Why is lemonade stock higher on Friday while the market is falling?


What happened

The stock market was in solid red on Friday as it ended its worst week since January on a negative note. As of 12:45 p.m. EDT today, the Dow Jones Industrial Average is down more than 400 points, and the S&P 500 and Nasdaq indices were 0.9% and 0.6% lower, respectively.

But insurance troublemakers lemonade (NYSE: LMND) was a big exception. Shares rose 4% and the stock was one of the best performing companies in the market.

Image source: Getty Images.

so what

There’s no company-specific news fueling today’s move. Rather, this appears to be a continuation of a rotation away from the “reopening” games and towards some of the higher growth tech names that have generally lagged the market this year.

For example, banks, real estate, and energy stocks were all down sharply on Friday. But other high-growth tech stocks like Roku, Twilio, and MongoDB were a similar percentage higher than Lemonade. And while the Nasdaq is certainly in the red, note that the tech-heavy index is the top performer of the three majors.

What now

This shift is likely due to the Federal Reserve’s meeting, as the Federal Reserve’s Monetary Open Market Committee has indicated that inflation is heating up more than expected and rates could rise earlier than previously announced. And it’s worth noting that 10-year government bond yields (which usually move in the opposite direction of growth stock prices) have fallen from a high of 1.59% shortly after the Fed meeting to around 1.46% now is.

In short, this seems more of a rotation into some of the fastest growing tech names, but the momentum could certainly continue beyond this week.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.


About Paige McCarthy

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