (EQRR)

As rising rate worry was the main driving factor last week, EQRR gained materially. The underlying NASDAQ U.S. Large Cap Equities for Rising Rates Index seeks to provide relative outperformance during periods of rising U.S. Treasury interest rates, as compared to traditional U.S. large-cap indexes, such as the S&P 500. The expense ratio of EQRR is 0.35%.

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