U.S. stock futures fell as retail investors buoyed GameStop and other shares, pointing to a volatile end to 2021’s first month of trading.
Shares of GameStop soared over 60% premarket, after closing down 44% Thursday. AMC Entertainment was up more than 40% ahead of the opening bell. Robinhood Markets, a popular venue for online traders, said late Thursday it would reinstate some trading in stocks that it had curbed earlier. American Airlines climbed over 6% premarket.
“The GameStop story, where you have retail investors that are a new actor on the market, [is] one that people cannot ignore,” said Luc Filip, head of private banking investments at SYZ Private Banking. “There are some critical links for hedge funds that are short on those stocks.” Those investors are selling other long positions to close out money-losing short positions, weighing down markets overall.
Stock markets have seesawed in January, buffeted by headlines about coronavirus vaccine supplies and tightened lockdown measures around the world. The Cboe Volatility Index, a gauge of stress in markets, rose 7.5% Friday and is up over 42% in January.
Earnings season continued, with pharmaceutical company Eli Lilly and aerospace firm Honeywell set to post earnings in the early morning.
Oil major Chevron fell 2.2% in premarket trading after reporting a loss for the fourth quarter. Skyworks Solutions, a chip maker that supplies Apple, rose close to 13% in premarket trading after it reported earnings after hours Thursday that beat analysts’ estimates. Its board also approved a $2 billion share buyback. Construction equipment giant Caterpillar rose 1% after it said it achieved its target operating profit margin, despite a decrease in revenue and profit in the fourth quarter.
Pharmaceutical company Novovax soared 35% after it said its Covid-19 vaccine was 89% effective in a late-stage trial in the U.K. Johnson & Johnson fell 3.5% after saying its own vaccine was 66% effective.
Megacap tech companies slipped ahead of the opening bell. Microsoft fell 1.4% and Google’s parent company Alphabet was down 1.1%.
“Those hedge funds that have been hit, they’ll have no choice but to get rid of some favorite holdings in order to raise that cash,” to cover their short positions, said Seema Shah, chief strategist at Principal Global Investors, adding that she would see any further declines as a buying opportunity for tech stocks.
Overseas, the pan-continental Stoxx Europe 600 fell 1%. The European Union’s comparatively slow rollout of vaccines and recent delays to supply are creating concerns about prolonged lockdowns and weighing on markets, investors said.
Swedish telecom Ericsson jumped 10.7% after posting earnings that beat estimates and said it had gained market share. Meanwhile, Nokia’s shares listed in Finland rose 9.4%. The cellphone company’s U.S.-listed shares have been among those buffeted by retail investors in recent days.
In Asia, most major benchmarks declined. The Shanghai Composite Index edged down 0.6% and Japan’s Nikkei 225 fell 1.9%. South Korea’s Kospi index retreated 3%, in the biggest daily drop in five months.
In bond markets, the benchmark 10-year U.S. Treasury bond yield rose to 1.072%, from 1.055% Thursday.
Bitcoin rose 15% to trade at $37,545. Tesla CEO Elon Musk mentioned the cryptocurrency in his Twitter account, writing “#bitcoin.”
The Bureau of Economic Analysis in the U.S. will release the latest data on consumer spending at 8:30 a.m. ET. Economists expect it declined in December for a second straight month due to a rise in virus cases, signaling a loss of momentum in the economy at the end of the year.
“We expect more prudence from the U.S. consumer in the short term,” said Gero Jung, chief economist at Mirabaud Asset Management, stating that this would affect the economic recovery as consumer spending makes up two-thirds of U.S. gross domestic product.
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