NEW YORK – Wall Street stocks concluded a bad week with another volatile session yesterday, as the buying frenzy over GameStop and some other equities resumed amid stepped-up scrutiny from regulators.
The Dow Jones Industrial Average ended down 2% at 29,982.62.
The broad-based S&P 500 fell 1.9% to 3,714.24, while the tech-rich Nasdaq Composite Index tumbled 2% to 13,070.69.
Analysts said there are factors besides the drama around GameStop in the pullback yesterday and earlier in the week.
These include concerns about lofty equity valuations given the economic weakness caused by Covid-19.
Investors are also worried that United States fiscal stimulus may lag market expectations after President Joe Biden’s US$1.9 trillion (RM7.7 trillion) package garnered a sceptical reception in Congress.
But, much of the focus landed on questions over GameStop, which soared nearly 70% after Robinhood and other trading platforms lifted restrictions on trading the equities.
Shares of GameStop, AMC Entertainment and others have been on a tear much of the week as investors organised over Reddit targeted the equities to combat hedge fund short-sellers betting on lower prices.
“This is all a de-risking event by hedge funds because of the loss that they have taken from stocks like GameStop,” said Karl Haeling of LBBW.
“These hedge funds are facing billions of dollars of losses, and they had to go and sell stocks where they had profits and long positions. They have to sell them off to cover their losses.”
Among other companies, Johnson & Johnson fell 3.6% after announcing that its Covid-19 vaccine has an overall efficacy of 66%, with 85% effectiveness in preventing severe Covid-19 across all geographical regions, but only a 57% success rate in combating a variant discovered in South Africa.
The J&J vaccine has been eagerly anticipated because it requires only one shot, in contrast to other options now in the market.
Chevron fell 4.3% after reporting a US$665 million fourth-quarter loss, taking its annual loss to US$5.5 billion amid a big drop in oil prices. – AFP, January 30, 2021
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