The Dow, the New York Stock Exchange closed more than 600 points last night (29 Jan) and was the biggest drop this week since October. The market is under pressure from the results of trials on the efficacy of COVID-19 vaccines. Disappointingly from Johnson & Johnson (J&J) and the volatility in the market caused by the spinning out of GameStop, a well-known US video game retailer.
The Dow Jones Industrial Average closed 29,982.62, dropped 620.74 or -2.03%, the S&P 500 closed at 3,714.24, down 73.14, or -1.93%, and the Nasdaq closed 13,070.69, down 266.46 or -2.00%.
In this week, all three indices dropped the worst weekly since the end of October. The Dow fell 3.28%, the S & P500 slipped 3.31% and the Nasdaq dropped 3.49%. The Dow was down 2.04%, the S & P500 was down 1.12%, while the Nasdaq was up 1.42%.
The market was under pressure from J&J shares that fell 3.56% after it was revealed. The company’s single-dose vaccine was 72% effective in preventing COVID-19 in the US and below 66% in trials worldwide. This is a lower efficacy level than Pfizer / Biotech vaccine. And Moderna, which is about 95% in the prevention of COVID when injected 2 doses.
Moderna shares jumped 8.53 percent and Pfizer shares were up 0.11 percent.
The market was also pressured by spin-off worries, GameStop shares, which closed up 67.87% after the iconic US video game store stock had surged more than 1,000% since the start of this month. This is the result of the combination of US retail investors in buying to push up prices. It hopes to teach big hedge funds that are often speculative by selling short in the market.
The group of investors in WallStreetBets This is a sub-board on Reddit, a forum with over 4 million members and a common place for retail investors to chat to exchange information on the stock market. It aims to push GameStop’s share price higher in order to pressure the hedge fund to re-buy it to cut losses. After selling short before, it was speculated that GameStop would soon shut down.
That action by small investors has cost hedge funds billions of dollars.
There is now concern that if GameStop stocks continue to rise. Will cause the hedge fund to suffer heavy losses As a result, these hedge funds will sell other stocks in the market to raise funds to compensate for the speculative losses on GameStop.
There is also concern that the GameStop phenomenon is signaling a market bubble. Which if the bubble burst Will create a panic And severely impacted retail investors
Trading in GameStop shares pushes trading volume on the New York Stock Exchange to reach 1713 billion shares. This is higher than the average volume in the past 20 business days of 1526 billion shares.
The US Securities and Exchange Commission (SEC) said it would keep an eye on the stock trading of brokers and traders on social media.
The Dow and the S & P500 closed 50-day averages below technical support.
Apple shares fell 3.74 percent and Microsoft shares fell 2.92 percent, pressured by hedge fund sales to offset a multi-billion dollar loss from a short sale of GameStop stocks.
The key US economic disclosures last night were: University of Michigan survey results indicate that The US consumer confidence index fell to 79.0 in January, lower than analysts had expected 79.2 from the December 80.7, the US National Real Estate Brokerage Association (NAR). Revealed that the pending home sales index fell 0.3% in December compared to monthly. While analysts expected a 0.1% reduction, the US Department of Commerce said. US consumer personal spending fell 0.2% in December, a second-month decline after a 0.7% drop in November, the Commerce Department said. Core Personal Consumption Price Index (PCE), excluding food and energy And it is a measure of inflation that the Federal Reserve (Fed) has focused on, up 0.3% in December after stabilizing in November. And the US Department of Labor said Employment Cost Index (ECI), the broadest measure of labor cost, increased 0.7% in 4Q2020 on quarterly basis. It was above analysts’ forecast of 0.5% after a 0.5% increase in 3Q20.
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