Wall Street wobbled last week and so did other markets as investors saw fears about inflation replaced by old concerns about Covid – specifically the new Omicron variant (and not Delta).
But unlike the previous Covid waves and associated lockdowns or restrictions (closed borders and no travel) the stockmarket reaction on Wall Street was very different.
That is best exemplified by the treatment investors have handed out to Ark Innovation, the high profile megatech skewing Exchange Traded Fund (ETF).
Under its high-profile founder, Cathy Wood, the Ark ETF outperformed all other US equity funds last year due to its outsized bets on so-called stay-at-home stocks, especially big techs (and she also liked Chinese tech giants before Alibaba founder Jack Ma was humiliated by President Ji Jinping’s government).
Shares of the fund tumbled 5.5% on Friday to a 13-month low amid steep declines in many of the stocks it holds. Over last week it slumped more than 14%. The high profile megatechs are on the nose – except the biggest of them all, Apple.
So-called stay-at-home stocks that benefitted from Covid-19 and the ensuing lockdowns such as Zoom, Etsy, DoorDash, DocuSign and Netflix all tanked last week despite rising fears about the impact of the new Covid variant.
There were a few that did well, but Apple stood head and shoulders above the pack – despite a wobble on reports of weaker than expected demand for its iPhone 13 model running into the end of year selling season.
It was joined by middle ranking techs like dell, Cisco and HP. All good names but nowhere near the recognition value of Apple (though Dell used to be a much more high-profile tech company).
The sharp sell-off in the one-time lockdown faves suggests that investors in the world’s biggest market have gone post-lockdown so far as the new variant is concerned.
At the moment investors think Omicron does not pose the same dangers that Alpha and especially Delta did and if that’s the case, it will be due to the high levels of vaccination in many countries.
That in turn suggests that those unvaccinated could learn, as they are doing with Delta, that Covid is a nasty infection and life threatening to boot.
Shares in Zoom slumped 16.5% last week, hitting a new 52-week low on Friday of $US177.12 a share, a 69% drop from its record high in 14 months ago. Having sat through numerous Zooms, millions of people will not be unhappy at that.
Shares of online marketplace Etsy, which became a place for mask buyers to buy and meet early in the pandemic, fell 20.6% for the week, while food delivery service DoorDash slumped 16%, Roku dropped 13%, Shopify slid 10.5% and Netflix shares slumped more than 9%.
Shares in Amazon, which prospered during the online boom, lost more than 3% last week when it really should have been doing well. Alphabet shares were down (just 0.3%). Shares in Meta Platforms (the old Facebook) fell more than 7% as well.
Microsoft shares were down more than 2%.
Friday saw the shares in e-signature software maker DocuSign, which tripled in value last year, slump 42% after the company issued weak fourth-quarter guidance.
Overall this sell-off saw the tech heavy Nasdaq – which led the rebound from March 2020 as investors hunted and found stocks that benefited in the lockdowns – drop more than 1.9% on Friday alone and more than 2.6% for the week.
Apple stood out – up 3.2% for the week after hitting a new all time high on Tuesday after Omicron suddenly got serious.
In fact it was the only major stock in the S&P 500 to gain on the day and that strength came the same day as Fed chair, Jay Powell signalled a big switch in the central bank’s view of inflation – it’s no longer ’transitory’.
The Financial Times claimed on the weekend that Apple’s strength is linked to intense options trading by hedge funds and others, as well as some of the Reddit investors that pushed GameStop higher earlier in the year.
But joining Apple in the green for the week were shares in middle ranking techs, HP (up nearly 8.6% on a good earnings report) and Cisco (up 2.8%) and Dell technologies, up 4%. Shares in chip group, Boradcom rose around 2%, Intel shares ended up around 1% as did shares in another chipmaker, Qualcomm.
But among the megas – Netflix led the way lower, followed by Meta. Tesla fell more than 6% as did chipmaker AMD.
Cloud software vendor Asana which had been the best-performing tech stock of the year, plunged 36.8%, and Bill.com, another recent star lost 21%.
Up to last Friday the Dow is up 12.98%, the S&P 500, 20.8% and the Nasdaq, 17.05%.
