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Greenwich, Connecticut, is home to many US hedge funds.
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Global stocks were bruised on Thursday in response to the forced sale by hedge funds following unprecedented pressure from retail investors to buy heavily short-short securities. The major US stock indices were mixed, but thankfully quiet after a tough Wednesday.
Shortly after opening, the
Dow Jones Industrial Average
263 points or 0.9%, while the
S&P 500
0.8% recovered, and the
Nasdaq Composite
0.7% added.
In Asia, which has had a hot start to 2021, the
Nikkei 225
ended 1.5% lower and the
Hang Seng
Decreased 2.6%.
The
Stoxx Europe 600
recovered from previous strong losses and declined 0.2%.
The
S&P 500
Wednesday ended 2.6% lower, the worst result since October.
The financial turmoil was caused by the organized purchasing of companies, including video games
GameStop
(ticker: GME), software company
BlackBerry
(BB) and cinema chain
AMC Entertainment
(AMC), all of which had difficult financial performances that caused many institutional players to short their stocks.
“The retail purchases forced several large hedge funds to buy back the shares as soon as possible to limit the damage. [GameStop] was the most actively traded stock in the US for the second straight day in the middle of the earnings season, ”said Marshall Gittler, chief of investment research at BDSwiss.
GME sources
(GME.AU), the Australian mining company that has nothing in common with GameStop, aside from the GME ticker symbol, was up 13% in Sydney.
Mark Haefele, chief investment officer for global asset management at UBS, said the outlook remains bright, citing the 68% jump for the S&P 500 from its March 2020 low.
“After a rally of this magnitude, and with stocks close to record highs, it is understandable that near-term uncertainty leads to an increase in volatility. In our view, the focus is likely to shift back to revenues, incentives and vaccine rollouts. We believe the path for the market will remain higher in the medium term, ”he said.
The GameStop-led frenzy overshadows a key day for earnings and economic news.
Gross domestic product rose 4% in the fourth quarter, missing estimates of 4.3%, while the number of jobless claims improved from 900,000 to 847,000 last week, surpassing expectations for 875,000.
Apple
(AAPL) shares fell 2.2% after the company said it earned $ 1.68 per share, against estimates of $ 1.41. The company posted sales of $ 111 billion, exceeding expectations of $ 103 billion.
Tesla
(TSLA) shares fell 5.3% after the electric vehicle manufacturer posted a mixed quarter. The company earned 80 cents a share and missed estimates of $ 1.03 while posting revenues of $ 10.74 billion, versus a forecast of $ 10.4 billion.
Facebook
(FB) shares gained 4.9% after the company beat revenue and earnings expectations, earning $ 3.88 per share at estimates of $ 3.22 on revenues of $ 28 billion, making it the company’s Exceeded expectations of $ 26.4 billion.
McDonald’s
(MCD) rose 0.5% even after the company missed expectations. The fast food chain said it made $ 1.70 a share, lower than the $ 1.78 estimated share, on revenue of $ 5.31 billion, below expectations of $ 5.37 billion.
Twitter
(TWTR) is up 2.7% on a weak day for technology as KeyBanc upgraded its stock to Overweight from sector weight.
Write to Steve Goldstein at [email protected] and Jacob Sonenshine at [email protected]