Cathie Wood’s Ark ETFs Are Slumping as Speculative Stocks Suffer

(Bloomberg) -- Cathie Wood’s flagship exchange-traded fund extended its decline as a sell-off resumed in the most speculative corners of the stock market.

The $21.5 billion Ark Innovation ETF (ticker ARKK) tumbled as much as 10% at the peak of Friday’s rout before rebounding to trade 3.7% lower at 1:08 p.m. in New York. The fund is down for four straight days and headed to its worst week since November. Losses for Tesla Inc., Palantir Technologies Inc. and Square Inc. were some of the biggest drags.

Other Ark funds also fell. The $9.3 billion Ark Genomic Revolution ETF (ARKG) was down 2.5% as data showed a record $251 million outflow Wednesday -- the largest exit on record. The $7.2 billion ARK Next Generation Internet ETF (ARKW) dropped almost 4%.

Ark has been caught up in the broad rout for tech and particularly the most speculative shares as rising bond yields make investors cautious about expensive parts of the stock market. The ETFs had been on a red-hot run over the past year as Wood’s strategy of targeting innovative companies won a legion of fans, whose loyalty is now facing its first big test.

“It shows a shift in the willingness to take risk,” said Matt Maley, chief market strategist at Miller Tabak + Co. “With long-term rates making a higher-high this week, investors are re-thinking their risk tolerance.”

The $21.5 billion ARKK saw another $95 million exit on Wednesday, the latest day for which data is available. However, technical analysis suggests some of the funds including ARKK may have fallen too far, too fast. Its 14-day relative-strength index dropped below 30 on Thursday, a level most analysts consider oversold.

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