Traders on the floor of the New York Stock Exchange.
Source: The New York Stock Exchange
U.S. stock futures moved lower in early morning trading on Friday, as Wall Street’s volatile week continued.
Dow futures fell 353 points. S&P 500 futures and Nasdaq 100 futures also traded in negative territory.
On Thursday, the Dow Jones Industrial Average rose 300 points, thanks to gains in Disney, Intel and American Express. The S&P 500 climbed nearly 1%. Thursday’s rally follows the worst sell-off in the Dow and S&P in three months on Wednesday. The Nasdaq Composite closed up 0.50% on Thursday.
Thursday’s rally was a reversal from recent weakness in equities fueled by market volatility spurred by speculative trading from retail investors. Several e-brokers took steps to curb the deliberate buying of heavily shorted names, giving investors a breather from the remarkable, albeit seemingly synthetic, moves in names like GameStop.
However, shares of the brick-and-mortar game retailer and AMC Entertainment were popping in extended trading on Thursday after Robinhood said it would allow limited buying of some of the restricted securities on Friday.
Investors are concerned that if GameStop continues to rise, it may force bigger losses at hedge funds, which in turn could cause ripples in the market as these funds are forced to sell other securities to raise cash. At the same time, there’s concern that the GameStop mania is a sign of larger bubble in the market and that its unraveling could also cause turbulence and hit retail investors hard.
“From a regulatory perspective, we’ve seen a phenomena of lets call it retail investors flocking into new trading mechanisms,” Hercules Investments’ James McDonald said on CNBC’s “Fast Money.” “We saw this during the Dotcom run up and it resulted in the institution of practices that were restricted on day trade rules. There’s going to be limits on to what extent instructions or recommendations can me made, those rules will be applied and then the brokers will follow.”
Strong corporate earnings continued to roll in after the bell on Thursday. Payments giant Visa, Mondelez, Western Digital and Skyworks Solutions all rose in extended trading after reporting better-than-expected profits and sales for their quarterly results.
Caterpillar, Chevron, Eli Lilly and Honeywell report earnings before the bell on Friday.
On the vaccine front, biotech firm Novavax said Thursday that its coronavirus vaccine was more than 89% effective in protecting against Covid-19 in its phase three clinical trial conducted in the United Kingdom.
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