Dow Jones falls after J&J vaccine data, hedge fund-retail investor clash

Dow Jones falls after J&J vaccine data, hedge fund-retail investor clash

U.S. stock indexes fell on Friday after COVID-19 vaccine data from Johnson & Johnson hurt sentiment, while worries over a growing standoff between hedge funds and retail investors persisted.

Shares of Johnson & Johnson fell 4% after the drugmaker said its single-dose vaccine was 72% effective in preventing COVID-19 in the United States, with a lower rate of 66% observed globally.

The results compare to the high bar set by two authorized vaccines from Pfizer Inc/BioNTech SE and Moderna Inc, which were around 95% effective in preventing symptomatic illness in pivotal trials when given in two doses.

“While it’s good to have another entrant, the question is the efficacy. The concern is if it’s a lot less effective, then investor and consumer confidence will be substantially lower,” said Sam Stovall, chief investment strategist at CFRA Research.

Moderna jumped 10.2%, helping cushion some declines on the Nasdaq. The Nasdaq Biotechnology index added 1.8%.

All the three main indexes tracked their biggest weekly fall since the end of October.

Worries of a short squeeze grew after an army of retail investors returned to trade shares in GameStop Corp, AMC Entertainment Holdings Inc and BlackBerry Ltd.

Shares of the companies surged after Robinhood and Interactive Brokers said they planned to ease restrictions after imposing buying halts a day earlier.

Investor favorites including Apple Inc were sold off by hedge funds recently to cover billions of dollars in losses.

Shares in Apple, Inc, Microsoft Corp , Facebook Inc, Netflix Inc, Tesla Inc and Alphabet Inc fell between 0.7% and 2.3%.

“The markets were vulnerable to a decline because of how far they had advanced as compared with either moving averages, and this Reddit activity was the catalyst that sort of triggered the sell off,” Stovall said.

Concerns over stretched valuations, new coronavirus variants and rising COVID-19 cases kept investors on edge about a pullback and an increase in volatility in the near-term.

The first known U.S. cases of the South African COVID-19 variant, found to be partly resistant to current vaccines and antibody treatments, was detected in South Carolina on Thursday.

At 10:07 a.m. ET the
Dow Jones Industrial Average was down 244.21 points, or 0.80%, at 30,359.15, the S&P 500 was down 30.23 points, or 0.80%, at 3,757.15, and the Nasdaq Composite was down 125.18 points, or 0.94%, at 13,211.98.

Data showed U.S. labor costs increased more than expected in the fourth quarter amid a jump in wages, supporting views that inflation could accelerate this year, while a report showed U.S. consumer spending fell for a second straight month in December.

Honeywell International Inc fell 1.7% after it posted a 13% fall in quarterly profit.

Declining issues outnumbered advancers for a 1.55-to-1 ratio on the NYSE and a 1.18-to-1 ratio on the Nasdaq.

The S&P index recorded five new 52-week highs and no new low, while the Nasdaq recorded 31 new highs and eight new lows.

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