US equities fell and put Wall Street on track to widen losses amid investors’ concerns about a slowing economic upswing and foam in markets, as illustrated by the wild retail trade GameStop.
The futures contract linked to the S&P 500 fell 0.3% after the benchmark shares had its biggest two-day drop since October. Contracts for the Nasdaq-100 declined by 1%, after the earnings of several technology giants, including Apple, undermined investors late Wednesday. The futures contract linked to the Dow Jones industrial average, which fell five days in a row in its longest losing streak since February, fell less than 0.1%.
The stock stumbling block follows a strong start to the year, which some investors say has pushed share prices beyond the corporate base. The sale took place amid wild swings in individual stocks, including GameStop and AMC Entertainment,
AMC 301.21%
fueled by a battle between day traders and professional investors in the hedge fund.
“There’s a bit too much excitement in the market,” said Olaf van den Heuvel, chief investment officer of Aegon Asset Management in the Netherlands. He cites the increase in GameStop shares as an example. “It was a bubble area.”
Individual stocks remained volatile before the clock in New York. GameStop shares rose 28% and rose 135% on Wednesday. AMC reversed earlier losses to climb 6.1%, increasing Wednesday’s profit by more than 300%.
The stock stumbling block came amid wild volatility in individual stocks, including GameStop and AMC Entertainment.
Photo:
Courtney Crow / Associated Press
Van den Heuvel said the slow vaccination and restrictions on Covid-19 in large economies have prompted investors to take money off the table. He said Aegon would likely view the sell-out as an opportunity to buy risky assets when markets settle.
Technology stocks fell ahead of the clock in New York. Shares of Apple fell 2.9% after the iPhone maker reported its most profitable three-month record, but did not provide a specific revenue list for the current quarter.
Tesla fell 6.1% after the electric vehicle manufacturer – whose shares have risen in recent months – made its first annual profit, but missed Wall Street expectations. Facebook,
which generated a record net income but warned that uncertainty through regulatory sins and advertising target limits could create headwinds fell 0.8% in market trading.
In one sign of rising risk aversion, yields on the standard ten-year U.S. Treasury note fell below 1% for the first time since Jan. 6, before falling back to 1.008%, according to Tradeweb..
Bond yields fall as prices rise. Falling returns are often an indication that investors are seeing the economic outlook weaken.
The dollar strengthened against various currencies, including the Australian dollar and the Korean won. The WSJ Dollar Index, which measures the greenback against a basket of other currencies, rose 0.2%.
Comcast,
American Airlines and Mastercard are scheduled to publish results before the markets open. Investors will also analyze data on unemployment claims – which will be published at 08:30 ET and are expected to show that the number of workers seeking benefits has decreased last week – for new clues as to how the economy is coping with the pandemic.
The Federal Reserve on Wednesday upheld its easy monetary policy, saying business operations had softened with the revival of Covid-19 cases.
“Any removal of fiscal stimulus could soon lead to a faltering recovery,” said Mary Nicola, a portfolio manager at PineBridge Investments.
Sales in US equities have expanded overseas. The pan-continental Stoxx Europe 600 fell 0.7%, led lower by shares of oil and gas and financial companies.
Shares in several heavily shortened European stocks that shot up on Wednesday, when the short pressure spread further beyond the US, came under pressure. Commercial real estate firm Unibail-Rodamco-Westfield lost 2.4% and German drugmaker Evotec fell 4%.
“It’s nerve-wracking,” said Remi Olu-Pitan, a Schroders fund manager, referring to the large movements in stock prices fueled by day traders exchanging tips online. She said the volatility is likely to encourage professional investors, including those caught with lossless short positions, to take money off the table, with a view to broader markets.
“You will see more violent retreats,” she said. Olu-Pitan said. “There are parts of the market that are bubbling.”
Among other individual movers, Prudential fell 7.5% after the insurer said it was weighing a stock offer and would secede its Jackson National arm in the US. Diageo rose 4.8% as analysts encouraged a strong first half in North America by the alcohol producer. .
Markets generally retreated in Asia. Hong Kong’s Hang Seng fell 2.6%, the Shanghai Composite Index fell 1.9% and the Japanese Nikkei 225 fell 1.5%. Container giant Cosco Shipping suffered losses in mainland China and slipped by 10%.
In a sign of unrest in Chinese markets, money market rates continued to rise. The one-week rate in Shanghai offered between banks has risen by 0.012 percentage point to 2.981%, according to FactSet, the highest since 2015.
Short-term borrowing costs have risen in recent days as the People’s Bank of China unexpectedly drains funds from the financial system. Earlier this week, a major business newspaper also published remarks by Ma Jun, a central bank adviser, who warned of assets emerging as a result of loose monetary policy.
Tai Hui, Asia’s chief market strategist at JP Morgan Asset Management, said new pockets of coronavirus outbreaks in China had also sent off investor sentiment.
Write to Joe Wallace at [email protected] and Chong Koh Ping at [email protected]
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