Global stocks crushed by forced sale by hedge funds to GameStop Surge

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Global stocks were bruised on Thursday, in response to forced sell-offs by hedge funds after the unprecedented retail investor insisted on buying heavily shorted bonds. The major US stock indices were mixed but fortunately quiet after a rough Wednesday.

Shortly after opening, the

Dow Jones Industrial Average

increased by 263 points or 0.9%, while the

S&P 500

0.8%, and the

Nasdaq Compound

0.7% added.

In Asia, which had a warm start to 2021, the

Nikkei 225

ends 1.5% lower and the

Hang Seng

it fell 2.6%.

The

Stoxx Europa 600

recovered from earlier steep losses and traded at 0.2%.

The

S&P 500

ended 2.6% lower on Wednesday, the worst performance since October.

The financial turmoil was caused by the organized acquisition of companies, including the retailer of video games

GameStop

(ticker: GME), software company

BlackBerry

(BB) and movie theater chain

AMC Entertainment

(AMC), which all experienced financial achievements, which led to many institutional players shortening their shares.

‘The retail purchase has forced several large hedge funds to buy back the shares as soon as possible to limit the damage. [GameStop] was the second most active trading stock in the US for the second day in a row, ”said Marshall Gittler, Head of Investment Research at BDSwiss.

GME Resources

(GME.AU), the Australian mining company that shares nothing in common with GameStop apart from its GME symbol, has risen 13% in Sydney.

Mark Haefele, chief investment officer for global wealth management at UBS, said the outlook was still bright, with the 68% jump for the S&P 500 from the March 2020 low.

‘After a march of this magnitude and with equities near record highs, it is understandable that short-term uncertainty will lead to an increase in volatility. In our view, the focus is likely to shift back to earnings, stimulus and vaccine deployment. We believe that the road will remain higher for the medium term, ”he said.

The GameStop-led frenzy overshadows an important day for earnings and economic news.

Gross domestic product rose 4% in the fourth quarter, with missing estimates of 4.3%, while unemployment claims improved to 847,000 from 900,000 last week and beat expectations of 875,000.

appeal

(AAPL) shares fell 2.2% after the company said it earned $ 1.68 per share, compared to estimates of $ 1.41. The company had revenue of $ 111 billion, beating expectations of $ 103 billion.

Tesla

(TSLA)’s shares fell 5.3% after the electric vehicle manufacturer achieved a mixed quarter. The company earned 80 cents a share, and was missing estimates of $ 1.03 while having revenue of $ 10.74 billion, compared to a forecast of $ 10.4 billion.

Facebook

(FB) shares rose 4.9% after the company beat revenue and earnings expectations, earning $ 3.88 per share, compared to estimates of $ 3.22, with revenue of $ 28 billion, which raised expectations for $ 26.4 billion.

McDonald’s

(MCD) rose 0.5% even after the company missed expectations. The fast food chain said it earned $ 1.70 per share, lower than the estimated $ 1.78 share, on revenue of $ 5.31 billion, below expectations for $ 5.37 billion.

Twitter

(TWTR) rose 2.7% on a weak day for technology as KeyBanc upgraded the stock to overweight from the weight of the sector.

Write to Steve Goldstein at [email protected] and Jacob Sonenshine at [email protected]