Volatile global markets have pulled in sports stocks Monday as broad concerns about the U.S. job market and what that means for anticipated interest rate cuts sent the Sportico Sports Stock Index down 5% at the start of trading Monday, roughly in line with the drops in smaller- and tech-focused stock sectors that account for a bulk of sports-related shares. The sports index recouped some of the losses during the day- much like the broader market- and closed down 3% at 1,113, a three-month low.
“Markets are clearly nervous about the divergent paths central banks are taking, leading to lots of volatility,” Jamie Cox, managing partner for Harris Financial Group, said in a Monday email. “Couple that with a potential escalation of hostilities in the Middle East and a presidential election cycle that is rife was craziness, things are ripe for negativity.”
In recent weeks the stock and bonds markets have been expecting a cut of interest rates in September by the Federal Reserve Bank, but traders were shook out of their complacency by a weaker-than-expected jobs report Friday, which caused a myriad of reactions. Some are worried the Fed will begin cutting interest rates sooner and deeper than expected to fulfill its mandate to encourage full employment. Others are worried the job report means the economy is, by some technical measures, already in recession and therefore consumer spending won’t improve no matter what. Still others contend job and economic activity are very good by historical comparison and maybe the Fed won’t cut rates before September.
Whatever the beliefs, the actions have been the same: a move away from trades perceived as riskier—owning tech stocks and small- and medium sized companies—and toward less risky holdings such as bonds.
In the 40-stock Sportico index, the sell-off resulted in a deep drop in sports betting and entertainment stocks in particular: Wagering firms Rush Street Interactive, Super Group and Caesars Entertainment were down 6% to 7% from Friday early. TV station owner Sinclair Broadcast Group, which is heavily reliant on local economic strength for TV advertising revenue on its stations, including the Tennis Channel, lost 7% Monday while Nexstar, another local station owner, lost 5%. Every stock in the sports index closed lower on the the day. While closely-held sports teams are seen as immune to the wild swings of the market, most publicly traded sports stocks tend to be more volatile—gaining more when the markets are bullish and losing more when the markets are bearish. At the worst point of trading Monday, the Sportico index was down to 1,108, its lowest mark since October, before recovering a bit into the close.
With a slate of corporate earnings reports due later this week including from TKO Group and Genius Sports, it’s possible good news on the sports could swing sentiment again. Prior to the stock market weakening on Friday, such small- and mid-cap were among the more recent leaders of the market.
“We’re getting the pullback we anticipated, but way faster than we expected. Odds of a recession are rising,” said Gina Bolvin, principal of Bolvin Wealth Management. “Investors need to take a deep breath: Corrections are normal, and while unemployment is rising, it’s still historically low.”
(This story has been updated with closing price and other market information throughout.)
