Traders in the Direxion Daily Industrials Bull 3X Shares (DUSL) were rewarded during Tuesday’s trading session as the ETF jumped 6% while the Dow Jones Industrial Average (DJIA) climbed over 350 points.
Equities in general are off to a strong start, with industrials helping to lead the way, along with energy and financials. Meanwhile, tech is stumbling out the gate in 2022.
“The Dow Jones Industrial Average climbed to its second record of 2022 on Tuesday, while declines in technology stocks weighed on the broad market,” a Wall Street Journal report says. “Stocks in economically sensitive sectors including energy, financials and industrials advanced as investors parsed manufacturing and labor data and focused on rising long-term bond yields.”
The strength of industrials in particular will weigh on how factory activity responds this year. The Omicron variant continues to inject uncertainty in the capital markets, especially as rising COVID-19 cases should pose a tangible threat to supply chains.
“The different corners of the stock market diverged as investors scrutinized new data that showed expanding U.S. factory activity and a tight labor market,” the report adds. “A manufacturing sector survey showed signs that supply-chain problems could be improving. Separate data showed the number of times workers quit their jobs rose to a high in November while job openings remained near record levels.”
Despite the threat of the Omicron variant, analysts remain vigilant that the beginning quarter of 2022 should end strong.
“We think this quarter will be strong, but we think that guidance into next quarter may be a little murkier from companies just because of concerns about Omicron,” said Eric Freedman, chief investment officer at U.S. Bank Wealth Management.
Levering Up on Industrials
DUSL, which is up over 80% within the past year, seeks daily investment results of 300% of the daily performance of the Industrials Select Sector Index. The fund, under normal circumstances, invests at least 80% of its net assets in financial instruments, such as swap agreements, securities of the index, and ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index.
The index includes domestic companies from the industrials sector, which includes aerospace and defense, industrial conglomerates, marine products, and more. Similar non-leveraged ETFs are already portending signs of strength for industrials.
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