Monday, October 25, 2021

Surging Treasury Yields Better Amid Broad Take Selloff

NEW YORK—A broad sell-off in technology and growth names battered the flagship fund of star stock picker Kathy Wood’s ARK Invest, as investors turned away from tech stocks amid a sharp rise in Treasury yields.

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

ARK Fund’s losses have been accelerated by a rise in Treasury yields in the wake of the Federal Reserve’s monetary policy meeting last week, which has impacted a broader universe of technology and growth stocks. At that meeting the central bank took an aggressive stance, which some interpreted as a vote of confidence in the US economy.

Brian Price, head of investment management for the Commonwealth Financial Network, said, “Whenever we see that the 10-year UST yield rises by such a dramatic amount in a short period of time… a note.” Given value and cyclical stocks tend to hold better than their growth counterparts.”

While rising bond yields reduce the relative attractiveness of many stocks, they can especially weigh on tech and other growth names, whose valuations depend more on future cash flows as bond yields rise. more seriously missed.

The yield on the 10-year US Treasury note has climbed 24 basis points to 1.54 per cent since Wednesday, while the ARK ETF is down 5 per cent and the Nasdaq 2.4 per cent.

Although stock indexes are nearing record highs, several individual names have been struggling in recent weeks. Half of the S&P 500 shares were down 10 percent or more from their 52-week highs as of Tuesday afternoon. This included more than 60 stocks that fell 20 percent or more.

The Woods Fund, which was the best-performing US equity fund in 2020, is down about 10 percent so far this year, while the S&P 500 is up about 16 percent. The ARK Innovation ETF ranks in the lowest percentage year-over-year among the 601 mid-cap growth funds tracked by Morningstar.

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High-growth names that helped Wood Reap outsized profits during last year’s coronavirus lockdown have hurt the fund’s performance in 2021, with so-called stay-at-home stocks such as Teladoc Health and Roku losing their shine As investors turn to financials, the drama of energy companies and other economic reopenings has happened several times in the past few months.

“What worked for the fund in 2020, the long-term trends backed by ARK have not remained relevant even when the ARK-backed long-term trend remains relevant,” Todd Rosenbluth, Head of ETFs and Mutual Fund Research at CFRA, said in an emailed comment.

Earlier this month, Wood reiterated his call that slowing economic activity in the United States would boost growth stocks.

ARK Invest did not immediately comment on Tuesday.

The short interest in the ARK ETF is 21.41 million shares, or 11.9 percent of the float, according to Ihor Dusanivski, managing director of predictive analytics at S3 Partners, down 1.1 percent in the past week as shorts covered their bets. . .

The fund’s top holdings include electric car maker Tesla Inc. as well as virtual health company Teladoc and television streaming firm Roku. Where Tesla has climbed 10 percent in 2021, Roku shares are down 6.5 percent and Teladoc’s is down 35 percent.

Last week, China’s move to crack down on bitcoin trading dealt another blow to the fund, which listed cryptocurrency trading firm Coinbase Global Inc as its fifth-largest holding. Since its inception in 2014, the ARK fund is up nearly 450 percent, against a gain of about 115 percent for the S&P 500, and ranks among the top percentage points in its category of funds tracked by Morningstar over a five-year period.

by Louise Kruskoff

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This News Originally From – The Epoch Times

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