Friday January 29th


Dow futures extend losses after J&J says vaccine less effective against some Covid variants

U.S. stock index futures were sharply lower in early trading on Friday after Johnson & Johnson said its one-dose coronavirus vaccine showed less effectiveness in some regions. Dow Jones Industrial average futures lost 310 points, or 1%. S&P 500 futures lost 1%. Nasdaq 100 futures shed 1.1%. Futures accelerated losses after JNJ said its one-dose vaccine demonstrated 66% effectiveness overall in protecting against Covid-19. The vaccine was 72% effective in the United States, 66% in Latin America and 57% in South Africa after four weeks, according to the late-stage trials. Heightened speculative trading by retail investors continued to unnerve the market. Shares of GameStop doubled in premarket trading after Robinhood said it would allow limited buying of the stock and other heavily shorted names after restricting access the day before. Robinhood raised more than $1 billion from its existing investors overnight, in addition to tapping bank credit lines, to ensure it had the capital required to allow some trading again in the volatile stocks. Investors are concerned that if GameStop continues to rise in such a volatile fashion, it may ripple through the financial markets, causing losses at brokers like Robinhood and forcing hedge funds who bet against the stock to sell other securities to raise cash. There are also fears that the GameStop mania is a sign of a larger bubble in the market and that its unraveling could also cause turbulence and hit retail investors hard. Several e-brokers on Thursday took steps to curb the deliberate buying of highly speculative names. A number of lawmakers also called for an investigation into the chaotic trading. “Between Washington calling for hearings and reports Robinhood was forced to not only draw down on its credit lines but also raise $1B from existing investors, the entire situation continues to erode market confidence,” Adam Crisafulli, founder of Vital Knowledge, said in a note Friday. It’s been a volatile week on Wall Street. The Dow lost more than 600 points on Wednesday, suffering its worst sell-off in three months. Then the blue-chip benchmark rebounded by 300 points on Thursday amid a broad market rally. All three major averages have lost at least 1% this week. The market also experienced the highest trading volume in years as the mania heated up. On Wednesday, total market volume hit more than 23.7 billion shares, surpassing the level during the height of the financial crisis in 2008. Thursday also saw extremely heavy trading with more than 19 billion shares changing hands. A wave of retail traders have been motivating each other on the red-hot WallStreetBets Reddit forum to pile into the most hated names by hedge funds, creating massive short squeezes in the stocks. GameStop has soared more than 900% in January, while AMC Entertainment has rallied over 300% this month. “That smaller-cap rally would likely be destabilizing and create inefficiencies,” Christopher Harvey, senior equity analyst at Wells Fargo, said in a note. “Stocks are ultimately grounded by fundamentals – and reversions can be very painful to both the upside and the downside.” Strong corporate earnings continued to roll in after the bell on Thursday. Payments giant Visa, Mondelez, Western Digital and Skyworks Solutions all rose in extended trading after reporting better-than-expected profits and sales for their quarterly results. Caterpillar, Chevron, Eli Lilly and Honeywell report earnings before the bell on Friday. On the vaccine front, biotech firm Novavax said Thursday that its coronavirus vaccine was more than 89% effective in protecting against Covid-19 in its phase three clinical trial conducted in the United Kingdom. Stocks in Asia-Pacific were lower in Friday trade, with South Korea’s Kospi leading losses among the region’s major markets. By the Friday market close in South Korea, the Kospi fell 3.03% to 2,976.21. Japan’s Nikkei 225 dropped 1.89% to close at 27,663.39 while the Topix index slipped 1.64% to finish its trading day at 1,808.78. Mainland Chinese stocks were also lower on the day: The Shanghai composite fell 0.63% to 3,483.07 while the Shenzhen component slipped 0.612% to 14,821.99. Hong Kong’s Hang Seng index declined 0.94% to close at 28,283.71. Oil prices were steady on Friday, sticking to ranges seen over the past three weeks, as investors looked for signs of changing supply and demand fundamentals. A cut in Saudi Arabia’s oil supply and lower U.S. oil stocks helped offset price pressures from fuel demand, which is slowing due to stalled vaccine rollouts and contagious new coronavirus strains. “We’re waiting for the next shoe to drop in the oil market. We really don’t have much to move us around,” said Michael McCarthy, chief strategist at CMC Markets. Brent crude futures for March rose 55 cents, or 1%, to $56.08 a barrel, after falling 0.5% in the previous session. The Brent March contract expires on Friday. The more active April contract rose 13 cents, or 0.2%, to $55.23. U.S. West Texas Intermediate (WTI) crude futures climbed 32 cents, or 0.6%, to $52.63 per barrel, after falling 1.0% on Thursday. Gold and silver rose on Friday as an ongoing retail versus hedge fund faceoff and doubts over European vaccine supply hurt global stocks, but a resilient dollar took away some of bullion’s allure and kept it on track for its worst January in a decade. Spot gold rose 0.6% to $1,851.20 per ounce by 1027 GMT. U.S. gold futures rose 0.7% to $1,854.20.