Cannabis, crypto and meme stocks soar Monday as market sell-off continues

Investors have found some relief in the latest price change in US stocks, but not necessarily where one would expect.

While traditionally defensive sectors like utilities managed to hold onto gains in Monday’s session, some of the other bright spots in the market were more speculative assets like cannabis stocks, meme stocks and cryptocurrencies.

Collect cannabis stock

Cannabis stocks have had a tough year, but some on Wall Street think that could change.

Popular cannabis names like Tilray Inc. TLRY,
+1.20%,
Aurora Cannabis Inc. PBR
+5.47%
and Cronos Group Inc. cron,
+1.97%
traded sharply higher on Monday, extending last week’s gains, a period in which all three companies posted gains of 9% or more, according to FactSet.

Equity-focused cannabis ETFs, such as the MSOS AdvisorShares,
+4.46%
The Pure US Cannabis ETF rose 4.5% on Monday, while other cannabis-focused ETFs such as Innovation Shares Cannabis ETF THCX,
+1.33%
increased by 1.5%.

A Wall Street analyst who reports on the cannabis industry but asked for substantive comment said the recent rally was driven by a confluence of factors, including hopes that the US Senate could pass a federal bill on banking reform this fall. can accept. Analysts have also pointed to the possibility of Germany legalizing marijuana for adult use.

To be sure, cannabis stocks remained well below their 52-week high, with shares of Aurora down more than 80% from their peak above $14.

Cryptocurrencies are rebounding

After being beaten on Friday, cryptocurrencies withdrew on Monday. BitcoinBTCUSD,
-0.11%
rose 0.7% back above $20,000 per coin, a closely monitored technical level, according to data from CoinDesk. Ether, ETHUSD,
-0.55%
the No. 2 cryptocurrency rose 3.9%, according to data from cryptocurrency exchange Kraken. Crypto traders bought up Ethereum prior to “the merger,” a much-anticipated change in the framework underlying the Ethereum blockchain.

As cryptocurrencies soared on Monday, Nicholas Colas, co-founder of DataTrek Research, estimated that their aggregate market cap had fallen further to about $1 trillion, from a peak of $3 trillion in November 2021, in a research note Monday morning.

“This 67% drop in virtual currency values ​​from the peak is not far off from the NASDAQ 2000 – 2002 experience of a 78% drop, and it begs the question of ‘how do you know when a bubble has completely burst? said Coke.

Meme stocks also outperform

Bed Bath & Beyond BBBY Shares,
+24.77%
climbed 24.8% on Monday as investors waited for a “strategic update” from the beleaguered retailer.

To see: Bed Bath & Beyond stock explodes a day before ‘strategic update’

BBBY’s rally appeared to lift other meme stock names, including GameStop Corp. EMG,
+1.97%
and AMC Entertainment Holdings Inc. AMC,
+3.27%

Admittedly, Wall Street analysts remain skeptical. Of the 18 analysts listed by FactSet as covering Bed Bath & Beyond, 12 were bearish and five were neutral, while only one was bullish.

Energy stocks rise alongside oil and natural gas

West Texas Intermediate CLV22 Rough Futures,
-0.12%
for October, delivery rose more than 4% on Monday to top $97 a barrel, the highest end-of-day price for a first-month contract in more than a month.

Shares of oil and gas companies recovered strongly as a result, and many of the industry’s biggest names topped the S&P 500 on Monday. Some of them include APA Corp. apa,
+2.94%,
Diamondback Energy Inc. FANG,
+3.98%,
Marathon Oil Corp. MRO,
+2.41%,
Halliburton HAL Company,
+2.57%
and Exxon Mobil Corporation XOM,
+2.30%.

The Energy Select XLE Sector SPDR Fund,
+1.51%,
which tracks the performance of the S&P 500 energy sector climbed 1.5%, bringing last week’s gains to 6%.

Defensive stocks also outperform

Utility stocks are considered defensive due to stable cash flows that often remain resilient during economic downturns and yield large dividends. In that sense, it’s perhaps not surprising that the utilities sector outperformed the S&P 500 on both Monday and last week. But the outperformance was not spectacular. The Utilities Select Sector SPDR XLU Fund,
+0.30%,
which tracks the S&P 500, rose 0.6%.

Utilities have outperformed the S&P 500 this year, with the sector up nearly 6% year-to-date, making utilities the best performing sector after energy.

But technical analysts also saw signs that the sector may already be overbought. Jonathan Krinsky, chief market engineer at BTIG, said the utility sector recently pulled back from the widest gap to the 200-day moving average in seven years. It could be a sign that more pain is coming.

US stocks closed lower Monday as the sell-off continued. On Friday, the S&P 500 SPX,
-0.67%
and Nasdaq Composite COMP,
-1.02%
recorded the worst daily decline since mid-June following aggressive comments from Federal Reserve Chairman Jerome Powell.

To see: Fed’s Powell Says Lowering Inflation Will Hurt Households and Businesses in Jackson Hole’s Speech

The Dow Jones Industrial Average DJIA,
-0.57%
fell 0.6% Monday, after falling 1,000 points on Friday.

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