By Will Horner and Paul Vigna
U.S. stocks fell amid concerns about Covid-19 vaccine
distribution while traders were captivated by the frenzied trading
in GameStop and other heavily-shorted stocks.
The Dow Jones Industrial Average declined 540 points, or 1.7%,
and the S&P 500 dropped 2.2%. The Nasdaq Composite lost 2%.
Delays in the rollout of Covid-19 vaccines, coupled with
lingering lockdown measures, marked a "double whammy" of bad news
for investors, said Hani Redha, a portfolio manager at PineBridge
"I think the market expected that by now we would be talking
about loosening, not tightening restrictions," he said. "On the
vaccine rollout, this is very problematic for the near term. It is
very critical for shaping the growth bounce back, and these issues
are just adding more delay to that."
AstraZeneca rebutted reports Wednesday that it had pulled out of
a meeting with European Union officials, as a spat between the two
groups regarding a vaccine shortfall deepened.
The Biden administration said Tuesday it would purchase enough
additional coronavirus shots to vaccinate most of the U.S. with a
two-dose regimen by the end of summer.
While questions about the pace of vaccine rollout and the
economic recovery are real, they aren't new issues for investors,
said Victoria Fernandez, the chief market strategist at Crossmark
Global Investments. Given the market's run to new highs, it isn't
surprising that investors are a bit worn out.
"I really think it's a hodgepodge of different things and the
market is saying, you know what, we're taking a breather," she
The most fascinating market dynamic, however, remains the
spectacular, day-trader driven gains for heavily shorted stocks
like GameStop and BlackBerry.
GameStop, is the most visible token in this game. Driven largely
by day traders on the social-media message board Reddit, who have
en masse been buying up the stock, squeezing short sellers, the
stock rose 106% on Wednesday after rising 113% on Tuesday. After
markets closed Tuesday, Tesla Chief Executive Elon Musk tweeted
"Gamestonk!!" in an apparent reference to the frenzied trading
GameStop's rise this year on its own comprises nearly a full
percentage point of the small-cap S&P 600's gains, according to
S&P Dow Jones Indices. The index was up 10.2% through Tuesday.
GameStop is now the index's largest issue; at the end of 2020, less
than a month ago, it ranked 287.
Another target of the day-trader crowd, AMC Entertainment, was
up 263% on Wednesday. If the gains held to the closing bell, it
would be the stock's biggest one-day gain on record.
The Reddit crowd's gang-piles into these stocks resembles
century-old pump and dump schemes from the 1920s, said Hans Olsen,
the chief investment officer at Fiduciary Trust Co.
Back then, stock operators would pool money to pump up the price
of a targeted stock. Once the public caught wind of the moves and
bought, the operators would sell at a profit. Those schemes of
course didn't have a convenient platform like Reddit through which
traders could coordinate.
"This is old stuff coming new again," Mr. Olsen said, "and
facilitated in a way we haven't seen, by social media."
This kind of trading is a also warning sign that the markets --
driven by central-bank policy toward risk-taking -- are dangerously
out of balance, Mr. Olsen said. He wondered whether the Federal
Reserve addresses any of this in today's press conference.
"You talk about systemic risk? This is systemic risk seeding
itself. They ought to address it."
In the afternoon, the Federal Reserve said it would maintain its
current monetary policies while acknowledging the economy has
softened in recent weeks. Investors were also parsing comments from
Chairman Jerome Powell's press conference.
In corporate news, investors parsed results from AT&T,
Blackstone and Boeing, with earnings from Apple, Facebook and Tesla
due just after the market closes. Investors are eager to see how
the tech giants fared during a quarter marked by continued
lockdowns and stay-at-home orders.
"The bar for tech stocks to beat is quite high because we were
still in lockdown and yet they do seem to be doing well relative to
those higher expectations," said Mr. Redha.
Shares of Microsoft gained 1% after the company reported record
quarterly sales Tuesday. Its shares closed at a new high
Walgreens Boots Alliance was up 4.8% after the drugstore chain
named Starbucks operating chief Rosalind Brewer as its next chief
In commodities markets, U.S. crude rose 0.9% to $53.10 a barrel.
Gold prices fell 0.4% to $1,843.00. The U.S. 10-year Treasury
note's yield was down slightly at 1.01%.
Overseas, the pan-continental Stoxx Europe 600 was down 1.2%,
while in Asia, stock indexes were mixed. Japan's Nikkei 225 rose
0.3%, Hong Kong's Hang Seng fell 0.3%, while in mainland China, the
Shanghai Composite edged up 0.1%.
Write to Will Horner at William.Horner@wsj.com and Paul Vigna at
(END) Dow Jones Newswires
January 27, 2021 15:03 ET (20:03 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.