US equity futures fell, prompting Wall Street to extend losses amid investor concerns about slowing economic recovery and foaming in the markets, exemplified by GameStop retailer wild trading.
S&P 500 futures fell 0.8% after the benchmark stock gauge declined the most in two days in October. Contracts for the Nasdaq-100 fell 1.2% after earnings from several tech giants, including Apple, overwhelmed investors late Wednesday. Dow Jones industrial average futures, which fell for five consecutive days in the longest series of losses in February, fell 0.5%.
The stock crash follows a strong start to the year that some investors say has pushed stock prices beyond levels justified by corporate fundamentals. The sale took place amid wild fluctuations in individual stocks, including GameStop and AMC Entertainment,
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fueled by a battle between day traders and hedge fund professionals.
“There is some excitement in the market,” said Olaf van den Heuvel, chief investment officer for Aegon Asset Management in the Netherlands, citing an increase in GameStop shares. “It was a bubble territory.”
GameStop shares fell 8.5% before the New York bell, after pulling out 135% on Wednesday. AMC fell 23%, reducing Wednesday’s gains by more than 300%.
The slow launch of vaccines and restrictions on Covid-19 in major economies have led investors to take some money off the table, van den Heuvel added. He said Aegon will likely consider the sale as a chance to buy risky assets when markets settle.
Technology stocks fell before the New York bell. Apple shares fell 3.4% after the iPhone maker reported the most profitable three months on record, but offered no specific revenue guidance for the current quarter.
Facebook,
which recorded record net revenues, but warned that uncertainty in regulatory probes and ad targeting limits could create business winds, fell 2.2% in premarket trading. Tesla fell 5.9 percent after the electric vehicle maker – whose shares have risen in recent months – posted its first full-year profit, but missed Wall Street expectations.
As a sign of increased risk aversion, the yield on the 10-year US Treasury benchmark fell below 1% for the first time since January 6, to 0.998%, according to Tradeweb.
Bond yields fall as prices rise. Declining returns are often an indicator that investors are seeing a weakening economic outlook.
The dollar strengthened against various currencies, including the Australian dollar and the Korean dollar. The WSJ Dollar, which measures the green dollar against a basket of other currencies, rose 0.2%.
Investors will analyze data on unemployment claims – to be published at 8:30 AM ET and expect to show that the number of workers claiming benefits fell last week – for new clues as to how the economy is coping with the pandemic.
The Federal Reserve on Wednesday maintained its light money policies, saying that commercial activity softened with the resurgence of Covid-19 cases.
“Any removal of the fiscal stimulus soon could lead to a recovery in recovery,” said Mary Nicola, portfolio manager for PineBridge Investments.
Ms Nicola is optimistic about the outlook for stocks in the US and elsewhere, saying vaccines will fuel new gains over the next 18 months.
“It’s hard to say that markets are overvalued or what is happening in the markets is frothy,” when comparing stocks with the low yields available for bonds, she said.
Sales of US stocks have expanded abroad. Pan-continental Stoxx Europe 600 fell 2%, driven lower by shares of oil and gas, technology and healthcare companies.
Shares of several strong European stocks, which rose on Wednesday as it briefly expanded beyond the US, came under pressure. The commercial real estate company Unibail-Rodamco-Westfield lost 4.7%, and the German doctor Evotec decreased by 5.5%.
Among other individual factors, Prudential fell 6.5% after the insurer said it was weighing an equity offering and separating its Jackson National arm from the US Diageo gained 3.4%, while analysts appreciated sales strong from North America to North America by the alcohol manufacturer.
Markets have retreated widely in Asia. Hong Kong’s Hang Seng fell 2.6 percent, the Shanghai Composite Index fell 1.9 percent, and Japan’s Nikkei 225 fell 1.5 percent. Container transport giant Cosco Shipping led to losses in mainland China, slipping by 10%.
In a sign of nervousness in Chinese markets, money market rates continued to rise. The one-week Shanghai interbank rate rose 0.012 percentage points to 2.981%, the highest since 2015, according to FactSet.
The costs of short-term loans have risen in recent days as the People’s Bank of China unexpectedly drained 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 asset bubbles due to weak monetary policy.
Xing Zhaopeng, a Chinese market economist at ANZ in Shanghai, said outflows from Chinese markets and the central bank’s position contributed to sales in Shanghai and Shenzhen.
“International investors are reducing their risky positions because of concerns about bubbles, including onshore stocks and bonds,” Mr Xing said.
Tai Hui, Asia’s chief market strategist at JP Morgan Asset Management, said new pockets of coronavirus outbreaks in China also affected investor sentiment.
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