U.S. stocks finished lower on Friday but posted weekly gains as investors weighed Kevin Warsh’s caution on inflation and the possibility of a September rate hike. For the week, the S&P 500 gained 0.5%, the Nasdaq rose 0.9% and the Dow advanced 0.5%, marking its first weekly gain in three weeks.
Warsh Raises Rate-Hike Concerns
Speaking at the Federal Reserve’s annual Jackson Hole symposium, Warsh indicated that recent inflation readings have not provided enough evidence of a sustained slowdown in underlying price pressures, as quoted on CNBC.
His comments prompted traders to sharply increase expectations for a September rate hike. Fed funds futures showed a 57% probability of a hike, up from 39.9% a week ago (at the time of writing), according to CME Group’s FedWatch tool.
Short-term Treasury yields initially moved higher following the speech, reflecting growing expectations for tighter monetary policy, while longer-dated yields were relatively steady.
AI Stocks Face a New Test
Technology stocks rebounded strongly during the week thanks to NVIDIA’s revenue guidance, but the rally could face a tougher test as investors reassess valuations against a potentially more hawkish Fed (read: NVIDIA Raises the Bar on AI Growth: AI ETFs to Win).
AI remains a major focus for investors, with market participants continuing to position around companies benefiting from AI spending and infrastructure. However, higher interest-rate expectations could create additional pressure on growth-oriented technology stocks. VanEck Semiconductor ETF SMH displayed a seesaw trading pattern in the week and posted a dip of 0.1%.
However, Fed Chair Kevin Warsh said, “we should not indulge a regime in which market participants are looking primarily to the Fed for their next trade,” as quoted on CNBC.
Leveraged ETF Winners
Below we highlight a few winning leveraged ETFs of last week.
Leverage Shares 2X Long CRM Daily ETF CRMG – Up 44.6%
Shares of Salesforce (CRM) skyrocketed last week after the company reported a beat on second-quarter earnings and expanded its partnership with Anthropic. Salesforce shares surged 22.8% last week, helping the leveraged fund surge.
Leverage Shares 2X Long OKTA Daily ETF OKTG – Up 42.9%
Okta Inc. OKTA shares rose 24.3% last week as the identity software provider surpassed Wall Street’s fiscal second-quarter estimates. During the quarter, the company made its Okta for AI Agents solution, designed to manage and secure AI agents, available to all customers.
New products contributed 30% of total bookings, while Okta closed dozens of AI-related deals, including a multimillion-dollar agreement with a healthcare company.
Tradr 2X Short AXTI Daily ETF AXTQ – Up 37.0%
AXT Inc. AXTI shares lost 12.6% last week. The stock has recently pulled back due to profit-taking, high valuation concerns, and changing market dynamics in the indium phosphide supply chain.
Defiance Daily Target 2x Short QBTS ETF QBTZ – Up 34.6%
D-Wave Quantum Inc QBTS shares fell over 14% last week.Leadership changes like CFO John Markovich's surprise retirement and wider financial losses led to the decline in the stock.
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This article originally published on Zacks Investment Research (zacks.com).
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