Thursday, January 28, 2021
Wild ascent and descent
Gamestop throws Wall Street into an uproar
The mood on the US stock exchanges is splendid – the balance sheet season is boosting prices. The major indices are increasing. However, the price chaos of individual stocks such as that of Gamestop is causing a stir. Individual online brokers are already restricting trading in highly hyped papers.
Backed by the US accounting season, Wall Street stock investors have returned. Big jumps in the share price of Gamestop and other stocks that were recently targeted by speculators caused a sensation, with the leading Dow Jones Industrial index trading 1.0 percent higher at 30,603 points. With the broader S&P 500, it was ultimately also 1.0 percent to 3787 points. Among the technology indices, the Nasdaq 100 rose 0.7 percent to 13,202 points.
On Wednesday, discussions about coronavirus mutations, new lockdowns and concerted actions by small investors against hedge funds resulted in significant losses. Investors then went back to index heavyweights such as Microsoft, Facebook, Netflix and Alphabet, some of which had posted the largest losses in three months on Wednesday.
The latest economic data provided some relief. It is true that the US economy slowed its growth rate significantly in the second corona wave: In the fourth quarter, gross domestic product only rose by 4.0 percent projected over the year. However, experts had calculated this figure for the months from October to December. "Despite the chaotic corona management of the Trump administration, the United States has so far got through the pandemic better than Germany, the United Kingdom or Japan, for example," summarized LBBW analyst Dirk Chlench.
Chaos over Gamestop shares
GameStop's shares went up and down, after several trading interruptions they were 44.3 percent in the end. However, the stocks immediately gained 21.3 percent in after-hours trading. Bed Bath & Beyond shares also fell 36 percent. Hedge funds that would have speculated there would now have to part with other investments in order to compensate for these losses, said Naeem Aslam, chief market analyst at the brokerage house AvaTrade. In addition, the online brokers Robinhood and Interactive Brokers restricted trading in some of the hyped titles.
On Twitter, observers criticized the broker for protecting the interests of large Wall Street investors at the expense of small investors. However, if these buy shares on a large scale, apparently in a coordinated manner, that raises the question of possible market manipulation, said investment strategist Michael Hewson from brokerage firm CMC Markets. Such agreements are expressly prohibited for institutional investors.
The online brokers Robinhood and Interactive Brokers restricted trading in some of the hyped stocks. The move called MPs from both US parties who were outraged and accused brokers of preferring large hedge funds at the expense of small investors. The future chairman of the Senate Banking Committee, Sherrod Brown, announced hearings "on the state of the stock market". After the stock market closed, the House of Representatives Financial Services Committee followed suit. The surveys will be about short sales and online trading platforms, it said in an announcement.
Tesla disappoints investors
In addition, the current balance sheet season caused price movements. Mastercard shares rose 2.8 percent. The credit card company had exceeded the market's profit forecasts in the fourth quarter with net profits of $ 1.6 billion. The travel business collapsed during the Covid pandemic, but increases in contactless payments in retail mitigated the decline.
Apple and Facebook, on the other hand, delivered strong numbers, but remained cautious with their forecasts. Apple gave way by 3.5 percent, Facebook by 2.6 percent. Tesla, on the other hand, could not even meet the high expectations of investors, said a market strategist. The shares of the electric car maker fell 3.3 percent.
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