Overnight trading in US stock index futures declined as speculative trading by retail traders continued to take hedge funds at risk and upset investors worried about market bubbles. Last week’s fall resulted in losses, which were the worst for the market since October.
Futures contracts involving the Dow Jones Industrial Average declined by 270 points, indicating a 271-point decline at the opening bell. S&P 500 futures slipped 1%, while Nasdaq 100 futures fell 1.2%.
For the first time since December, the Dow closed 630 points or 2% below the 30,000 level on Friday. The Nasdaq Composite also slipped 2%, while the S&P 500 fell 1.9%.
For the week, all three major averages slipped more than 3% to their worst weekly performance since October. The Dow and S&P also posted losses for January – the first negative month in four – although Nasdaq did manage to post gains for the month.
Friday’s plunge came amid a frenzy of activity by retail investors in heavy-handed stocks, including GameStop and AMC Entertainment, which aroused concerns about the overall health of the market. Goldman Sachs noted that the current short squeeze is the worst in 25 years.
“This week’s events have turned the markets on their head, but fear indicators indicate that we may have seen the worst of the situation,” Jefferies wrote in a note to clients over the weekend. Barclays said it is unlikely that the impact of the small squeeze will ripple through the broader market.
In a recent note to clients, the firm wrote, “The petty squeeze by retail investors into some stocks has raised widespread concerns.” “While we believe there is more pain to come we remain optimistic that it is likely to remain localized.”
Meanwhile, a group of 10 Republican senators sent a letter to President Joe Biden on Sunday urging them to consider shortening the Kovid-19 relief proposal. His current plan calls for additional fiscal stimulus for $ 1.9 trillion. House Speaker Nancy Pelosi said as the alternative proposal comes, the chamber would move to pass a budget resolution, the first step toward approving the law through reconciliation. This process would enable Senate Democrats to approve an aid measure without GOP votes.
Elsewhere, another busy week’s earnings are coming with 99 S&P companies ready to report. Alphabet, Amazon, Alibaba, Snap, Exxon, Biogen, Pfizer and Chipotle are among the names reporting this coming week. Thursday is the busiest day of the earning season.
“We believe that the medium-term path to the market remains high,” said Mark Heffel, global CIO at UBS Wealth Management. “In the same pattern as the previous two quarters, corporate earnings for 4Q20 exceeded expectations by a significant margin.”
He said that beyond the delay in vaccine production and distribution, along with an incentive package, investors should further boost the stock.
– CNBC’s Jacob Pramuk contributed reporting.
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