ARK Innovation fund rebounds from tech-driven rout as Cathie Wood calls markets 'irrational'

Published Mon, Jan 10 202210:52 AM ESTUpdated Mon, Jan 10 20225:11 PM EST

Cathie Wood's flagship fund ARK Innovation rebounded from steep losses on Monday as the sell-off in tech shares stablized. The innovation-focused exchange-traded fund dropped 4% in morning trading but ended the day up 0.3% as technology names came back from sharp losses. Still, the ETF is now about 47% off its February 2021 all-time high. ARKK has fallen about more than 10% in the new year as some of its core holdings hit new lows, including Zoom Video , Teladoc and Roku . The sell-off comes as investors rapidly rotate out of technology stocks amid a spike in interest rates. Higher rates typically punishes growth pockets of the market that rely on low rates to borrow for investing in innovation. Additionally, their future earnings look less attractive when rates rise. The 10-year Treasury yield topped 1.8% on Monday, as investors bet the Federal Reserve could enact its first 25 basis point rate hike as soon as March. The central bank has signaled a faster-than-expected policy tightening this year, including reducing its massive bond-buying program. Wood said in an investor update video Friday that the stock market seems irrational at the moment, but she believes it will stabilize soon amid the new earnings season. "Sometimes the market can remain irrational and I'll say what's going on right now is irrational. Sometimes it can remain irrational," Wood said in the video posted on ARK Invest's website. "But I do think as we see these earnings reports coming in, and the guidance for the first quarter and this 'fessing up out there into what's really going on with inventories, that we're going to see the turn sooner rather than later." The widely followed Wood said investor asset retention has been "pretty phenomenal," adding that she continues to believe in the innovative technologies she bets on. ARKK has had about $420 million in 2022 outflows through Friday, according to FactSet. "Keep your eye on that prize. And if we're right, the technologies around which we have focused our research, those technologies, we believe will compound in terms of revenues and earnings for the companies involved," Wood said. She previously has said her fund will quadruple in price over the next five years. ARK Innovation's tumultuous start to 2022 follows a rough year for ARK Innovation, which slumped 24% in 2021. — CNBC's Maggie Fitzgerald contributed reporting.

Catherine Wood, chief executive officer of ARK Investment Management LLC, speaks during the Milken Institute Global Conference in Beverly Hills, California, on Monday, Oct. 18, 2021.

Kyle Grillot | Bloomberg | Getty Images

Cathie Wood's flagship fund ARK Innovation rebounded from steep losses on Monday as the sell-off in tech shares stablized.