NEW YORK (Reuters): Futures tracking the tech-heavy Nasdaq were muted on Wednesday after sliding for six straight sessions as investors swapped growth-oriented technology shares with stocks that stand to gain the most from an economic rebound.
Shares of Microsoft Corp, Alphabet Inc, Amazon.com Inc and Apple Inc slipped between 0.1% and 0.5% in trading before the bell on high valuation concerns.
Tesla Inc, however, gained 3% after star investor Cathie Wood’s Ark Invest funds added a further $171 million worth of the company’s shares in the wake of a sharp fall in the electric carmaker’s stock.
Growth-sensitive banks, industrial and energy stocks edged higher with Bank of America, Caterpillar Inc and Chevron Corp up between 0.4% and 0.6%.
The S&P 500 and Dow closed higher on Tuesday, staging a late session turnaround, while the Nasdaq slipped in a tug-of-war between stocks that thrived amid lockdowns and those that stand to benefit most from a reopening economy.
At 06:46 a.m. ET, Dow E-minis were up 9 points, or 0.03% and S&P 500 E-minis were up 1 points, or 0.03%. Nasdaq 100 E-minis were down 24.75 points, or 0.19%.
Wall Street’s main indexes have slid from record highs last week on concerns over a potential spike in inflation, while a climb in Treasury yields continued on expectations of a vaccine-backed and stimulus-supported economic recovery, hitting high-flying shares.
Tech stocks are particularly sensitive to rising yields because their value rests heavily on future earnings, which are discounted more deeply when bond returns go up.
Federal Reserve Chair Jerome Powell pushed back on suggestions that loose monetary policy risked unleashing inflation and said the central bank would keep its attention focused on getting Americans back to work as a vaccine-related recovery proceeds.
Lowe’s Companies Inc rose 0.7% after it beat estimates for quarterly same-store sales, benefiting from sustained demand from people sprucing up their homes during the COVID-19 pandemic.
Ark adds $171 million Tesla shares as short bets on ETF soar
Cathie Wood’s Ark Invest funds bought a further $171 million of Tesla shares on Tuesday, the fund group said on Wednesday, after the electric carmaker’s stock fell sharply and closed below $700 for the first time this year.
The $26.6 billion ARK Innovation exchange-traded fund (ETF), one of the best-performaing ETF’s in 2020, fell sharply this week along with Tesla as momentum stocks pulled back sharply. Tesla shares account for about 10% of the fund.
The sell-off triggered heavy trading, with $5 billion of ARK Innovation shares changing hands on Tuesday – more than double the previous session’s volume. The fund traded slightly higher on Wednesday but has lost 9% this week.
Meanwhile, short interest in the fund’s shares showed a massive spike, with 100% of the shares available for shorting currently out on loan, FIS Astec Analytics data showed.
Short sellers typically borrow and sell shares they expect to fall in value, hoping to buy them back at a lower price to pay back the loan and pocket the difference.
David Lewis of FIS Astec Analytics said his firm’s data on borrowing costs suggest potential buying of the ETF as the price falls.
According to Ark Invest’s website, the Tesla share purchases were carried out in three instalments worth about $124 million, $39 million and $8 million. On the same day Ark Invest’s funds also sold $126 million of Taiwan Semiconductor’s US-listed shares.
Ark Invest now holds a more than 0.5% stake in Tesla for a weighting of 6.6% across all its funds.
Tesla shares rose 2.6% in US pre-market trade on Wednesday after losing as much as 13.4% in the previous session, dragged down by heavy losses in Bitcoin, in which Elon Musk’s company recently invested $1.5 billion.
The ARK Innovation fund has large positions in so-called momentum stocks, which tend to attract investors based on thematic trends rather than fundamentals or valuation.
