Cathie Wood’s flagship fund clocked its best session on Thursday as riskier assets bounce following a softer-than-expected inflation report.
The ARK Innovation ETF (ticker ARKK) surged 15%, the most on record, after data showed that prices rose slower than forecast, which fueled bets that the Federal Reserve could dial back its aggressive tightening efforts. That’s good news for riskier assets that have been weighed down by the central bank’s rate-hiking efforts.
ARKK’s best day ever shows how swiftly battered growth stocks can recoup losses and outperform major asset classes when inflation softens. Ark Investment Management LLC’s funds capitalized on Thursday’s sizzling rebound by paring stakes in self-driving technology provider TuSimple Holdings Inc., 3D printing services provider Materialise 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 boosted bets on some of her favorites like electric vehicle bellwether Tesla Inc., cryptocurrency exchange operator Coinbase Global Inc, online broker Robinhood Markets Inc., software maker Adobe Inc. and even small biotechnology firms like Nurix Therapeutics Inc. Key exits included chipmaker Nvidia Corp.
Meanwhile, the AXS 2X Innovation ETF (TARK), which tracks double the performance of Wood’s fund, raced ahead by 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, slid 14%, the most on record.
“It’s a super mean-reversion day,” said Todd Sohn, ETF strategist at Strategas Securities. “A little beat on inflation and we see market relief,” he said, adding that a lot of investors who had shorted ARKK might also be forced to cover their positions.
Stocks and cryptocurrencies surged on Thursday for its 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, following a two-day drubbing that saw it tank below many closely-watched technical levels as the collapse of the popular crypto exchange FTX.com spurred industry wide angst. A basket of the most shorted companies gained more than 8%.
Wood’s other key funds -- the ARK Fintech Innovation ETF (ARKF), ARK Genomic Revolution ETF (ARKG) and ARK Next Generation Internet ETF (ARKW) -- each added more than 11% Thursday. ARK Space Exploration & Innovation ETF (ARKX) and ARK Autonomous Technology and Robotics ETF (ARKQ) rose more than 6% each.
“This is a very highly skewed buy-day. I think this is well-needed good news for the market after the last 48 hours. ARK’s fund was getting 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’re kind of making way through this inflation cycle.”
Still, the year hasn’t been the kindest for Wood and her suite of products. ARKK’s top holdings -- tech companies that project growth far out into the future -- have suffered amid the Fed’s monetary tightening campaign. ARKK is down more than 60% this year as is ARKF, while the ARKG has shed about 44%.
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