Cathie Wood’s flagship exchange-traded fund soared the most since its launch as tech stocks leapt on signs of easing inflation and hopes interest rate hikes may slow.
The ARK Innovation ETF (ARKK) rose 14% after a report that consumer prices rose less than expected, suggesting the Federal Reserve would raise rates less aggressively. Meanwhile, the fund saw more than $48.1 million in shares traded by midafternoon in New York, Yahoo Finance data shows, topping the $30.1 million traded the day before.
ARKK’s gain was fueled by its three largest holdings—Zoom Video Communications Inc., Tesla Inc. and Exact Sciences Corp.—which rose 14%, 7.4% and 9.2%, respectively, during midday trading. The three companies make up just over a quarter of the fund’s portfolio.
Still, the fund is down 62% year to date, and news of the rally comes just one day after ARKK recorded a five-year low after the collapse of a deal between crypto exchanges Binance and FTX.
At least one expert suggested investors should curb their enthusiasm.
“I don't know how sustainable it is,” Mark Neuman, CIO and founder of Constrained Capital, said in an interview with ETF.com regarding ARKK’s Thursday performance. “We’re now in a seasonal period, where things tend to on average do better.”
ARKK’s rise also comes as previously battered technology stocks soared during the trading day, with shares of Amazon.com Inc., Meta Platforms Inc. and Alphabet Inc. all jumping higher than 7.8%. Tech-focused ETFs such as the Technology Select Sector SPDR Fund (XLK) climbed more than 8.2%.
Rising inflation has proven tough for technology companies, as it raises the costs of labor and parts, as well as materials. Adding to the pain is the cost of repatriating earnings, which takes a chunk of earnings. Alphabet, for example, derives nearly half its revenue from overseas operations.
Still, a sign of moderating prices, and a declining dollar, may boost bets that conditions are turning favorable for technology companies.
“The idea is that the Fed is going to pivot again,” Neuman said. “The best areas to recover would be the large cap growth, the tech stocks, that have been the darlings for so long prior to this year.”
Meanwhile, the leveraged AXS 2X Innovation ETF (TARK), which seeks to provide twice the returns of ARKK, notched a corresponding gain of more than 28% during midday trading. The ARK Next Generation Internet ETF (ARKW) was neck and neck with its sister fund, with a gain of 14%, while the ARK Fintech Innovation ETF (ARKF) jumped 12%.