Dow futures edge higher after steep Wall St. selloff; GameStop underlines worries about market froth

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Dow futures edge higher after steep Wall St. selloff; GameStop underlines worries about market froth


Stock futures were mixed Thursday, struggling for direction a day after steep losses for major indexes tied to worries over a slowing economic recovery.

Investors continued to monitor a surge in shares of GameStop Corp. that underlined concerns about speculative excess. Meanwhile, shares of big tech stocks were lower in premarket trade after earnings late Tuesday from Apple Inc.
AAPL,
-0.77%
,
Tesla Inc.
TSLA,
-2.14%

and Facebook Inc.
FB,
-3.51%
.

What are major benchmarks doing?
  • Futures on the Dow Jones Industrial Average
    YM00,
    +0.17%

    rose 49 points, or 0.2%, to 30,238.

  • S&P 500 futures
    ES00,
    -0.01%

    were little changed, down 0.2 point at 3,744.

  • Nasdaq-100 futures
    NQ00,
    -0.39%

    fell 62.75 points, or 0.5%, to 13,042.75.

Benchmarks fell sharply on Wednesday, with the Dow
DJIA,
-2.05%

dropping 633.87 points, or 2.1%, while the S&P 500
SPX,
-2.57%

and Nasdaq Composite
COMP,
-2.61%

each dropped 2.6%.

What’s driving the market?

Stocks gave up 2021 gains as investors fretted that the equity rally had gone too far as the economy continues to reel from the COVID-19 pandemic. Worries about speculative froth were underlined by the surge in shares of GameStop, which has been the most heavily traded stock on Wall Street for two days, as part of a battle between an army of individual investors organized on platforms like Reddit and short selling hedge funds.

Analysts said equity weakness also reflected fears that some hedge funds were scrambling to exit long positions in a bid to offset losses on shorts against stocks like GameStop and AMC Entertainment Holdings Inc.
AMC,
+301.21%
.
GameStop shares were up another 32% in volatile premarket trade Thursday.

“The GameStop short squeeze saga has sparked worries that certain investment firms are rushing for the exit to obtain cash to nurse any painful losses they are enduring. Within the past 24 hours, the mood has changed a lot as there is now a feeling that stocks across the board are in for further losses as a cut-and-run mentality is being adopted by some dealers,” said David Madden, market analyst at CMC Markets UK, in a note.

While overshadowed by the GameStop saga, analysts said remarks Wednesday by Federal Reserve Chairman Jerome Powell underlining that the economy remains a long way from recovery and that some sectors already damaged by the coronavirus pandemic were experiencing another round of pain were also a drag on the market.

A first estimate of fourth-quarter economic growth is due at 8:30 a.m. Eastern. Economists surveyed by MarketWatch, on average, expect gross domestic product to show annualized growth of 4.3%.

Weekly data on jobless claims will provide investors a look at the state of the labor market. First-time claims are expected to fall to 875,000 from 900,000 a week earlier.

Trade data is also due at 8:30 a.m., while December new home sales and the December leading economic indicators report are both due at 10 a.m.

Which companies are in focus?



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