Cathie Wood’s ARKK ETF heads for best day ever as risky assets rise

(Bloomberg) – Cathie Wood’s flagship fund had its best session on Thursday as riskier assets rebounded following a weaker-than-expected inflation report.

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ETF ARK Innovation (ticker ARKK) jumped 15%, the most on record, after data showed prices rose slower than expected, fueling bets that the Federal Reserve could retrace. its aggressive tightening efforts. This is good news for riskier assets which have been weighed down by the central bank’s rate hike efforts.

ARKK’s best day shows how troubled growth stocks can recoup losses and outperform major asset classes when inflation slows. Funds at Ark Investment Management LLC capitalized on Thursday’s sizzling rebound by trimming stakes in standalone technology provider TuSimple Holdings Inc., 3D printing services provider Materialize NV, defense systems maker Elbit Systems ltd. and Southeast Asian e-commerce company Sea Ltd.

In the days leading up to the Consumer Price Index print, Wood had increased bets on some of his favorites like electric vehicle leader Tesla Inc., cryptocurrency exchange operator Coinbase Global Inc., online brokerage Robinhood Markets Inc., software maker Adobe Inc. and even smaller biotech companies like Nurix Therapeutics Inc. Major exits included chipmaker Nvidia Corp.

Meanwhile, the AXS 2X Innovation ETF (TARK), which tracks twice the performance of the Wood fund, rose 28%, the most since its inception earlier this year, while the AXS Short Innovation Daily ETF (SARK), which is structured to deliver the inverse of ARK Innovation’s performance each day, slipped 14%, the highest on record.

“It’s a day of super mean reversion,” said Todd Sohn, ETF strategist at Strategas Securities. “A bit behind inflation and we see market relief,” he said, adding that many investors who had sold ARKK might also be forced to hedge their positions.

Stocks and cryptocurrencies surged Thursday for their best day since April 2020, with the S&P 500 adding 5.5%. Bitcoin, the largest digital token by market value, gained more than 13% to trade above $17,000, after a two-day beating that saw it drop below many closely watched technical levels then. that the collapse of popular crypto exchange FTX.com has spurred industry wide angst. A basket of the top shorted companies gained more than 8%.

Wood’s other key funds – ARK Fintech Innovation ETF (ARKF), ARK Genomic Revolution ETF (ARKG) and ARK Next Generation Internet ETF (ARKW) – each added more than 11% on Thursday. ARK Space Exploration & Innovation ETF (ARKX) and ARK Autonomous Technology and Robotics ETF (ARKQ) rose more than 6% each.

“It’s a very skewed buy day. I think this is much needed good news for the market after the last 48 hours. ARK’s fund has been destroyed all week,” said Anthony Denier, CEO of trading platform Webull “It’s kind of one of those ‘hoorah’ moments for the market that there’s finally some good news, or at least finally some light at the end of the tunnel, that we we’re kind of going through this cycle of inflation.”

Still, the year hasn’t been the kindest for Wood and its product line. ARKK’s core holdings – tech companies that project long-term growth – have suffered from the Fed’s monetary tightening campaign. ARKK is down more than 60% this year, as is ARKF, while ARKG is down around 44%.

–With help from Emily Graffeo.

(Adds Ark Investment Management LLC trading activity in third and fourth paragraphs and updates prices throughout)

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