New price capers at Gamestop: Bond market sends Wall Street downhill

Thursday, February 25, 2021

New course capers at Gamestop
Bond market sends Wall Street downhill

The US stock exchanges close in the red. One of the reasons for this is inflation concerns. Meanwhile, the Tesla share is on the downside, while the hype about Gamestop continues.

Significantly higher bond yields have sent Wall Street downhill. The background to this was rising inflation expectations and, at the same time, continued loose monetary policy in the USA. Positive US economic data also fueled inflation worries in this environment. Incoming orders for January, the weekly labor market data and the second reading of the GDP data for the fourth quarter were better than forecast.

"The market is jittery. The rise in bond yields is putting stocks, especially growth stocks, under pressure," said market strategist Sebastien Galy of Nordea Asset Management. After the record levels of the previous day, the willingness to reap profits also increased. The Dow Jones index lost 1.8 percent to 31,402 points, the S&P 500 lost 2.4 percent. The technology-heavy Nasdaq indices fell by 3.5 and 3.6 percent.

Among the individual values ​​was once again the Gamestop share in focus. After the price had shot up by 103 percent the previous day, it has now increased by a further 18.6 percent. The video game retailer announced that the chief financial officer would be leaving the company on March 26th. According to the company, this step has nothing to do with disagreements in the company. According to a report, however, the CFO was put out under pressure from investors, especially shareholder Ryan Cohen, who recently joined the board of directors.

The US computer manufacturer HP Inc benefited from increased demand for computers in the wake of the corona pandemic and performed better than expected in the first quarter. The group had actually announced the business card after the US market closed, but then published the figures during trading. After initially higher premiums, the price climbed 0.8 percent.

Tesla fell 8.1 percent. In the trade, reference was made to a report according to which the production of the electric car manufacturer for the important Model 3 at a location in California will be suspended for around two weeks. Chief Financial Officer Zach Kirkhorn recently warned that the shortage of semiconductors and difficulty at ports could temporarily affect the company.

Nvidia fell by as much as 8.2 percent. The digital graphics card maker presented strong results for the fourth quarter. The outlook for the important business with data centers disappoints with the margin, said a stockbroker. Thanks to the first deliveries of vaccines against the corona virus, the US vaccine manufacturer Moderna had significantly more sales in the fourth quarter than in the previous year. However, the loss also widened due to higher spending on research and development. Investors forgive the company for this, the share gained 2.5 percent.

Merck (+0.1 percent) is taking over the US biopharmaceutical company Pandion Therapeutics for around 1.85 billion US dollars. Pandion develops therapeutics for autoimmune diseases.

WTI oil price at 21-month high

After the strong plus of the previous day, oil prices are only moving moderately. A barrel of the US variety WTI rose 0.5 percent to the 21-month high of 63.53 US dollars. The European Brent variety, on the other hand, just held its own in late trading. All eyes are already on the meeting of the Opec + group in the coming week. It has around 8 million barrels a day of free production capacity and, according to a report, is considering easing production cuts.

Of the Dollar index initially lost 0.4 percent to a seven-week low, but then recovered significantly. As a result, the euro gave up its mark-ups again and was at the previous evening's level at $ 1.2168. Market participants saw the initial weakness of the dollar in connection with the statements repeated the day before by Federal Reserve President Jerome Powell that monetary policy would remain loose until there was substantial progress towards the targets for inflation and employment.

Ten year return over 1.50 percent

Yields on the US bond market rose sharply. The yield on ten-year paper rose by 14.5 basis points to 1.53 percent, an annual high. Commerzbank noted that the rising US yields also reflected the market's justified assumption that US government debt would continue to rise and that a higher supply of US government bonds could therefore be expected. In addition, an auction for seven-year-old Treasuries in the evening was extremely weak.

The price of gold fell significantly despite increased inflation worries – weighed down by the higher yields and the recovery of the dollar. The interest-free precious metal will become less attractive, it said. The troy ounce fell 1.9 percent to $ 1,772.