Cannabis, crypto and meme stocks rise on Monday as the stock market sell-off continues
Investors found some support in the recent rally in US stocks, but not necessarily in the places one might expect.
While traditionally defensive sectors such as utilities managed to hold on to gains in Monday’s session, some of the market’s other bright spots included more speculative assets such as cannabis stocks, meme stocks and cryptocurrencies.
Cannabis stocks rise
Cannabis stocks have had a rough year, but some on Wall Street believe that may be about to change.
Popular cannabis names such as Tilray Inc. TLRY,
Aurora Cannabis Inc. ACB,
and Cronos Group Inc. CRON,
traded sharply higher on Monday, extending gains from the past week, a period in which all three companies have posted gains of 9% or more, according to FactSet.
Cannabis stock-focused ETFs such as AdvisorShares MSOS,
The Pure US Cannabis ETF rose 4.5% on Monday, while other cannabis-focused ETFs such as the Innovation Shares Cannabis ETF THCX,
rose 1.5 percent.
A Wall Street analyst who covers the cannabis industry but declined to speak on background said the recent rally has been driven by a confluence of factors, including hopes that a federal banking reform bill could pass the US Senate this fall. Analysts also cited the prospect of Germany legalizing marijuana for adult use.
To be sure, cannabis stocks stayed well off their 52-week highs, with shares of Aurora down more than 80% from peaks above $14.
Cryptocurrencies bounce back
After taking a beating on Friday, cryptocurrencies bounced back on Monday. Bitcoin BTCUSD,
was up 0.7% to trade back above $20,000 per coin, a closely watched technical level, according to data from CoinDesk. Ether, ETHUSD,
No. 2 cryptocurrency, rose 3.9%, according to data from cryptocurrency exchange Kraken. Crypto traders have been buying back into Ethereum ahead of “the Merge,” a long-awaited shift in the framework underlying the Ethereum blockchain.
While cryptocurrencies climbed on Monday, Nicholas Colas, co-founder of DataTrek Research, estimated that their combined market capitalization has still fallen to about $1 trillion from a peak of $3 trillion in November 2021, in a research note Monday morning.
“That 67% decline in virtual currency values from the peak is not far off from the NASDAQ 2000-2002 experience of a 78 percent drop, and it raises the question of ‘how do you know when a bubble has completely burst?'” Colas said.
Meme stocks also outperform
Share of Bed Bath & Beyond BBBY,
rose 24.8% on Monday as investors awaited a “strategic update” from the beleaguered retailer.
See: Bed Bath & Beyond stock rockets a day ahead of ‘strategic update’
The rally in BBBY appeared to lift other meme stock names, including GameStop Corp. GM,
and AMC Entertainment Holdings Inc. AMC,
To be sure, Wall Street analysts remain skeptical. Of the 18 analysts listed by FactSet covering Bed Bath & Beyond, 12 were bearish and five were neutral, while only one was bullish.
Energy stocks are rising along with oil and natural gas
West Texas Intermediate crude oil futures CLV22,
for October delivery climbed more than 4% on Monday to settle above $97 a barrel, the day’s highest closing price for a front-month contract in more than a month.
Shares in oil and gas companies rose sharply as a result, and many of the sector’s biggest names were the top performers on the S&P 500 on Monday. Some of these included APA Corp. APA,
Diamondback Energy Inc. CAPTURE,
Marathon Oil Corp. MRO,
Halliburton Company HAL,
and Exxon Mobil Corporation XOM,
Energy Select Sector SPDR Fund XLE,
which tracks the performance of the S&P 500 energy sector, climbed 1.5%, bringing its gains over the past week to 6%.
Defensive stocks also give better results
Utilities stocks are seen as the quintessential defensive play because of steady cash flows that often remain resilient in economic downturns, and pay big dividends. In this sense, it is perhaps not surprising that the utilities sector has outperformed the S&P 500 both on Monday and over the past week. But the excess result has not been spectacular. Utilities Select Sector SPDR Fund XLU,
which tracks the S&P 500, was up 0.6%.
Utilities have outperformed the S&P 500 this year: The sector is up nearly 6% year-to-date, making utilities the best-performing sector by energy.
But technical analysts also saw signs that the sector was already overbought. Jonathan Krinsky, chief market officer at BTIG, said the utilities sector has recently pulled back from the biggest spread against the 200-day moving average in seven years. This could be a sign of more pain to come.
US stocks closed lower on Monday as a sell-off continued. On Friday, the S&P 500 SPX,
and Nasdaq Composite COMP,
posted its worst daily drop since mid-June due to hawkish comments from Federal Reserve Chairman Jerome Powell.
See: Fed’s Powell says bringing down inflation will cause pain for households and businesses in Jackson Hole speech
Dow Jones Industrial Average DJIA,
fell 0.6% Monday, after plunging 1,000 points Friday.
