Levered Tesla ETFs Surge on Robotaxi Hopes

Holiday-shortened equity markets produced new highs for the broad S&P 500 and Nasdaq indexes, which pulled out slight gains, while the more concentrated Dow Jones Industrial Average declined slightly.

The broad market movement paled in comparison to a handful of leveraged single-stock exchange-traded funds directly and indirectly linked to Tesla Inc., which jumped 6.5% on hopes for its self-driving taxi fleet initiative and better-than-expected second quarter deliveries.

The T-Rex 2X Long Tesla Daily Target ETF (TSLT) added 14% at the 1 p.m. New York time market close. The Direxion Daily TSLA Bull 2X Shares ETF (TSLL) and the GraniteShares 2X Long TSLA Daily ETF (TSLR) each gained 13%.

TSLL was the most active ETF Wednesday, with trading volume up more than 12%.

Riding the same electric transportation theme, the Direxion Daily Electric And Autonomous Vehicles Bull 2X Shares (EVAV) rounded out the top four gainers with a 9.5% jump.

As should be expected in the world of levered and inverse single-stock ETFs, the day’s biggest losers were two funds that let investors bet against Tesla.

The T-Rex 2X Inverse Tesla Daily Target ETF (TSLZ) and the GraniteShares 2X Short TSLA Daily ETF (TSDD) both declined by more than 13%.

U.S. financial markets will be closed Thursday in honor of the July Fourth holiday and reopen Friday.

Broad markets inched up as jobs data released Wednesday painted a portrait of a cooling economy. 

SPY, the SPDR S&P 500 ETF Trust and DIA, the SPDR Dow Jones Industrial Average ETF Trust were both slightly positive, about 0.03%.

QQQ, the Invesco QQQ Trust which tracks the tech-heavy Nasdaq rose just 0.02%.

According to ADP's employment report, private payrolls increased by 150,000 in June, less than economists surveyed by Dow Jones had expected. The increase is the third straight month of cooling job creation, the payroll provider released. 

"Job growth has been solid, but not broad-based," said ADP's Chief Economist Nela Richardson. "Had it not been for a rebound in hiring in leisure and hospitality, June would have been a downbeat month."

Initial unemployment claims also rose by 4,000 to 238,000 by the end of last week, the Labor Department said in a release Wednesday morning.

The two snapshots are the last pieces of economic data set to be released before Friday's jobs report at 8:30 AM Eastern. 

The labor market has been closely watched by investors looking for any clues to the future path of rate hikes from the Federal Reserve. A strong jobs market signals a strong economy, giving the Fed breathing room to keep interest rates higher for even longer. A cooling labor market however can stoke hopes that a rate cut will be on its way.

Speaking in Portugal at the European Central Bank forum yesterday, Fed Chair Jay Powell stated that cooling inflation was encouraging, but that the central bank still needed "more confidence" in cooling inflation before cutting rates.

Currently, markets aren't expecting the first rate cut until September, according to the CME Fed Watch Tool. 

On the news of a cooling jobs market, Treasury yields fell, boosting bond ETFs.

TLT, the IShares 20+ Year Treasury Bond ETF jumped roughly 1.25%, while GOVT, the IShares U.S. Treasury Bond ETF rose 0.5%. Short-term Treasury ETFs like BIL, the SPDR Bloomberg 1-3 Month T-Bill ETF stayed close to the flatline.

Tesla ETFs continued to perform well Wednesday after better than expected deliveries for the second quarter were reported by the car manufacturer. TSLL, the Direxion Daily TSLA Bull 1.5X Shares was the most actively traded ETF on Wednesday morning with over 46M shares in trading volume. The fund was also one of the biggest gainers of the day, popping nearly 12%.

Other ETFs betting on rising Tesla share prices did well Wednesday morning. TSLT, T-Rex 2X Long Tesla Daily Target ETF jumped roughly 12% while TSLR, the GraniteShares 1.75x Long TSLA Daily ETF rose about the same.

Markets are set to close early today for the July 4 holiday and today's trading session will end at 1 PM Eastern. The market will be closed tomorrow for the holiday.