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Cathie Wood's ARK Fund set for worst week since Sept as higher rates loom

David Randall
·2 min read
Cathie Wood, CEO of Ark Invest, speaks during an interview on CNBC on the floor of the NYSE in New York

By David Randall

NEW YORK (Reuters) - Big declines in holdings including Tesla Inc and 2U Inc are leaving star stock picker Cathie Wood's flagship ARK Innovation Fund on pace for its worst weekly decline since September as the Federal Reserve appears ready to hike interest rates further.

Tesla, the fund's top holding, is down nearly 11% for the week to date, while online education company 2U Inc is down nearly 18% for the week.

Overall, the fund is down approximately 10% for the week to date, its worst weekly performance since an 11.1% decline in the week ending Sept. 23, according to Refinitiv data. None of the 27 companies in the fund's portfolio are in positive territory for the week.

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Ark Invest did not immediately respond to a request for comment.

The $7 billion fund, which soared during the 2020 pandemic lockdowns, is often seen as a measure of investor's tolerance for riskier assets, analysts say.

A hawkish message from Federal Reserve Chair Jerome Powell in testimony before Congress this week prompted investors to price in additional interest rate hikes this year, dealing a blow to the sort of high-growth, speculative companies that Wood favors.

Higher rates weigh heavily on technology stocks by increasing the cost of borrowing and decreasing the value of expected future profits.

Markets are now pricing in a 49% chance that the Federal Reserve raises rates by 50 basis points to a range of 5%-5.25%, up from a 28% chance at this time last week, according to CME's FedWatch Tool.

"(ARK) is a good barometer of sentiment toward higher risk, higher reward investments. When investors shift to a risk-off mindset this ETF tends to decline as the fund invests in securities tied to long-term themes," said Todd Rosenbluth, head of research at data analysts company VettaFi.

Overall, it remains up 17% for the year to date, a performance driven largely by a gain of more than 25% in January, the best monthly performance in its history

(Reporting by David Randall; Editing by Kirsten Donovan)