US futures indexes fell in overnight transactions as rising speculative transactions by retailers continued to cause hedge fund risk and worried investors about the market bubble. The losses are based on last week’s decline, which was the worst for the market since October.
Dow Jones industrial average futures fell 270 points, indicating a loss of 271 points at the opening bell. The S&P 500 futures fell 1%, while the Nasdaq 100 futures fell 1.2%.
The Dow fell 620 points on Friday, or 2%, to close below 30,000 for the first time since December. The Nasdaq Composite also fell 2%, while the S&P 500 fell 1.9%.
For the week, all three major averages fell by more than 3% for the worst weekly performance in October. Dow and S&P also posted losses for January – the first negative month out of four – although the Nasdaq managed to record a gain for that month.
Friday’s decline came amid a slowdown in retail investors’ activity in sharply shortened shares, including GameStop and AMC Entertainment, which fueled concerns about the general state of the market. Goldman Sachs noted that the current short pressure is the worst in 25 years.
“This week’s events may have turned markets on their heads, but fear indicators suggest that you may have seen the worst degradation phenomenon,” Jefferies wrote in a note to clients over the weekend. Barclays added that the impact of short squeezes is unlikely to spread to the wider market.
“The ongoing short spill of several shares by retail investors has raised concerns about a wider contagion,” the company wrote in a recent note to customers. “While we believe more pain will come, we remain optimistic that it may remain localized.”
Meanwhile, a group of 10 Republican senators sent a letter to President Joe Biden on Sunday urging him to consider a smaller and smaller Covid-19 aid proposal. Its current plans call for an additional $ 1.9 trillion fiscal stimulus. The alternative proposal comes after the president of the Chamber, Nancy Pelosi, declared that the chamber will move to the adoption of a budget resolution, the first step towards the approval of the legislation through reconciliation. The process would allow Senate Democrats to approve an aid measure without GOP votes.
Elsewhere, another week of revenue is coming, with 99 S&P companies reporting. Alphabet, Amazon, Alibaba, Snap, Exxon, Biogen, Pfizer and Chipotle are among the names set to report next week. Thursday is the busiest day of the earnings season.
“We believe the medium-term market path remains the same,” said Mark Haefele, global CIO at UBS Wealth Management. “In a similar pattern to the previous two quarters, corporate earnings for 4Q20 exceeded expectations by a significant margin.”
He added that a stimulus package as well as investors looking beyond delays in vaccine production and distribution should further stimulate stocks.
– CNBC’s Jacob Pramuk contributed to the reporting.
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