ETFs for Leveraging the Surge in Nasdaq and S&P 500

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The S&P 500 and Nasdaq Composite reached new peaks on Wednesday, thanks to a surge in Big Tech stocks. The optimism surrounding potential interest rate cuts, spurred by indications of slowing labor market and an easing economy, caused the rally.

Recent data indicates a cooling labor market. April saw job openings decline to a three-year low, while Wednesday’s ADP private payrolls report revealed May’s private-sector growth fell below estimates. The S&P 500 climbed approximately 1.2%, closing at a record 5,354. Meanwhile, the Nasdaq Composite, known for its tech-heavy composition, surged nearly 2% to achieve a new closing high of 17,187.

Tech Sector Dominance

Tech stocks led the charge, with Nvidia NVDA experiencing a remarkable uptick of over 5%, pushing its market capitalization beyond $3 trillion for the first time. Simultaneously, Apple AAPL reclaimed a market cap exceeding $3 trillion, a milestone last reached in January. Nvidia’s market cap, however, surpassed Apple’s.

Nvidia Has More Room to Grow

On Monday, Bank of America analysts boosted their price target, once again, to a Street-wide high of $1,500, saying Nvidia’s premium is justified by its growth outlook. Nvidia takes 5.36% of SPDR S&P 500 ETF (SPY) and 6.31% of Nasdaq ETF Invesco QQQ QQQ.

After blockbuster results, the AI chipmaker is making a series of new record highs on the upcoming 10-for-1 stock split, which will make its shares more affordable to a wider range of investors, including the ones who make small trades, and increase liquidity (read: ETFs to Tap on NVIDIA’s 10-for-1 Stock Split Retail Frenzy).

Fed Rate Cut Ahead?

Expectations for a Fed rate cut are on the rise. Approximately 65% of traders anticipate a reduction in the benchmark interest rate at the September meeting, marking a notable increase from less than 50% just a week prior, according to the CME FedWatch tool.

Earnings Growth Driving Market

Entering 2024, bullish strategists put stress on the importance of a corporate earnings rebound for the market rally, which has materialized with a 6% growth in the first quarter—the highest in nearly two years. Tech earnings have driven most of this growth. However, strategists believe the earnings growth is broadening to other sectors like Utilities and Energy.

Upbeat S&P 500 Target

In late May, three equity strategists tracked by Yahoo Finance have raised their year-end targets for the S&P 500. The median target was then at 5,250, up from 4,850 on December 30, according to Bloomberg data (read: More S&P 500 Rally in the Cards? ETFs to Gain).

BMO Capital Markets’ chief investment strategist, Brian Belski, lately acknowledged underestimating the market’s strength and boosted his year-end target for the S&P 500 from 5,100 to 5,600, the highest on Wall Street. Historically, years with an S&P 500 rally of over 8% in the first five months tend to see further gains, according to Belski’s analysis.

ETFs in Focus

Against this backdrop, Investors with a strong stomach for risks may bet on leveraged S&P 500 and Nasdaq ETFs like ProShares Ultra S&P 500 SSO, ProShares UltraPro QQQ TQQQ, Direxion Daily S&P 500 Bull 3X Shares SPXL, ProShares Ultra QQQ QLD, ProShares UltraPro S&P500 UPRO.

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Apple Inc. (AAPL) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

Invesco QQQ (QQQ): ETF Research Reports

SPDR S&P 500 ETF (SPY): ETF Research Reports

Direxion Daily S&P 500 Bull 3X Shares (SPXL): ETF Research Reports

ProShares UltraPro S&P500 (UPRO): ETF Research Reports

ProShares Ultra QQQ (QLD): ETF Research Reports

ProShares Ultra S&P500 (SSO): ETF Research Reports

ProShares UltraPro QQQ (TQQQ): ETF Research Reports

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