By Will Horner and Paul Vigna
Major stock indexes suffered their sharpest one-day losses since
October on Wednesday amid concerns about Covid-19 vaccine
distribution, while traders were also captivated by the frenzied
trading in GameStop and other heavily shorted stocks.
GameStop surged $199.53, or 135%, to $347.51 and AMC
Entertainment Holdings soared $14.94, or 301%, to $19.90, part of a
battle between day traders and short sellers. Both stocks are up
more than 800% in January. Until Wednesday, the broader market's
moves had been relatively muted in recent sessions, despite the
wild swings in a handful of individual stocks.
The blue-chip index fell 633.87 points, or 2.1%, to 30303.17,
extending its losing streak to five sessions, and the S&P 500
dropped 98.85 points, or 2.6%, to 3750.77. The Nasdaq Composite
lost 355.47 points, or 2.6%, to 13270.60. All three indexes posted
their biggest one-day losses on a point and percentage basis since
New variants of the Covid-19 virus are showing up around the
world, putting fresh pressure on governments to get their
populations vaccinated. That exacerbates the peril in any delays in
the vaccination programs and the ability to eventually end
lockdowns or other restrictions.
AstraZeneca has said problems at a European factory would
sharply cut supplies to EU nations. The EU this week pressured the
drugmaker to instead supply it with vaccine from its U.K. factories
if need be, which would then affect the rollout in the U.K.
Meanwhile, 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. A number of
cities and other jurisdictions have reported vaccine shortages.
"I think the market expected that by now we would be talking
about loosening, not tightening restrictions," said Hani Redha, a
portfolio manager at PineBridge Investments. "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."
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
The gains have been driven largely by day traders on the
social-media message board Reddit, who have en masse been buying up
the stock, squeezing short sellers. 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 is up 9.9% so far this year,
while the S&P 500 is down 0.1%. GameStop is now the index's
largest issue; at the end of 2020, less than a month ago, it ranked
The Reddit crowd's gang-pile 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 also a warning sign that the markets --
driven by a central-bank policy tilted toward risk-taking -- are
dangerously out of balance, Mr. Olsen said.
In the afternoon, the Federal Reserve said it would maintain its
current monetary policies while acknowledging the economy has
softened in recent weeks. But the first question Jerome Powell
fielded in his press conference was about the trading in
He said he wasn't going to comment on a particular stock or
day's market activity. In response to another question about
financial bubbles, he played down the role of Fed policy in driving
asset prices higher.
In corporate news, investors parsed results from AT&T,
Blackstone Group and Boeing, while Apple, Facebook and Tesla
reported after the close.
"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 rose 57 cents, or 0.3% to $232.90 after the
company reported record quarterly sales Tuesday. Walgreens Boots
Alliance was up $1.99, or 4.1%, to $51.18 after the drugstore chain
named Starbucks operating chief Rosalind Brewer as its next chief
In commodities markets, U.S. crude rose 0.5% to $52.85 a barrel.
Gold prices fell 0.3% to $1,844.90. The U.S. 10-year Treasury
note's yield was down slightly at 1.014%.
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 17:46 ET (22:46 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.