As the Federal Reserve moves closer to raising interest rates, investors are repricing their bets on one of the riskiest corners of the market: shares of companies that don't make money. Cash-burning technology firms, biotechnology companies without any approved drugs, and startups that listed quickly via mergers with blank-check companiessome of which soared during the pandemichave dropped sharply.

A Wall Street Journal data analysis shows that as Fed officials' signals and continued high-inflation readouts made it clearer that rate increases were looming, shares of unprofitable companies in the Nasdaq Composite Index have skidded while their profitable counterparts have traded nearly flat. On average, loss-making companies in the analysis slid 28% from the market's close on Sept. 30 through Tuesday. Profitable companies in the index edged down 0.7% on average for the same time frame.

The Journal's analysis identified loss-making firms as having earnings per share below zero for at least the past four quarters combined. It excluded blank-check companies that haven't merged with a target and some companies for which FactSet didn't identify earnings-per-share figures for the most recent four quarters.

Fed officials have indicated they are speeding up their timetable for raising interest rates, potentially as soon as March, to combat burgeoning inflation. Many investors value stocks based on the present value of companies' future earnings. When interest rates rise, eating into that future value, it becomes less appealing to make high-price bets on companies that might not be profitable for years to come.

"Within our team, we are considering, 'Should we be shifting out of some of these high-growth areas that may be susceptible to rising rates and look at beaten down, undervalued sectors of the market?'" said Emerson Ham III, a senior partner with Sound View Wealth Advisors.

The performance of riskier growth stocks, which aim to deliver sharp profit growth in the future, also lagged behind broader indexes in the latter part of 2021. The Nasdaq CTA Internet Index, for example, has fallen 18% from Sept. 30 through Tuesday. The Nasdaq Composite gained 0.4% for the same time frame, while the S&P 500 added 6.3%.

Hawkish Fed policy is driving a rotation toward stocks that generate higher-than-average dividend yield, such as areas like banks and insurance, said Jonathan Garner, the Hong Kong-based chief Asia and emerging-market strategist at Morgan Stanley.

"That's playing out on a worldwide basis, and we expect it to continue," Mr. Garner said.

Some unprofitable companies' stocks had soared earlier in the pandemic, when their businesses got a boost from lockdowns and social-distancing measures. Shares of e-signature software maker DocuSign Inc., DOCU 4.91% which surged early in the pandemic as businesses adapted to remote and paperless environments, hit an all-time closing high of $310.05 on Sept. 3 but have fallen 59% since thenDocuSign has posted a loss every quarter it has reported as a public company since its initial public offering in April 2018.

The rout has also particularly pushed down companies making debuts in the public market through special-purpose acquisition companies, also known as blank-check companies, which raise money with the purpose of seeking a target to merge with and take public. Though one of Wall Street's hottest trades during early 2021, SPACs have fallen from their highs).

Electric-truck startup Nikola Corp. NKLA 2.05% , which went public through a SPAC, declined 35% last year and has pulled back 13% since Sept. 30. The Defiance Next Gen SPAC Derived ETF, which tracks companies that have gone public through SPACs along with SPACs that have yet to do deals, fell about 26% in 2021 overall and is down 17% since Sept. 30.

Unprofitable traditional IPOs also delivered lower first-day returns in 2021, according to an analysis by Jay Ritter, a finance professor at the University of Florida. About three-quarters of the more than 300 operating companies tracked by Prof. Ritter that went public in the U.S. had earnings per share below zero, and they delivered an average first-day return of 30% in 2021, compared with 45.3% among a smaller pool of companies in 2020.

Questions:

• According to the articles, why have loss-making companies' share prices declined recently?
• How have some of the recent high-profile IPOs of 2021 fared?
• Until recently, what has been the link between monetary policy and growth stocks?

How have shares in special purpose acquisition companies (SPACs) performed recently and why?