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Need to Know: A tangled market web of Tesla-bitcoin-ARK Investment could spell trouble for investors, warns strategist

Need to Know: A tangled market web of Tesla-bitcoin-ARK Investment could spell trouble for investors, warns strategist

2021-02-23 16:24:00
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Tuesday looks set to be a rough patch for technology stocks after a sell-off that greeted investors to start the week.

The Nasdaq Composite
COMP,
-1.96%

– Up 40% in the past 12 months – fell 2.5% Monday amid concerns about rising bond yields that could make these tech stocks look pricey. When the so-called "risk-free" returns rise, it is much more difficult to justify high equity valuations.

Leading techies down in premarket are electric car manufacturer Tesla
TSLA,
-5.13%

6% down after down about 8% on Monday. Our call of the day comes from Saxo Bank's head of equity strategy, Peter Garnry, who has warned customers that Tesla is entangled in a & # 39; risk cluster & # 39; involving bitcoin and Cathie Wood's ARK Investment Management firm.

Tesla announced a $ 1.5 billion bitcoin investment earlier this month. Along with Tesla's weakness, bitcoin fell 10% early Tuesday, which some attributed to criticism from Treasury Secretary Janet Yellen (see below). That crypto drop will "clearly illustrate the volatility of the revenues that Elon Musk has delivered to Tesla," Garnry said.

Read: Tesla bitcoin gambit has already made $ 1 billion, more than 2020 profit from car sales, analyst estimates

Meanwhile, Tesla is “also the largest holding in all ARK Invest ETFs, which has added pressure on its largest fund, the ARK Disruptive Innovation Fund.
ARKK,
-5.91%

lost 6% yesterday. This is exactly the risk cluster we have been concerned about and wrote about two weeks ago, ”Said the strategist.

Read: According to fund manager Cathie Wood, stocks are not in a bubble, but this is what it is

In the Saxo Note delving deep into the hugely popular, actively managed fund holdings, Garnry highlighted ARK's concentration in biotech names that he said could be risky if the market decides to reverse. And Tesla shares represent 6.7% of the total assets under management of ARK's five actively managed ETFs, according to data that Saxo crashed two weeks ago.

What it means is that a correction in stocks for any reason could be higher interest rates or long-term COVID-19 lockdowns could cause a sell-off between biotechnology stocks or Tesla stocks and deteriorate performance, leading to a net outflow of AUM and then the feedback loop has begun, ”said Garnry at the time.

For her part, Wood, the chief executive of ARK Invest and manager of the popular ARK Innovation exchange-traded fund, said last week that she was surprised by how quickly companies are adopting bitcoin, and that her "Trust in Tesla has grown."

The markets

Shares
DJIA,
-0.37%

SPX,
-0.74%

COMP,
-1.96%

sales, led by techies, with European stocks
SXXP,
-0.55%

aside from some travel supplies. The Asian markets had a mixed day
000300,
-0.32%

Oil prices
CL00,
+ 0.06%

rise, while closely watched returns on the 10-year treasury
TMUBMUSD10Y,
1.356%

trades around 1.35%.

The graph

Finance Minister Yellen may have released some steam from bitcoin
BTCUSD,
-13.29%

after reiterating some concerns about the cryptocurrency in an interview with the New York Times Dealbook. Bitcoin last fell 13% to $ 48,886, taking a number of other cryptos with it.

The buzz

All eyes are on Federal Reserve Chairman Jerome Powell giving a two-day testimony on Capitol Hill. With more than 10 million Americans still out of work, Mr. Powell will do everything I am sure to taper to bed and rightly so as I fear thinking what a taper tantrum of the 2020s will look like & # 39; & # 39; Jeffrey Halley, Senior Market Analyst, Asia Pacific, Oanda.

We also get the latest home price indexes from S&P CoreLogic Case-Shiller and the Federal Housing Finance Agency, along with an update on consumer confidence.

Shares of Home Depot
HD,
-5.33%

decline despite positive results.

Shares of Churchill Capital Acquisition Company
CCIV,
-32.63%

also known as a blank check business, sink. After weeks of rumors, Churchill finally announced a deal to acquire electric vehicle business Lucid Motors.

President Joe Biden mourned more than 500,000 American lives lost to COVID-19, observed a moment of silence late Monday and urged the public to "mask" themselves.

Social media group Facebook
FB,
+ 1.01%

says it will restore links to news articles in Australia five days after proposed changes to the country's media law.

Read randomly

"I can speak obscenities to people and they have no idea." Redditors pandemic positives

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