Markets are being put in the fighting chair as another day of retail nutrition frenzy on short circuits is about to come online.
If you thought trading mania is a limited battle between internet day traders and Wall Street hedge funds: video game retailer GameStop was one of the most traded stocks in America on Wednesday.
Amateur investors, many of whom are based on the Reddit group WallStreetBets, are jumping into stocks with a major shortfall, raising prices to astronomical levels and forcing hedge funds to sell bigger, safer bets to cover losses.
Selloff crawls to other investments and scary sentiment. Major indices declined 2% to 3% on Wednesday and will continue to navigate.
A must-read: Tendies? Diamond hand? Your guide to language on WallStreetBets, the Reddit forum fueling the wild rise of Gamestop
We call of the day comes from US equities researchers at Jefferies, led by global equity strategist Sean Darby, with a bonus call from Sébastien Galy, a strategist at Nordea Asset Management.
The Jefferies team is clear that the correction of the share prices has little to do with fundamental factors. What happens sooner reflects a “sentiment shift within some of the more overbought and speculative parts of the market.”
The group’s retail speculative index, which measures the deviation from the trend of assets where it is difficult to determine value, is high with four standard deviations. “So there is a lot of air to come out of the riskier financial assets,” the team said.
Darby’s team noted that the short – term concern is whether the dangerous parts of the market will create a domino effect as the common stock is liquidated to stem losses.
Galy, of Nordic asset manager Nordea, agrees with Jefferies’ warning about bigger sales. He also says it’s too early to buy the dip, because there are more to come.
The big move to cover a pair of shorts during high leverage usually forces more decline, Galy said. This is because the restriction on capital due to the risk of losses on investments is increasing.
“As a result, the cost of hedging the downside risk has increased sharply,” Galy said. “This risk reduction could take several days, followed by a strong liquidity-driven rebound in US and to a lesser extent European equities.”
Galy said even a dark meeting of the Federal Reserve on Wednesday could not turn the market around, which is another sign that it could last.
The buzz
Shares in GameStop GME,
touched the $ 500 level in the forex market before retreating. The stock was only $ 19 after 2021. Fashion brand Nakd NAKD,
is another stock that is making a big leap in the forex market, with 130% higher.
In a security and exchange commission filed this morning, the theater chain AMC AMC,
reveals that holders of the company’s convertible bonds have opted to convert the notes into shares, as shares in the company have risen by about 330% since Tuesday.
Apple AAPL,
Facebook FB,
and Tesla TSLA,
after the close yesterday achieved an earnings. Technology giant Apple raised $ 100 billion in quarterly revenue for the first time, shattering expectations as social media company Facebook also beat the estimate, with sales rising 156% from ‘other revenue’ – such as virtual reality chapters and video chat devices. Electric carmaker Tesla reported its sixth consecutive quarter of profit, but it missed expectations.
But if you can pull your eyes off the stock market, it’s a big day on the economic front. Initial and ongoing claims for unemployed must be 8:30 a.m. EST, and about 875,000 people are expected to have filed for unemployment last week. The figures for the gross domestic product for the fourth quarter of 2020 will come at the same time before the new home sales figures for December are reported at 10:00.
After the Federal Committee for Public Markets decided yesterday to keep monetary policy stable, Fed Chairman Jerome Powell gave evidence that the central bank had not yet completed the recovery of the COVID-19 pandemic-stricken economy. not. “We have not won it yet,” he said.
The markets
It looks like another wild day on Wall Street. The uproar of yesterday has the Dow Jones Industrial Average DJIA,
tumbles more than 630 points, and the stock market term YM00,
ES00,
NQ00,
pointing down, is set to continue selling. Asian markets NIK,
HSI,
HSI,
fell across the board and European indices SXXP,
UKX,
DAX,
PX1,
is firmly in the red.
The graph
Our map of the day, from Marshall Gittler at BDSwiss, shows how the S&P 500 SPX,
has fallen the most since October 2020, and the VIX index of expected volatility hit its biggest one-day rise since the COVID-19 pandemic in March 2020.
The tweet
When the sharks root the fish. Billionaire entrepreneur and investor Mark Cuban – of the “Shark Tank” fame – is rooted in Reddit’s WallStreetBets dealers.
Random reading
An Oklahoma lawmaker has proposed a “Bigfoot” hunting season with a new bill.
Key West wants to ban people from feeding fat, wild, free-range chickens.
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