Nvidia ETFS NVD, NVDQ Jump as Chipmaker Weighs Down QQQ, USD, SHOC

Tech stocks closed lower today, shaving a percentage point from the Invesco QQQ Trust (QQQ) and less than half of that amount from the broader SPDR S&P 500 ETF Trust (SPY), as high-flying AI stock Nvidia Corp. fell for a third day and approached a correction.

The broader Dow Jones Industrial Average, as measured by the SPDR Dow Jones Industrial Average ETF Trust (DIA) gained 0.7%. Bonds, as measured by the iShares 20+ Year Treasury Bond ETF (TLT), also jumped, with TLT adding 0.4%.

Nvidia's slump raised concerns that the rally that fueled a price gain of two-and-a-half times so far this year, including the recent 10-for-1 split, is cooling. The 13% three-day drop surpasses the common definition of a correction, which is a 10% decline. Nvidia for a short time was the world's most valuable company.

Other tech ETFs were dinged by Nvidia's 6.7% drop. The ProShares Ultra Semiconductors (USD) fell 9.7% and the Strive U.S. Semiconductor ETF (SHOC) lost 3.4%. Both allocate roughly 30% of their assets to Nvidia.

So-called single-stock ETFs that bet on Nvidia price declines gained as expected today. The T-Rex 2X Inverse NVIDIA Daily Target ETF (NVDQ) and the GraniteShares 1.5x Short NVDA Daily ETF (NVD) were two of the top gainers on Monday, according to etf.com data. 

Semiconductor bellwether Nvidia Corp. continues to drag down the tech-heavy Nasdaq Composite Index in mid-day trading Monday, while broader market indexes, including the S&P 500 and Russel 2000, are holding onto positive territory.

Nvidia, which is up 144% so far this year and has been carrying a disproportionate share of the broad market rally, has shown recent weakness and is now down 4.7% over the past five trading days.

The sudden Nvidia pullback underscores the double-edged sword of single-stock ETFs that amplify long and inverse exposure to select securities.

The NVDX T-Rex 2X Nvidia Daily ETF, which resets daily to offer twice the exposure to the stock, is down 18.5% over the past five trading days. Meanwhile, NVD, the Graniteshares 2X Short NVDA Daily ETF, which offers two times the inverse exposure to Nvidia, is up 20% over the past week.

Markets were a mixed bag to start the last trading week of June which closes out the first half of the year. QQQ, the Invesco QQQ Trust, which mirrors the tech-heavy Nasdaq, dropped more than a half-percent thanks to a decline in chipmaker Nvidia, the fund's third-largest holding. 

Nvidia's more than 5% slide also pulled down USD, ProShares Ultra Semiconductors and SHOC, the Strive U.S. Semiconductor ETF. The funds, both of which allocate roughly 30% of their assets to Nvidia, sank 8% and nearly 2.3% respectively.

But not all ETFs were weighed down by the slump in Nvidia. NVDQ, the T-Rex 2X Inverse NVIDIA Daily Target ETF and NVD, the GraniteShares 1.5x Short NVDA Daily ETF were two of the top gainers on Monday, according to etf.com data. Both ETFs make bets on the falling share price of the semiconductor and profit on losses in the stock. 

NVDQ soared over 12%, while NVD jumped more than 12.5%.

Source: etf.com

Inflation is also in focus for investors this week as the Commerce Department is set to release the personal consumption expenditures index (PCE) on Friday. The Fed's preferred inflation gauge will be closely watched by investors looking for clues into the Fed's future decision on rate cuts.

While investors started the year anticipating 6 rate cuts, their hopes were quickly dashed. The forecast dropped from 6 to 3 and was slashed again at the Fed's last policy meeting. Markets can now only expect 1 rate cut this year, which markets believe will land in September, according to the CME Fed Watch Tool. 

Investors in rate sensitive funds like fixed income and ETFs with large allocations in high growth stocks will cheer any signs that inflation is cooling further, increasing the likelihood that the Fed will move from its hawkish stance. Fixed income funds have been under pressure this year as the "higher for longer" rate environment have kept bond yields high. 

TLT 1-Month 

Source: etf.com

TLT, the IShares 20+ Year Treasury Bond ETF was flat on Monday, while GOVT, the IShares U.S. Treasury Bond ETF jumped about a quarter of a percentage point.