Sports Stocks Plunge With Market Over Interest Rate Cut Fears

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.

“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 5% to 7% from Friday early. The worst performer mid-morning was Sinclair Broadcast Group, which is heavily reliant on local economic strength for TV advertising revenue on its stations. It was down 10% mid-morning Monday. Every stock in the sports index was down on the day with the index’s mid-morning level of 1,108 putting at its lowest mark since October. 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.

Still, after early trading that saw the S&P 500 index fall 4.3% and other indexes even more steeply, trading appeared to be settling, with buyers coming back in to take back some of the losses. Similarly, the sports index had recouped a bit of the losses and was down 3.8% mid-morning.

“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.”