Tangled Tesla-bitcoin-ARK investment market network could spell trouble for investors, strategist warns


Tuesday is shaping up to be a tough day for tech stocks, after a selloff welcomed investors to start the week. The Nasdaq Composite COMP, -2.46%, up from 40% over the past 12 months, fell 2.5% on Monday on concerns that rising bond yields could make those tech stocks look like faces. When so-called “risk-free” returns are rising, it‘s much more difficult to justify valuations of stocks that appear high.

Electric car maker Tesla TSLA, which leads the lowest tech in the premarket phase, is down -8.55%, down 6% after a drop of about 8% on Monday. Our call for the day comes from Saxo Bank’s head of equity strategy Peter Garnry, who has been warning clients that Tesla is entangled in a “risk pool” involving bitcoin and Cathie Wood’s ARK Investment Management firm. Tesla announced a $ 1.5 billion bitcoin investment earlier this month. Along with Tesla weakness, bitcoin was down 10% early Tuesday, which some attributed to criticism from Treasury Secretary Janet Yellen (see below). That cryptocurrency crash “will obviously illustrate the volatility of earnings that Elon Musk has handed over to Tesla,” Garnry said. Read: Tesla bitcoin gambit already made $ 1 billion, plus 2020 profit from car sales, one analyst estimates. Meanwhile, Tesla “is also the largest position in all of ARK Invest’s ETFs, which added pressure to its largest fund, the ARK Disruptive Innovation Fund ARKK, -5.79% losing 6% yesterday. This is exactly the group of risks that concerns us and about which we wrote two weeks ago, ”said the strategist. Read: Stocks aren’t in a bubble, but this is what it is, according to fund manager Cathie Wood. In Saxo’s note that delved into the holdings of hugely popular and actively managed funds, Garnry highlighted ARK’s concentration on biotech names that he said could be risky if the market decides to back down. And Tesla shares represent 6.7% of total assets under management in ARK’s five actively managed ETFs, according to data Saxo analyzed two weeks ago. “What it means is that a correction in the stock for whatever reason, it could be higher interest rates or prolonged COVID-19 locks, could trigger sell-offs in biotech stocks or Tesla stocks and cause performance to deteriorate, which that could initiate a net exit from AUM and then the feedback loop has started, ”Garnry said, at the time. For her part, Wood, CEO of ARK Invest and manager of the popular exchange-traded fund ARK Innovation, said last week that she was surprised at how quickly companies are embracing bitcoin and that her “confidence in Tesla has grown.” ES00 stock futures markets, -0.46% YM00, -0.02% NQ00, -1.65% are falling, led by technicians, with European stocks SXXP, -0.89% sinking apart from a few travel actions. Asian markets had a mixed day 000300, -0.32%. CL00 oil prices, + 0.66% are rising, while the closely watched yield on the TMUBMUSD10Y 10-year Treasury note, 1.371% is trading around 1.35%. The chart Treasury Secretary Yellen may have blown off some bitcoin BTCUSD, -15.55% after repeating some concerns about the cryptocurrency in an interview with the New York Times Dealbook. Bitcoin was last down 13% to $ 47,909, taking a slew of other cryptocurrencies with it. The rumor All eyes are on Federal Reserve Chairman Jerome Powell, who is kicking off a two-day testimony on Capitol Hill. With more than 10 million Americans still out of work, “Mr. Powell will go out of his way, I’m sure, to end the tuning and rightly so, as I am scared to think what a 2020s tuning tantrum will look like, ”said Jeffrey Halley, analyst Asia Pacific market senior. Oanda. We’ll also get the latest homebuilding indices from S&P CoreLogic Case-Shiller and the Federal Housing Finance Agency, along with an update on consumer confidence. Shares of special-purpose acquisition company Churchill Capital CCIV, + 8.37%, also known as a blank check company, are sinking in the premarket phase. After weeks of rumors, Churchill finally announced a deal to buy electric vehicle company Lucid Motors. Mourning more than 500,000 American lives lost to COVID-19, President Joe Biden observed a moment of silence late Monday and urged the public to “mask themselves.” Social media group Facebook FB, -0.47% say they will restore links to news articles in Australia, five days after the proposed changes to media law in the country. Random reading “I can swear to people and they have no idea.” Redditors on pandemic positives. Need to Know starts early and is updated until the opening bell, but sign up here to receive it once in your email box. The e-mailed version will ship at approximately 7:30 am ET. Do you want more for the next day? Sign up for The Barron’s Daily, a morning investor briefing, featuring exclusive commentary from the Barron’s and MarketWatch writers.