By Joseph Adinolfi
Investors found some succor in the latest rout in U.S. stocks, but not necessarily in the places one might expect.
While traditionally defensive sectors like utilities managed to retain gains in Monday’s session, some of the market’s other bright spots included more speculative assets like cannabis shares, meme stocks and cryptocurrencies.
Cannabis stocks rally
Cannabis stocks have had a tough year, yet some on Wall Street think this may be about to change.
Popular cannabis names like Tilray Inc. /zigman2/quotes/226578748/delayed CA:TLRY +9.63% , Aurora Cannabis Inc. /zigman2/quotes/203734337/delayed CA:ACB +6.18% and Cronos Group Inc. /zigman2/quotes/202715342/delayed CA:CRON +6.14% traded sharply higher on Monday, extending gains from the past week, a period in which all three companies have booked gains of 9% or more, according to FactSet.
Cannabis-stock focused ETFs like the AdvisorShares /zigman2/quotes/220307682/composite MSOS +3.61% Pure U.S. Cannabis ETF advanced 4.5% on Monday, while other Cannabis-focused ETFs like the Innovation Shares Cannabis ETF /zigman2/quotes/213173823/composite THCX +4.55% rose 1.5%.
One Wall Street analyst who covers the cannabis industry, but asked 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 U.S. Senate this fall. Analysts also cited the prospect that Germany might legalize marijuana for adult use.
To be sure, cannabis stocks remained well off their 52-week highs, with shares of Aurora down more than 80% from their peak above $14.
Cryptocurrencies bounce back
After taking a beating on Friday, cryptocurrencies were edging back on Monday. Bitcoin /zigman2/quotes/31322028/realtime BTCUSD -0.31% was up 0.7% to trade back above $20,000 per coin, a closely watched technical level, according to data from CoinDesk. Ether, /zigman2/quotes/108573964/realtime ETHUSD -1.61% the 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-anticipated shift in the framework undergirding the Ethereum blockchain.
While cryptocurrencies climbed on Monday, Nicholas Colas, co-founder of DataTrek Research, estimated that their aggregate market capitalization still has fallen to roughly $1 trillion from a peak of $3 trillion in November 2021, in a Monday morning research note.
“That 67% decline in virtual currency values from the peak is not far off the NASDAQ 2000 – 2002 experience of a 78 pct drop, and it raises the question of “how do you know when a bubble has entirely burst?” Colas said.
Meme stocks are also outperforming
Shares of Bed Bath & Beyond /zigman2/quotes/209801102/composite BBBY +1.69% soared 24.8% on Monday as investors awaited a “strategic update” from the beleaguered retailer.
The rally in BBBY appeared to lift other meme stock names, including GameStop Corp. /zigman2/quotes/203755179/composite GME +3.46% and AMC Entertainment Holdings Inc. /zigman2/quotes/200235402/composite AMC 0.00%
To be sure, Wall Street analysts continue to be 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.