Markets are clinging to the battle chair as another day of insane retail short supply is about to appear online.
In case you think trading mania is a limited battle between internet day traders and Wall Street hedge funds: the video game retailer GameStop was one of the most traded stocks in the United States on Wednesday.
Amateur investors, many of whom are based on the Reddit WallStreetBets group, are jumping into sharply shortened stocks, raising prices to astronomical levels and forcing hedge funds to sell larger, safer bets to cover losses.
Selloff sneaks into other investments and scares the mood. Major indexes fell 2% to 3% on Wednesday and will continue to surf.
Required reading: Gentle? Diamond hands? Your WallStreetBets jargon guide, the Reddit forum that feeds the wild rise of Gamestop
Ours call of the day comes from U.S. Jefferies stock researchers, led by global stock strategist Sean Darby, with bonus conversation by Sebastien Gally, strategist at Nordea Asset Management.
The Jefferies team is clear that the stock price adjustment has little to do with the basics. Rather, what is happening is a reflection of a “mood swing in some of the more overbought and speculative parts of the market.”
The speculative index of the retail group, measuring the deviation from the trend of assets, where the value is difficult to determine, is high at 4 standard deviations. “Therefore, there is a lot of air coming out of the riskier financial assets,” the team said.
Darby’s team noted that the short-term concern was whether the “popping” of riskier parts of the market would create a domino effect as major stocks were liquidated to stop losses.
Galli, from the Scandinavian asset manager Nordea, echoes Jefferies’ caution about a wider sale. He also says it’s too early to buy a dip because there are more to come.
Large movements to cover shorts during high leverage usually require a greater reduction in indebtedness, Gally said. This is because the capital constraint on the risk of investment losses is increasing.
“As a result, the cost of hedging the risk of reduction has risen sharply,” Gally said. “This risk reduction could last for several days, followed by a sharp recovery in US liquidity and, to a lesser extent, European stocks.”
Gally said that even the tight meeting of the Federal Reserve on Wednesday could not turn this market, which is another signal that it can continue.
Shares in GameStop GME,
touched the $ 500 pre-market level before retiring. The shares cost only $ 19 for 2021. Fashion brand Nakd NAKD,
is another stock that makes a big jump in the preliminary market, by 130%.
In the Securities and Exchange Commission filed this morning, the AMC AMC cinema theater chain,
revealed that the holders of the company’s convertible bonds have chosen to convert the banknotes into shares, as the company’s shares have risen by about 330% since Tuesday.
and Tesla TSLA,
posted revenue after closing yesterday. Technology giant Apple reached $ 100 billion in quarterly revenue for the first time, crushing expectations as social media company Facebook also surpassed forecasts, with sales jumping 156% from “other revenue” – such as virtual reality headsets and video chat devices . Electric car maker Tesla is reporting its sixth consecutive quarter of profits, but that’s a failure to meet expectations.
But if you can take your eyes off the stock market, this is a big day on the economic front. Initial and ongoing unemployment claims are due at 8:30 a.m. EST, with about 875,000 people expected to apply for unemployment last week. Gross domestic product data for the fourth quarter of 2020 will come at the same time before new data on home sales for December are announced at 10 o’clock.
After the Federal Open Market Committee decided yesterday to maintain a stable monetary policy, Federal Reserve Chairman Jerome Powell gave silly signals that the central bank had not completed the recovery of health devastated by the COVID-19 pandemic. “We haven’t won that yet,” he said.
It looks like another wild day on Wall Street. Yesterday’s fuss saw the DJIA at the Dow Jones Industrial Average,
fall over 630 points, and futures on the stock market YM00,
pointing down, set to continue the sale. Asian markets NIK,
the European SXXP indices also fell overall,
are solid red.
Our chart for the day, by Marshall Gittler of BDSwiss, shows how the S&P 500 SPX,
fell the most since October 2020, and the expected volatility index VIX reported its biggest one-day rise since the COVID-19 pandemic hit in March 2020.
When sharks root for fish. Billionaire entrepreneur and investor Mark Kuban – the fame of Shark Tank – is taking root for RedSit WallStreetBets traders.
A lawmaker from Oklahoma has proposed a hunting season for “Bigfoot” with a new bill.
Key West wants to ban people from feeding fat, wild, free-roaming chickens.
Need to Know starts early and is updated to the bell, but sign up here to deliver it once to your mailbox. The e-mail version will be sent around 7:30 p.m. Eastern.
Want more for the next day? Sign up for The Barron’s Daily, a morning briefing for investors, including an exclusive commentary by the authors of Barron’s and MarketWatch.