Markets are stuck in the battlefield as another day of the retail supply frenzy of shortened stocks is about to appear online.
In case you thought trading mania was a limited battle between internet traders and Wall Street hedge funds: video game retailer GameStop was one of the most traded stocks worth the US on Wednesday.
Amateur investors, many of whom rely on the Reddit WallStreetBets group, are jumping to very short stocks, pushing prices to astronomical levels and forcing hedge funds to sell bigger and safer bets to cover losses.
Selloff slips into other investments and the scary feeling. Major indicators fell 2% to 3% on Wednesday and are ready to continue browsing.
A must read: Tenderness? Diamond hands? Your lingo guide on WallStreetBets, the Reddit forum that fuels Gamestop’s wild growth
Our call of the day comes from American equity researchers at Jefferies, led by global equity strategist Sean Darby, with a bonus call de Sébastien Galy, strategist at Nordea Asset Management.
The Jefferies team is clear that correcting stock prices has nothing to do with fundamentals. Rather, what is happening is a reflection of a “change in sentiment in some of the more over-bought and speculative parts of the market.”
The group’s retail speculative index, which measures the deviation from the asset trend in which the value is difficult to determine, is raised to 4 standard deviations. “Therefore, there is a lot of air coming out of riskier financial assets,” the team said.
Darby’s team mentioned that the short-term concern is whether the “emergence” of more risky parts of the market will create a domino effect, as the main actions are liquidated to stop losses.
Galy, Nordea’s Nordic asset manager, repeats Jefferies’ warning of a wider sale. He also says it is too early to buy a bathroom, because there are many more.
Large movements to cover the shorts at a time of high leverage usually force a greater reduction in the indebtedness effect, Galy said. This is due to the fact that capital constraints due to the risk of investment losses are increasing.
“As a result, the cost of covering downside risk has risen sharply,” Galy said. “This risk reduction could take several days, followed by a sharp return to liquidity in the US and, to a lesser extent, European equities.”
Galy said that not even a Federal Reserve meeting on Wednesday could return this market, which is another signal that it could take time.
Buzz
Shares in GameStop GME,
reached the $ 500 premarket level before withdrawing. The stock was only $ 19 by 2021. Fashion brand Nakd NAKD,
is another stock that makes a big leap in the premarket, up 130%.
In a deposit of the Securities and Exchange Commission this morning, the AMC AMC cinema-theater chain,
revealed that the company’s convertible bondholders chose to convert the banknotes into shares as the company’s shares rallied around 330% on Tuesday.
Apple AAPL,
Facebook FB,
and Tesla TSLA,
posted gains after yesterday’s close. Technology giant Apple exceeded $ 100 billion in quarterly revenue for the first time, shattering expectations, as social media company Facebook exceeded estimates, with sales rising 156% of “other revenue” – such as virtual reality headsets and video chat devices. Tesla, the electric car maker, reported its sixth consecutive quarter of profit, but missed expectations.
But if you can take your eyes off the stock market, it’s an important day economically. The initial and ongoing jobless claims are due at 8:30 AM EST, with approximately 875,000 people expected to have applied for unemployment last week. Gross domestic product figures for the fourth quarter of 2020 will come at the same time, before the new home sales figures for December are reported at 10 am.
After the Federal Open Market Committee decided yesterday to keep monetary policy constant, Fed Chairman Jerome Powell gave bad signals that the central bank has not finished restoring the health of the economy devastated by the COVID-19 pandemic. “I haven’t won this yet,” he said.
The markets
It looks like another wild day on Wall Street. Yesterday’s riot recorded the Dow Jones Industrial Average DJIA,
drop more than 630 points and on time to the YM00 exchange,
ES00,
NQ00,
are directed down, set to continue selling. Asian markets NIK,
HSI,
HSI,
SXXP European indices also fell everywhere,
UKX,
DAX,
PX1,
I’m firmly in the red.
Chart
Our chart of the day, from Marshall Gittler to BDSwiss, shows how the S&P 500 SPX,
it has fallen the most since October 2020, and the expected VIX volatility index is the biggest one-day increase since the COVID-19 pandemic, which occurred in March 2020.
The tweet
When sharks root the fish. Billionaire entrepreneur and billionaire investor Mark Cuban – known for his “Shark Tank” – is rooted for Reddit’s WallStreetBets traders.
Random readings
An Oklahoma lawmaker has proposed a “Bigfoot” hunting season with a new bill.
Key West wants to ban people from eating fat, wild chickens that travel freely.
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