Dow Jones closes in the red: Gamestop hype weighs on US stock exchanges

Friday 29th January 2021

Dow Jones closes in the red
Gamestop hype weighs on US stock exchanges

The week ends with significant losses on Wall Street. Shortages of vaccines make it difficult to predict the recovery of the world economy, and Johnson & Johnson's only moderately effective vaccine is not the sedative pill desired. On top of that, the gamestop hype continues to cause unrest.

The tug-of-war between retail investors and hedge funds over Gamestop's stocks is shaking Wall Street. The titles of the video game retailer shot up after further massive buy orders by up to 113 percent. In view of the high price fluctuations, investors took cover: The Dow Jones Index the default values fell by around two percent to 29,982 points. The broader one S&P 500 fell 1.9 percent to 3714 points. The index of the technology exchange Nasdaq plunged two percent to 13,070 points from. The stock exchanges in Europe also went deeper from trading and posted the largest weekly loss since October.

The fact that the Covid-19 vaccine from the US company Johnson & Johnson (J&J) has a comparatively low effectiveness of 66 percent worldwide contributed to the uncertainty among investors. "While it is good to have another player in the vaccine market, the question is effectiveness. The concern is that if it is much less effective, investor and consumer confidence will be significantly lower," said Sam Stovall, Chief investment strategist at the analysis company CFRA Research. J&J shares fell 3.6 percent. The papers of Biontech put, however 6.6 percent to, the titles of Moderna rose by more than 8.5 percent. The vaccines developed by pharmaceutical competitors are around 95 percent effective.

Stock marketers warned of the risks of the gamestop price capers for the entire financial system. "An imbalance in hedge funds can lead to drastic upheavals," said analyst Jochen Stanzl from the online broker CMC Markets. After several brokerage houses, under pressure from regulators and politicians, relaxed their restrictions on trading in certain papers, the papers that were also on the lists of gamblers withdrew AMC Entertainment increased 53 percent, Koss Corp down 52 percent.

The Game stopRate (today plus 69 percent) had risen by around 2000 percent in the past two weeks. Retail investors had forced hedge funds that had bet on falling prices to resolve their bets with concerted purchases and the resulting price increases in the corresponding stocks. The speculation could cause unrest for a while. Much depends on how the brokers, stock exchanges and regulatory authorities reacted, said equity strategist Christian Kahler from DZ Bank. The US Securities and Exchange Commission said it was closely monitoring the proceedings and would ensure the safety of investors and "fair, orderly and safe markets".

Shares in US pharmaceutical company Biogen rose more than seven percent after the FDA extended the trial period for its Alzheimer's drug by three months. Accordingly, a decision on possible approval for the drug aducanumab should not be made until the beginning of June instead of March. According to analysts at Jefferies, this is a good sign as the agency can work harder towards a permit after requesting new data. A profit decline in the quarter at Honeywell however, deterred investors. The shares of the conglomerate lost 3.8 percent.