The S&P 500 index rose more than 1% after trading platforms restricted activity in stocks whipsawed by Internet chatter, from GameStop to AMC Entertainment and American Airlines. Hedge funds that had shorted the stocks were burned in recent days, leading them to reduce holdings in shares they loved so they could cut risk.
That dynamic reversed Thursday, and a Goldman Sachs basket of stocks favored by hedge funds jumped the most since early November, halting a five-day slide. An index of the most-shorted shares tumbled more than 8%, the most since March. GameStop whipsawed, rising as much as 39% in early trading before plunging as much as 68%. It was down 34% midafternoon in New York. AMC sank 54%, American was up 8.4% and Tootsie Roll lost 13%.
The trading restrictions sparked outrage on the WallStreetBets forum where day traders have convened to drive the manic rallies that burned hedge funds across Wall Street. Washington took notice of what some have called inequitable rules, with Democratic and Republican lawmakers criticizing restrictions imposed on retail investors.
All 11 industry groups in the S&P 500 traded higher, with sentiment boosted by solid corporate earnings from the likes of Mastercard and Comcast and a surprise drop in jobless claims.
Stocks have seen volatile trading after a prolonged rally that spurred talk of possible asset bubbles and predictions of a pullback given a raging pandemic and patchy rollout of vaccines. The turmoil created by Internet chat rooms has stoked fears of broader consequences for Wall Street, particularly hedge funds, but that fear seemed to fade Thursday.
"Earnings are great, and guidance is better, and we're picking up the pace of getting vaccines out, and eventually we'll have fiscal stimulus coming out of Washington," said Arthur Hogan, chief market strategist at National Securities. "The market is trying to digest a lot of things at the same time."
The Stoxx Europe 600 index edged higher. Earnings beats from STMicroelectronics and Diageo were accompanied by a miss from Swatch Group and a revenue drop at EasyJet.
The benchmark 10-year Treasury yield rose after touching the lowest level since Jan. 5. Bitcoin climbed past $32,000. Stocks in Hong Kong and Australia saw the bulk of Asian losses.
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These are some key events coming up in the week ahead:
- U.S. personal income, spending and pending home sales come Friday.
These are the main moves in markets:
- The S&P 500 index jumped 1.4% as of 3:40 p.m. Eastern time.
- The Stoxx Europe 600 index rose 0.1%.
- The MSCI Asia Pacific index fell 1.7%.
- The MSCI Emerging Market index fell 1.3%.
- The Bloomberg Dollar Spot index slipped 0.2%.
- The euro rose 0.2%, to $1.2133.
- The British pound rose 0.4%, to $1.3743.
- The Japanese yen weakened 0.1%, to 104.21 per dollar.
- The yield on 10-year Treasurys rose four basis points, to 1.05%.
- Germany's 10-year yield rose one basis point, to -0.54%.
- Britain's 10-year yield rose two basis points, to 0.285%.
- West Texas Intermediate crude fell 1% to $52.34 a barrel.
- Gold was little changed at $1,843.43 an ounce.
Published : January 29, 2021
By : Syndication Washington Post, Bloomberg · Vildana Hajric, Lu Wang