Tuesday February 2nd

2-02-2021

Stocks are set to rally for a second day as the GameStop retail mania unwinds, Dow futures up 230

U.S. stock index futures were solidly higher early Tuesday, building on a strong rally in the previous session as concerns about a speculative retail trading frenzy eased. Futures contracts tied to the Dow Jones Industrial Average climbed about 230 points, implying an opening gain of more than 200 points. S&P 500 futures jumped 0.9% and Nasdaq 100 futures also gained 0.8%. The rise in futures as well as the market gains on Monday coincided with a sharp reversal in GameStop, the video game retailer that captivated Wall Street with its massive short squeeze coordinated by a band of retail investors on social media. GameStop, fresh off a 400% rise last week, slid 30% on Monday and fell another 40% in premarket trading. Other highly speculative investments popular with the Reddit crowd also started to decline. AMC Entertainment dropped more than 20% in premarket. Futures contracts for silver, which enjoyed their biggest one-day jump in 11 years Monday, slid more than 5% Tuesday. Some investors took it as a sign that the speculative mania from retail traders is unwinding, which is healthy for the overall market. “The GME nonsense seems to be abating as the fever around that cohort of stocks starts to break,” Adam Crisafulli, founder of Vital Knowledge, said in a note. On Monday, the Dow added more than 200 points and S&P 500 posted its best day since November all 11 sectors rose. The stock market was coming off its worst week since October as many grew worried the wild trading activity in those heavily shorted names could be contagious and spill over to other areas of the markets. Investors will be met with a slew of earnings on Tuesday, including industry leaders Pfizer and ExxonMobil before the bell. Tech giants Amazon and Alphabet will report after the market close. The market has appeared to shrug off even some of the stronger quarterly reports this earnings season, and Ally Invest chief investment strategist Lindsey Bell said on “Closing Bell” that those movements may mean the good news was already priced in to stocks after a strong close to 2020 for equities. “While these reports were not just good, they were better than expected and you would want to see the stocks move a little bit higher, it’s almost understandable that they haven’t,” Bell said. Investors will also be following stimulus negotiations in Washington, where congressional Republicans made a counteroffer to President Joe Biden’s $1.9 trillion stimulus plan on Sunday. Biden met with those lawmakers on Monday as congressional Democrats moved toward passing a reconciliation bill without bipartisan support. White House press secretary Jen Psaki described the meeting as “substantive and productive.” Stocks in Asia-Pacific rose on Tuesday following an overnight jump on Wall Street. The Shenzhen component in mainland China saw robust gains as it rose 2.073% on the day to 15,335.66. The Shanghai composite advanced 0.81% to 3,533.68. Hong Kong’s Hang Seng index was 1.15% higher, as of its final hour of trading. The Taiex in Taiwan also saw strong gains as it rose 2.27% to close at 15,760.05. South Korea’s Kospi jumped 1.32% to end its trading day at 3,096.81. In Japan, the Nikkei 225 gained 0.97% to close at 28,362.17 while the Topix index advanced 0.94% to finish its trading day at 1,847.02. Oil prices rose around 1% on Tuesday after major producers showed they were cutting crude output in line with their commitments on restraint, supporting a market thrown out of kilter by weak demand during the coronavirus pandemic. Brent crude was up 51 cents, or 0.9%, at $56.86 a barrel by 0134 GMT, while U.S. oil gained 53 cents, or 1%, to $54.08 a barrel. Both contracts rose more than 2% in the previous session. Silver fell more than 5% on Tuesday as a GameStop-style buying spree among small investors that took prices to a near eight-year peak appeared to fizzle out following a margin hike by the Chicago Mercantile Exchange. Spot silver fell 4.6% to $27.64 an ounce. On Monday it jumped 7.3% to its highest since February 2013 in the latest leg of a retail-driven buying frenzy in heavily shorted assets such as U.S. video game retailer GameStop. CME Group raised maintenance margins on Comex 5000 Silver Futures by 17.9% on Monday, and posts on the WallStreetBets Reddit forum at the centre of the past week’s action argued for traders to steer clear of the metal. Spot gold, meanwhile, fell 0.7% to $1,847.11 per ounce. U.S. gold futures shed 0.7% to $1,850.60.