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A trader works on the floor of the New York Stock Exchange on Nov. 29.BRENDAN MCDERMID/Reuters

The broad market relief rally on Monday left many so-called stay-at-home stocks behind, dealing another blow to Cathie Wood’s ARK Innovation fund .

The $18.6 billion ARK Innovation fund, which outperformed all other U.S.-based equity funds last year due to its outsized holdings of stocks that rallied during the economic lockdowns, dropped 0.5% in morning trading Monday, well behind the 1% gain in the S&P 500.

The benchmark index dropped nearly 2.3% Friday on news a new coronavirus variant, now known as Omicron, had been identified in southern Africa, spurring new travel restrictions worldwide. Yet global equity markets made up some of that lost ground Monday on reports the new variant may produce mild symptoms.

Signs Omicron will not deal a severe blow to the economy are prompting investors to remain in cyclical stocks, said Phil Orlando, chief equity market strategist at Federated Hermes.

“This is not February of 2020 when the world is about to shut down. If anything we think the economy will continue to improve from here,” he said.

ARK Innovation’s declines were widespread Monday, with 8 out of the fund’s 10 largest holdings down for the day. Telemedicine company Teladoc Health Inc, the fund’s second-largest holding, fell 5.1%, while streaming company Roku Inc shed 2.6% and Zoom Video Communications Inc lost 3.2%.

For the year, ARK Innovation is down 14%, while the benchmark S&P 500 is up 23.4%. That underperformance places ARK Innovation among the worst-performing mid-cap growth funds for the year to date, according to Morningstar. It remains among the top-performing funds over the last 5 years.

Ark did not respond to a request to comment for this story.

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