GameStop Stock Is Soaring Again. What’s Behind Its Remarkable — and Inexplicable — Run.

It’s also inexplicable. GameStop will open for trading Monday roughly 50% higher than prior cyclical peaks set in 2007 and 2013. The stock is trading for roughly 25 times the company’s best annual earnings of about $3.78 per share earned in 2016. GameStop has lost money in the past two years and is expected to post a full-year loss in 2020, 2021, and 2022.

How is that possible? It has nothing to do with fundamentals. Rather, it’s the mother of all short squeezes. Bearish investors, believing GameStop is the next Blockbuster, got so bearish that they sold every single share—and then some—of the company short.

But a little bit of good news—in this case the arrival of Chewy co-founder Ryan Cohen—provided a spark that sent shares higher. That spark was fanned into flames by investors on Reddit, who continue to push the stock.

That fuel will eventually run out. And when it does, watch out.

—Al Root

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The Busiest Week of Earnings Season Is Here

It’s a big week on Wall Street, with nearly a quarter of the S&P 500—39% of the S&P 500 by market value—set to report earnings. Among the big names reporting this week are Apple, Facebook and Tesla.

• Investors are expecting a record quarter from Apple, in part driven by the new importance to the company of subscriptions and hardware peripherals like headphones, which are more easily giftable than phones.
• Facebook is also expected to post record financial results. It will likely face questions about its decision to permanently bar former President Donald Trump from its platform.
• The key figure for Tesla will be its estimate for 2021 deliveries.
• So far during this pandemic-marred earnings season, U.S. companies have only barely managed to post positive earnings growth. Going into the quarter, investors were expecting profits to decline for the fourth straight quarter with a 6.3% overall drop.
• Another number investors will be watching is the gross domestic product for the fourth quarter, which economists polled by Dow Jones/The Wall Street Journal predict will have grown by 4.1% on an annualized basis.

What’s Next: Regardless of how fourth-quarter earnings shake out, analysts are projecting growth throughout 2021, as the pandemic eases and more fiscal stimulus boosts consumer activity.

—Ben Walsh

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Merck Ends Covid-19 Vaccine Programs as U.S. Cases Top 25 Million

Merck announced Monday that it will stop the development of its Covid-19 vaccines after early trial data showed the experimental shots did not boost immunity to the virus when compared with natural infection. The company will instead focus on two therapeutic candidates.

• Merck’s news comes as the total number of reported Covid-19 cases in the U.S. tops 25 million and the Biden administration and U.S. health officials ratchet up their criticism of President Trump’s handling of the vaccine rollout.
• White House chief of staff Ron Klain said Sunday that when the Biden administration came into office, a process to distribute Covid-19 vaccine doses “did not really exist” at the federal level and blamed the Trump administration for the “chaotic” way vaccine doses have been administered.
• Dr. Deborah Birx, the former White House Covid-19 response coordinator, said that the Trump administration did not have a full-time team working to contain the virus.
• Dr. Anthony Fauci told the New York Times that his relationship with President Trump deteriorated as he contradicted statements the president made about the pandemic. Fauci said Sunday that there would be a “turnaround in attitude when the federal government and the states start working together much more, as opposed to ‘You’re on your own.’”

What’s Next: An average of 1.1 million Americans are now being vaccinated daily, putting the administration on track for its goal of 100 million doses administered in 100 days. Klain acknowledged that shortages remain a problem and said, “we’re going to work closely with the manufacturers to ramp up production.”

—Ben Walsh

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Millions of Americans Face Tough Choices as Mortgage Protections May End

After a sustained decline in the second half of 2020, the portion of American homeowners postponing their mortgage payments has held steady over the last two months—an indication that for millions of households, the economic pain of the Covid-19 pandemic shows no sign of abating.

• Since early November, about 2.7 million, or 5.5%, of American mortgage holders have been putting off payments, according to weekly data released by the Mortgage Bankers Association. That’s down from a peak of just over 8.5% in early June.
• The ability of homeowners to pause mortgage payments was itself a product of the CARES Act signed into law last March. It allowed borrowers with federally-backed mortgages, which account for about three-quarters of U.S. home loans, to postpone payments for up to a year.
• The stalled recovery and weak labor market makes it unclear when financially-stressed homeowners will be able to resume payments. More likely, they will seek out different repayment options or loan modifications with lower interest rates. Some might sell their homes, which could be bought quickly given the tight housing market.
• President Biden has signed an executive order extending a federal moratorium on evictions and foreclosures through March 31. He has also asked federal agencies to extend the deadline for accepting new applications for forbearance at least until then.

What’s Next: Mass foreclosures are unlikely, since borrowers have other options. What’s more, Biden’s order could be extended again. But none of that changes the fact that millions of Americans still can’t make their home payments nearly a year into the pandemic.

—Ben Walsh

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France, Britain to Tighten Covid Restrictions Further

Both the French and British governments are due this week to take further measures to tighten the travel and domestic restrictions in place since the beginning of the year, as the fast rise of infections from new aggressive variants of the coronavirus undermines the mass vaccination campaigns under way.

• U.K. Prime Minister Boris Johnson will announce Tuesday new border restrictions that could include systematic quarantine for all visitors from abroad and the use of localization and facial-recognition technology to check that people required to do so remain in isolation.
• Even British Chancellor of the Exchequer Rishi Sunak, who tried to oppose previous restrictions on account of their economic cost, has now come out in favor of compulsory hotel quarantine for everyone entering Britain, according to the Times.
• The French government will discuss on Wednesday whether or not to put France under a third general lockdown, with a rising choir of medical experts and scientific government advisers demanding more stringent measures than the current 6 p.m. to 6 a.m. curfew.
• German Health Minister Jens Spahn said last week that the lockdown originally due to end on Jan. 31 would remain in place “at least until the end of February or into March.”

What’s Next: Governments are waiting for the first signs of relief brought about by the vaccination campaigns before they relax the restrictions. That will take time. And U.K. Health Secretary Matt Hancock summed it up when he warned that the lifting of lockdown rules is “a long, long, long way off.”

—Pierre Briançon

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Europe to Debate Russian Sanctions After Major Navalny Protests

European foreign ministers were due to debate possible measures against Russia on Monday after Russian police arrested more than 3,500 protesters over the weekend during the most important street protests of recent years.

• Tens of thousands of demonstrators took to the streets in more than 100 Russian cities to denounce the incarceration of Russian opposition leader Alexei Navalny, jailed last week upon his return from Germany where he had been treated for poisoning.
• The unsanctioned rallies coincided with a sharp decline in President Vladimir Putin’s popularity, even as measured by Russian polls, amid a deterioration of the Russian economy.
• Navalny’s team last week released a two-hour documentary alleging that Putin had built a £1 billion ($1.37 billion) extravagant palace on the shores of the Black Sea, “paid by the largest bribe in history.” Putin’s spokesman described the allegations as “pure nonsense.”
• The EU as well as several individual members have formally demanded Navalny’s release and several governments including the three Baltic countries, Italy or Romania have already indicated they favored new sanctions against the Putin regime.

What’s Next: No decision is expected today, and it will take France and Germany to agree before new sanctions are decided against Russia or some of its officials, on top of those already in place due to the annexation of Crimea or the poisoning of Navalny by members of the Russian security services.

—Pierre Briançon

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MarketWatch Wants to Hear From You

Cable companies are introducing data caps—what will it cost if you go over?

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—Newsletter edited by Matt Bemer, Anita Hamilton, Ben Levisohn, Stacy Ozol