Breaking News
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Surging Treasury yields batter ARK fund amid broad tech selloff

Stock MarketsSep 28, 2021 19:32
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Cathie Wood, founder and CEO of ARK Investment Management LLC, speaks during the Skybridge Capital SALT New York 2021 conference in New York City, U.S., September 13, 2021. REUTERS/Brendan McDermid/File Photo

By Lewis Krauskopf

NEW YORK (Reuters) - A broad selloff in technology and growth names battered the flagship fund of star stock picker Cathie Wood’s ARK Invest, as investors shifted away from tech shares amid a sharp rise in Treasury yields.

The ARK Innovation ETF, which had $21.4 billion in assets as of last week, according to Refinitiv, fell 4.2% on Tuesday. That drop outpaced a 2% swoon for the benchmark S&P 500, its biggest one-day percentage decline since May, and a 2.8% fall for the tech-heavy Nasdaq, its biggest one-day decline since March.

Losses for the ARK fund have accelerated in recent days, fueled by a rise in Treasury yields that has hit the broader universe of technology and growth stocks in the wake of the Federal Reserve’s monetary policy meeting last week. The central bank took a hawkish tilt at that meeting, which some interpreted as a vote of confidence in the U.S. economy.

“Anytime we see the 10-year UST yield move such a dramatic amount in a short period of time ... it generally coincides with a market sell-off of some magnitude,” said Brian Price, head of investment management for Commonwealth Financial Network, in a note. “It is not surprising to see value and cyclical stocks hold up better than their growth counterparts given the increase in yields.”

While rising bond yields tend to reduce the relative attractiveness of many stocks, they can particularly weigh on tech and other growth names whose valuations rely more on future cash flows, which are discounted more severely as bond yields rise.

Since Wednesday, the yield on the 10-year U.S. Treasury note has climbed 24 basis points to 1.54%, while the ARK ETF has fallen 5% and the Nasdaq is down 2.4%.

Though stock indexes remain near record highs, many individual names have struggled in recent weeks. Half of S&P 500 stocks were down 10% or more from their 52-week highs as of Tuesday afternoon. That included over 60 stocks that had fallen 20% or more.

Wood’s fund, which was the best-performing U.S. equity fund in 2020, is down about 10% so far this year, while the S&P 500 has gained nearly 16%. The ARK Innovation ETF ranks in the lowest percentile year-to-date among 601 mid-cap growth funds tracked by Morningstar.

The high-growth names that helped Wood reap outsized gains during last year’s coronavirus lockdowns have hurt the fund’s performance in 2021, with so-called stay-at-home stocks such as Teladoc Health and Roku losing their luster as investors have turned to financials, energy companies and other economic reopening plays at various times over the last few months.

“What worked for the fund in 2020 has not persisted even if the long-term trends favored by ARK remain relevant,” Todd Rosenbluth, head of ETF & mutual fund research at CFRA, said in an emailed comment.

Earlier this month, Wood reiterated her call that slowing economic activity in the United States will bolster growth stocks.

ARK Invest had no immediate comment on Tuesday.

Short interest in the ARK ETF amounts to 21.41 million shares, or 11.9% of the float, with short interest declining by 1.1% in the past week as shorts have covered their bets, according to Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.

The fund’s top holdings include electric car maker Tesla Inc as well as virtual health company Teladoc and television streaming firm Roku. While Tesla has climbed 10% in 2021, Roku has slumped 6.5% and Teladoc shares have dropped some 35%.

Last week, China's moves to crack down on bitcoin trading dealt another blow to the fund, which lists cryptocurrency trading firm Coinbase (NASDAQ:COIN) Global Inc as its fifth-largest holding. Since its inception in 2014, the ARK fund is up about 450% against a gain of roughly 115% for the S&P 500, and ranks in the top percentile in its category of funds tracked by Morningstar over a five-year period.

Surging Treasury yields batter ARK fund amid broad tech selloff
 

Related Articles

Why did the SEC release a report on GameStop?
Why did the SEC release a report on GameStop? By Reuters - Oct 18, 2021

(Corrects paragraph 6 to clarify that Schwab did not restrict buying or selling of GameStop's shares, but that it adjusted margin requirements and restricted certain advanced...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email