Ameritrade restricts trading in GameStop, AMC as trading platforms struggle to keep up with historic volume

TD Ameritrade
TD Ameritrade halts trading for GameStop, AMC, and others.

  • Ameritrade said on Wednesday it had restricted access to GameStop, AMC, and “other securities” as retail traders send markets for a loop.
  • Ameritrade’s mobile platform was down for about an hour Wednesday morning due to high trading volumes.
  • Retail traders are hoping to take advantage of short and gamma squeezes that can skyrocket share prices.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Ameritrade has restricted access to GameStop, AMC, and “other securities” as retail traders continue to send the markets for a loop.

“In the interest of mitigating risk for our company and clients, we have put in place several restrictions on some transactions in $GME, $AMC, and other securities. We made these decisions out of an abundance of caution amid unprecedented market conditions and other factors,” Ameritrade said in a statement.

Read more: MORGAN STANLEY: Buy these 9 sports-betting stocks ahead of the industry’s expected legalization in 12 states this year and its growth to $10 billion in 2025

Ameritrade saw “unprecedented volumes” on Wednesday after retailer traders piled into heavily-shorted stocks.

The platform announced in a tweet that its mobile app had crashed due to the surge. About an hour later, it tweeted the problem had been resolved and apologized to customers for the inconvenience.

Ameritrade was one of several platforms, including Robinhood and E*Trade, that experienced outages as the number of retail trades soared in a wild day for the markets.

The trading platforms’ problems largely stem from Reddit’s WallStreetBets crowd, which now boasts over 2.2 million members.

Traders on the platform are betting against short-sellers hoping to cause short and gamma-squeeze conditions that lead to monumental near-term price appreciation.

The most talked-about name in the Reddit trade has been GameStop. Shares of the once-forgotten retailer have skyrocketed more than 1,200% since WallStreetBets first piled in on January 11. The move cost short-sellers billions of dollars in losses in just a few weeks.

Now the phenomenon has gone mainstream, and trading platforms are struggling to to keep up with the retail volumes.

Read the original article on Business Insider

AMC spikes 420% as day traders ignite shorted stocks like GameStop, BlackBerry, and Bed Bath & Beyond

AMC AP

  • AMC stock surged as much as 420% on Wednesday.
  • Day traders also sent GameStop shares soaring, along with BlackBerry and Bed Bath & Beyond.
  • Amateur investors are seeking quick profits from heavily shorted stocks.
  • Visit Business Insider’s homepage for more stories.

AMC shares skyrocketed as much as 420% on Wednesday as day traders piled into heavily shorted stocks for a third consecutive day. The stock rally added up to $7 billion to the cinema chain’s market capitalization.

Frenzied buying also drove GameStop shares up as much as 160%, BlackBerry up 31%, and Bed Bath & Beyond up 46%. The four companies gained a combined $29 billion in market capitalization at their peak stock prices.

Amateur investors have gathered, most notably on the Reddit forum r/wallstreetbets, to pinpoint stocks they can buy en masse with the hope of scoring fast profits. They frequently target stocks that are popular shorts, as driving their stock prices up can pressure short-sellers into buying shares back to cover their positions, which sends prices even higher.

Read more: The CEO of the world’s biggest asset manager warns that companies will ‘suffer’ if they don’t cut carbon emissions. Read excerpts from his letter to CEOs.

Day traders also see the strategy as a way to stick it to Wall Street. They have targeted hedge funds such as Melvin Capital, which had negative positions in 17 US-listed stocks at the last count. Four of those – GameStop, Bed Bath & Beyond, Dillard’s, and Ligand Pharmaceuticals – jumped at least 10% on Wednesday.

The GameStop frenzy is especially divisive. The billionaire investor Chamath Palihapitiya bought bullish options on the video game retailer’s stock Tuesday at the urging of his Twitter followers, while Tesla CEO Elon Musk tweeted the word “GameStonk!!” with a link to the Wall Street Bets subreddit.

Read more: MORGAN STANLEY: Buy these 9 sports-betting stocks ahead of the industry’s expected legalization in 12 states this year and its growth to $10 billion in 2025

In contrast, Michael Burry of “The Big Short” fame sent out a swiftly deleted tweet Tuesday condemning the frenzied buying of GameStop stock as “unnatural, insane, and dangerous.” The investor, who has most likely made a fortune on GameStop, also called for legal and regulatory action against those involved.

Read the original article on Business Insider

One Reddit day-trader claims to have turned $53,566 in GameStop call options into more than $11 million in just over a year

Video games gamers players

A day-trader on popular Reddit community WallStreetBets has claimed they scored an enormous gain on GameStop’s controversial 261% rally this year.

The user going by ‘DeepF—–gValue’ – censored for content – showed he turned an initial investment of $53,566 in GameStop call options into a stack of $11.2 million.

Several Redditors have increased their wealth at the expense of GameStop haters who were betting on the company’s inflated valuation, but this user has so far turned out to be the champion.

Insider has not independently verified the Redditor’s claims of turning a profit on GameStop.

Screenshot 2021 01 26 at 10.48.30

Read More: This actively-managed SPAC ETF amassed $60 million assets within a month of launching. Its founder breaks down how to pick blank-check firms – and shares 3 to watch in 2021

The trader initially showed his call positions doubling in value three weeks after Michael Burry’s Scion Management called on GameStop to buy back $238 million in shares on August 19, 2019 and a report warning about the dangers of shorting the stock.

An obsession with the video-retailer by online traders has fuelled outsized volatility over the past three weeks, followed by numerous trading halts. Bullish bets began around the time GameStop agreed with activist investor RC Ventures to add three members, including Chewy founder Ryan Cohen, to its board. The board overhaul was largely seen as a positive for the retailer.

Members on the WallStreetBets community piled into the stock on January 13, encouraging one another to push out short-sellers holding bearish positions. The stock closed 51% higher that same day. A handful of retail traders on TikTok also crowed about how GameStop was going to see frenzied buying again. 

GameStop’s shares are up 633% since the end of October and 308% year-to-date. “A wild ride and the retail day traders seem to be targeting and battling institutional shorts at the moment with the former generally winning in recent days and weeks,” Deutsche Bank analysts noted.

What happened with GameStop’s stock is a reminder of how times are changing, according to Edward Moya, a senior market analyst at OANDA. 

“A new army of traders are not focused on valuations, but rather by momentum opportunities they see from Reddit’s WallStreetBets, YouTubers, TikTok, or Robinhood,” he said. “Top research shops will now have to consider how millennial traders are positioning themselves. GameStop does not deserve a valuation over $90, but that might not matter if influencers keep retail traders buying.”

GameStop shares rose a further 14% in pre-market trading Tuesday, to $88.83 per share.

Inside GameStop’s chaotic week in the stock market, which saw Reddit day-traders revolt against a renowned short-seller and send shares spiking

Read More: An engineer-turned global macro investor breaks down why bitcoin is so volatile – and shares 3 reasons why she remains bullish about the digital asset

Read the original article on Business Insider

‘Big Short’ investor Michael Burry blasts Reddit-fueled GameStop rally as ‘unnatural, insane, and dangerous’

Michael Burry played by Christian Bale

  • Michael Burry criticized retail investors for working together to drive up GameStop’s stock price.
  • The “Big Short” investor described the behavior as “dangerous” and called for legal and regulatory action in a quickly deleted tweet.
  • Burry’s Scion Asset Management may have made a 1,400% gain on GameStop in under four months.
  • Visit Business Insider’s homepage for more stories.

Michael Burry slammed day traders who have worked in concert to boost GameStop‘s stock price and squeeze short-sellers in recent days, and called on federal regulators to investigate them.

“If I put $GME on your radar, and you did well, I’m genuinely happy for you,” the Scion Asset Management boss tweeted on Tuesday.

“However, what is going on now – there should be legal and regulatory repercussions. This is unnatural, insane, and dangerous,” he added, tagging the Securities and Exchange Commission’s enforcement arm. The tweet was deleted minutes later.

Read More: This actively-managed SPAC ETF amassed $60 million assets within a month of launching. Its founder breaks down how to pick blank-check firms – and shares 3 to watch in 2021

Burry’s billion-dollar bet against the US housing market was chronicled in Michael Lewis’ “The Big Short,” and he was portrayed by Christian Bale in the movie adaptation of the book.

Scion owned 1.7 million GameStop shares at the end of September. Assuming Burry hasn’t altered the size of the holding, it has ballooned in value from about $17 million to $250 million as of Tuesday’s close – an almost 1,400% gain in under four months.

Read More: An engineer-turned global macro investor breaks down why bitcoin is so volatile – and shares 3 reasons why she remains bullish about the digital asset

Retail investors, including members of the Reddit forum r/wallstreetbets, have made concerted efforts to drive GameStop shares higher and squeeze short-sellers such as Melvin Capital. They helped to send GameStop’s stock price up as much as 145% on Monday, then as much as 95% on Tuesday.

GameStop shares jumped another 45% in after-hours trading after Tesla CEO Elon Musk tweeted the word “Gamestonk!!” along with a link to the WallStreetBets subreddit.

Read the original article on Business Insider

Etsy rises after Elon Musk tweets about how he ‘kinda loves’ the online marketplace for independent creators

Etsy
  • Etsy rose by around 3.5% on Tuesday after Elon Musk, the world’s wealthiest person, touted the company on Twitter.
  • The Tesla founder said he “kinda loves” Etsy, prompting a sharp rally in pre-market trade.
  • Etsy is an online marketplace where independent creators can sell handmade goods. 
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Etsy shares rose on Tuesday after billionaire Elon Musk tweeted about how he loves the online marketplace.

“I kinda love Etsy,” Musk said in a tweet early Tuesday, adding that he bought a hand-knit woolen ‘Marvin the Martian’ helmet for his dog. 

Although the Tesla founder didn’t comment on Etsy’s financial prospects, its stock surged within minutes of Musk publishing his tweet.

Etsy shares were trading around $213.38 per share, up around 2.2% on the day.

Insider’s Meira Gebel reported the 15-year-old online marketplace competes with brands like Shopify, Big Cartel, and Amazon Handmade, but has grabbed its own niche in the market thanks to a seller pool that is made up of over 80% women. As of 2020, Etsy had more than 3.8 million sellers on its platform, up 51% year-over-year from 2.4 million, according to data from Marketplace Pulse.

According to its latest earnings report, the company generated revenue of about $451 million, up from $428.7 million in the previous quarter.

Read More: This actively-managed SPAC ETF amassed $60 million assets within a month of launching. Its founder breaks down how to pick blank-check firms – and shares 3 to watch in 2021

Read the original article on Business Insider

From AMC to Bed Bath & Beyond, the market’s most-shorted stocks are rallying as Reddit day-traders pile in

traders new york stock exchange

A handful of stocks that have high short-interest are staging epic raillies that are in-part being fueled by groups of investors on the popular Reddit forum WallStreetBets piling into the names.

Names like GameStop, BlackBerry, and AMC Entertainment have soared hundreds of percentage points in recent weeks with little fundamental news behind the moves. 

The rallies were likely sparked a short squeeze event in the shares, which further fueled the sky-high surges. A short squeeze is when short-sellers are forced to buyback the stock to close out their losing positions, boosting demand for the stock in question.

GameStop seems to have become the main target of Reddit users in recent weeks, sparked by the prospects of activist investor Ryan Cohen’s campaign to turn the company into a specialized e-commerce platform that sells gaming products. Shares of GameStop soared as much as 145% in Monday trades on no apparent news.

The moves in GameStop helped it become a battle ground stock, with Citron’s Andrew Left outlining why he felt the stock should fall about 50% to $20 when it was trading near $40 last week. Shares of GameStop hit an all-time high of $159.18 in Monday trades.

Read more: BANK OF AMERICA: Buy these 31 unheralded stocks as the recovery’s hottest trades of recent months continue to gain strength in 2021

Citron ultimately ended commentary on GameStop after being on the receiving end of harassing actions from investors, Left said in a letter last week. 

Shares of BlackBerry, AMC Entertainment, and Bed Bath & Beyond also staged monster year-to-date rallies with little news to back up the moves.

BlackBerry is up as much as 214% year-to-date at Monday’s intra-day high, with a mid January spike sparked by a patent settlement with Facebook on its messaging technology. Shares are up more than 100% over the past week.

AMC Entertainment is up as much as 130% year-to-date at Monday’s intra-day high. The stock surged as much as 39% on Monday after the movie theater chain said it raised nearly $1 billion over the past month, which will help it avoid bankruptcy and extend its cash runway well into 2021.

Bed Bath & Beyond is another heavily shorted stock that jumped as much as 58% on Monday on no apparent news besides a price target increase from Loop Capital. The home furnishing retailer has jumped as much as 169% year-to-date at Monday’s intra-day high.

Besides being stocks with high short interest and uncertain fundamentals, all have been mentioned on the WallStreetBets forums by users who were buying shares in recent weeks. 

Read more: GOLDMAN SACHS: These 22 stocks still haven’t recovered to pre-pandemic levels – and are set to explode amid higher earnings in 2021 as the economy recovers

Read the original article on Business Insider

Crypto whale lays out bitcoin’s bull case – Cathie Wood’s 2021 forecasts – How to pick tiny biotech winners

Hello and welcome to Insider Investing. I’m Joe Ciolli, and I’ll be shepherding you through what to expect in markets in the coming weeks, while also featuring some of Insider’s best work on the subject.

Regular readers may notice that this newsletter has moved from its previous slot early in the week to Sunday afternoon. This will be the new publication time, so please do continue to enjoy!

Here’s what’s on the docket:

If you aren’t yet a subscriber to Insider Investing, you can sign up here.

Have thoughts on the newsletter? Just want to talk markets? Feel free to drop me a line at jciolli@insider.com or on Twitter @JoeCiolli.


Your weekly outlook

All eyes will be on corporate earnings this coming week, with Apple, Facebook, Tesla, and Amazon set to report. Given the massive weighting of these stocks in major indexes, it’s not an exaggeration to say their quarterly results – and, perhaps more importantly, their forward outlooks – will dictate the entire market’s direction.

The question is the same for these tech titans: Will they be able to keep delivering (and forecasting) stronger-than-expected profit growth? It’s something they’ve been able to do for years, even as estimates have gotten more ambitious. With their valuations sitting at all-time peaks across every imaginable measure, these tech titans are especially vulnerable to any disappointment.

But if the latest earnings report for mega-cap tech stalwart Netflix – which handily blew past estimates for subscriber growth – is any indication, investors may not have much to worry about. In a post-pandemic world where the products and services provided by these companies are still attracting major demand, there’s seemingly endless profit-growth opportunity.

And as it pertains to Tesla specifically, just ask the legions of scorched short-sellers what it’s like to bet against Elon Musk. They lost roughly $39 billion in 2020 as Tesla’s stock soared 743%. Will the company’s earnings give them reason to start shorting again? Tune in Wednesday to find out.


The bull case for crypto from a CEO that’s poured $1 billion into bitcoin

bitcoin

Michael Saylor is the chief executive officer of business intelligence and software firm MicroStrategy, which has plowed more than $1 billion of its funds into bitcoin.

In a recent “SALT Talks” interview with SkyBridge founder Anthony Scaramucci, Saylor recounted how he went from a bitcoin skeptic to its “most important proselytizer.” He also shared the eureka moment that changed his beliefs about bitcoin and laid out the hurdles that the digital asset still has to jump through to become the “newest institutional safe-haven asset.”

Read the full story here:

Michael Saylor has invested over $1 billion of MicroStrategy’s funds in Bitcoin. The software CEO-turned Bitcoin whale explains why he is making such a massive bet on the digital asset.


Cathie Wood’s ARK Invest shares its 2021 outlook on the economy, bitcoin, and Tesla

Cathie Wood

All of the five active ETFs run by Cathie Wood’s ARK Invest returned more than 100% in 2020. This strong performance helped the firm rake in over $20 billion last year and bring its total assets under management to $50 billion, according to Morningstar and Bloomberg data.

In a recent markets update, Wood shared her 2021 outlook, breaking down why the current bull market is very different from the dot-com bubble. ARK crypto analyst Yassine Elmandjra also detailed a new three-layered framework for valuing bitcoin‘s fundamentals, while analyst Tasha Keeney shared her Tesla outlook for 2021.

Read the full story here:

Cathie Wood’s ARK Invest runs 5 active ETFs that more than doubled in 2020. She and her analysts share their 2021 outlooks on the economy, bitcoin, and Tesla.


How to make the biggest gains in the smallest biotech stocks

traders

Mutual fund manager Darren Chervitz has delivered returns of 32% a year for five years, investing in the market’s smallest stocks. Along the way, he’s become an expert in picking biotech stocks.

In an exclusive interview, Chervitz told Insider how he maximizes gains and reduces the risk of failures and blowups.

Read the full story here:

Darren Chervitz is crushing other fund managers in one of the riskiest parts of the market: small biotech stocks. He tells us how he scores the biggest gains, minimizes the risk of costly failures, and names his top 2 picks in the space.


JOIN OUR LIVE EVENT: Execs reveal what’s on tap for the red-hot IPO market in 2021

Join Insider on Wednesday, February 3 at 2:30 p.m. ET as Insider’s chief finance correspondent Dakin Campbell moderates a panel featuring Kim Posnett, Goldman Sachs partner and Internet investment banking chief, Greg Rodgers, a Latham & Watkins LLP attorney and direct-listings expert, and Mitchell Green, a venture capitalist at Lead Edge Capital who backed Uber, Spotify, Asana, and Alibaba.

These IPO experts will discuss what you can expect for the year ahead and how the recent changes have dramatically altered the calculus for startup entrepreneurs. They will also take reader questions. 

Register here.

uber ipo


Stock pick central

Seeking experts who are willing to name names? Look no further:

Read the original article on Business Insider

What you need to know about markets this week: Biden’s spending plans, bitcoin’s blues and an unloved dollar vye with the first Fed meeting and a look at US GDP

Twitter account of the President of the USA Joe Biden is seen displayed on a phone screen
President Biden’s Twitter page. He wasted no time in revealing his spending plans.

  • Joe Biden has been sworn in as the 46th president and wasted no time in unveiling his spending plans.
  • Stocks hit record highs thanks to the prospect of $1.9 trillion in stimulus, but bitcoin has tumbled.
  • Investors will get a first look at 4th quarter US GDP and the Federal Reserve meets for the first time in 2021.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell

Here are the big themes we’re looking at in the coming week, plus a chart of Big Tech performance around the world.

Joe Biden takes office with a $1.9-trillion bang

With Wednesday’s swearing-in, Biden becomes the 46th president of the United States and has not delayed kicking off his agenda. His proposed $1.9 trillion stimulus package was enough to coax more all-time highs from the global equity markets, with records in the S&P 500, the MSCI Asia ex-Japan index and Europe’s STOXX 600 close to where it was when the pandemic hit last year, despite an alarming rise in cases of COVID-19 and new lockdowns. 

Janet Yellen, Biden’s pick for treasury secretary, is urging the incoming government to spend big and worry about all the debt that will inevitably create later. 

How much the final package is, how those proceeds will be distributed, and what direct impact that will have on growth all remain to be seen. It’s enough, however, for the stock market to be looking past inconvenient economic truths like nearly one million Americans still filing for unemployment benefits a week. A number of other indicators have shown there is resilience to the recovery, with housing starts hitting 14-year highs and manufacturing activity in the mid-Atlantic region picking up to three-month highs.

How did the US economy finish 2020? 

This coming week, the markets will get the first look at US economic growth in the turbulent fourth quarter of 2020. After having contracted by a record 31% in the second quarter, when coronavirus lockdowns were at their harshest, the economy has since largely bounced back. At the last count, it was still 3.5% smaller than it was before the pandemic struck. The forecast is for growth of 4.4%.

The data won’t reflect the impact of the $892 billion aid package that was agreed in late December after months of torturous stand-off in Washington DC. But the prospect of Biden’s $1.9 trillion bazooka has given Wall Street’s big banks cause for optimism. Goldman Sachs raised its forecast for 2021 growth to 6.6% from 6.4% previously, while JPMorgan’s chief global strategist David Kelly believes nominal GDP could expand by 11.4% year-on-year by the end of December.

“Extended, expanded and enhanced unemployment benefits through September should significantly reduce poverty until the pandemic winds down,” Kelly said.

Bitcoin gets the blues

It was a bad week for bitcoin bulls last week. The price fell by 12%, marking its biggest one-week fall since late August. It’s still up nearly 270% in the last 12 months, so it’s not all doom and gloom. But the chorus of voices of those calling for greater scrutiny of cryptocurrencies generally is growing. This past week, Yellen said bitcoin and its ilk were “mainly” used in illegal financing and should be “curtailed.” 

“Cryptocurrencies are a particular concern. I think many are used – at least in a transaction sense – mainly for illicit financing,” she said.

Bitcoin is the most crowded trade at the moment, according to a recent survey of asset managers by Bank of America, and it feels like the most likely direction for the price is lower in the coming week.

“I expect the need to see a further pullback before we see significant bullish momentum build, which would then be a good time for new buyers to enter the market and push prices higher again,” DailyFX analyst Daniela Sabin Hathorn said.

Ditch the dollar and buy everything (and anything)

With another almost $2 trillion in stimulus coming that will boost growth and help keep borrowing rates low, the dollar can’t cut a break. Money managers are sitting on top of their biggest short position in almost a decade and even with the back-up in 10-year Treasury yields above 1.1%, risk appetite and Biden-based euphoria are running high and investors are back to the “buy everything” trade, largely at the dollar’s expense.

Junk bond yields have hit record lows, a basket of unprofitable tech companies has gone parabolic and the sovereign debt of Italy – where the government has just narrowly avoided total meltdown – is more expensive than that of the US. The dollar index is around its highest in six weeks, but just two weeks ago, it was at its lowest since early 2018 and the bears are firmly in control right now.

Can the Fed taper the tantrum?

With the prospect of swifter economic recovery, comes a rise in Treasury yields that for many is reminiscent of 2013’s “Taper Tantrum” – the sharp spike higher in yields that ensued after the Fed indicated it would start to wind down its asset-purchasing program that started with the great financial crisis of 2008/2009.

The Fed’s roster of officials are in pre-meeting blackout until the first monetary policy meeting of the year takes place on Wednesday, followed by a press conference hosted by chair Jerome Powell. But a host of central bankers, including Fed board members Lael Brainard and Richard Clarida, have signaled the Fed isn’t in any rush to wind down its current program, under which it buys $120 billion a month in Treasuries and mortgage-backed securities. 

“Market anticipation of Fed tapering picked up sharply in early 2021, but we think a reduced pace of asset purchases could still be a year away, depending on the evolution of US growth and inflation. This likely means no taper announcement before 2H at the earliest,” Bank of America rate strategists Ben Randol and Ralph Axel Bofa said in a note last week.

Chart of the Week – There’s more to Big Tech than FAANGs

Big Tech is all the rage. The Apples, Amazons, Teslas, and Microsofts are among the best-performing stocks, not just of 2020, but of the past few years. However, valuations are high and the FAANGs aren’t the only way for investors to sink their teeth into this sector. Asia’s tech giants perform just as strongly and, with valuations that are almost half those of their New York-listed counterparts, are far less pricey.

Big Tech index performance since January 2018 rebased to 0
Big Tech index performance since January 2018 rebased to 0

Next week’s events:

Earnings

January 26 Microsoft, J&J, Visa, LVMH, NextEra, Starbucks, 3M

January 27 Apple, Tesla, Facebook, Boeing

January 28 McDonald’s

January 29 Caterpillar

 

Economic data

January 26 UK employment

January 27 Federal Reserve rate decision and press conference

January 28 Euro zone consumer confidence; US GDP – Q4 advanced

January 29 US core PCE

Read the original article on Business Insider

What you need to know on the markets this week: Biden’s spending plans, bitcoin’s blues and an unloved dollar vye with the first Fed meeting and a look at US GDP

Twitter account of the President of the USA Joe Biden is seen displayed on a phone screen
President Biden’s Twitter page. He wasted no time in revealing his spending plans.

  • Joe Biden has been sworn in as the 46th president and wasted no time in unveiling his spending plans.
  • Stocks hit record highs thanks to the prospect of $1.9 trillion in stimulus, but bitcoin has tumbled.
  • Investors will get a first look at 4th quarter US GDP and the Federal Reserve meets for the first time in 2021.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell

Here are the big themes we’re looking at in the coming week, plus a chart of Big Tech performance around the world.

Joe Biden takes office with a $1.9-trillion bang

With Wednesday’s swearing-in, Biden becomes the 46th president of the United States and has not delayed kicking off his agenda. His proposed $1.9 trillion stimulus package was enough to coax more all-time highs from the global equity markets, with records in the S&P 500, the MSCI Asia ex-Japan index and Europe’s STOXX 600 close to where it was when the pandemic hit last year, despite an alarming rise in cases of COVID-19 and new lockdowns. 

Janet Yellen, Biden’s pick for treasury secretary, is urging the incoming government to spend big and worry about all the debt that will inevitably create later. 

How much the final package is, how those proceeds will be distributed, and what direct impact that will have on growth all remain to be seen. It’s enough, however, for the stock market to be looking past inconvenient economic truths like nearly one million Americans still filing for unemployment benefits a week. A number of other indicators have shown there is resilience to the recovery, with housing starts hitting 14-year highs and manufacturing activity in the mid-Atlantic region picking up to three-month highs.

How did the US economy finish 2020? 

This coming week, the markets will get the first look at US economic growth in the turbulent fourth quarter of 2020. After having contracted by a record 31% in the second quarter, when coronavirus lockdowns were at their harshest, the economy has since largely bounced back. At the last count, it was still 3.5% smaller than it was before the pandemic struck. The forecast is for growth of 4.4%.

The data won’t reflect the impact of the $892 billion aid package that was agreed in late December after months of torturous stand-off in Washington DC. But the prospect of Biden’s $1.9 trillion bazooka has given Wall Street’s big banks cause for optimism. Goldman Sachs raised its forecast for 2021 growth to 6.6% from 6.4% previously, while JPMorgan’s chief global strategist David Kelly believes nominal GDP could expand by 11.4% year-on-year by the end of December.

“Extended, expanded and enhanced unemployment benefits through September should significantly reduce poverty until the pandemic winds down,” Kelly said.

Bitcoin gets the blues

It was a bad week for bitcoin bulls last week. The price fell by 12%, marking its biggest one-week fall since late August. It’s still up nearly 270% in the last 12 months, so it’s not all doom and gloom. But the chorus of voices of those calling for greater scrutiny of cryptocurrencies generally is growing. This past week, Yellen said bitcoin and its ilk were “mainly” used in illegal financing and should be “curtailed.” 

“Cryptocurrencies are a particular concern. I think many are used – at least in a transaction sense – mainly for illicit financing,” she said.

Bitcoin is the most crowded trade at the moment, according to a recent survey of asset managers by Bank of America, and it feels like the most likely direction for the price is lower in the coming week.

“I expect the need to see a further pullback before we see significant bullish momentum build, which would then be a good time for new buyers to enter the market and push prices higher again,” DailyFX analyst Daniela Sabin Hathorn said.

Ditch the dollar and buy everything (and anything)

With another almost $2 trillion in stimulus coming that will boost growth and help keep borrowing rates low, the dollar can’t cut a break. Money managers are sitting on top of their biggest short position in almost a decade and even with the back-up in 10-year Treasury yields above 1.1%, risk appetite and Biden-based euphoria are running high and investors are back to the “buy everything” trade, largely at the dollar’s expense.

Junk bond yields have hit record lows, a basket of unprofitable tech companies has gone parabolic and the sovereign debt of Italy – where the government has just narrowly avoided total meltdown – is more expensive than that of the US. The dollar index is around its highest in six weeks, but just two weeks ago, it was at its lowest since early 2018 and the bears are firmly in control right now.

Can the Fed taper the tantrum?

With the prospect of swifter economic recovery, comes a rise in Treasury yields that for many is reminiscent of 2013’s “Taper Tantrum” – the sharp spike higher in yields that ensued after the Fed indicated it would start to wind down its asset-purchasing program that started with the great financial crisis of 2008/2009.

The Fed’s roster of officials are in pre-meeting blackout until the first monetary policy meeting of the year takes place on Wednesday, followed by a press conference hosted by chair Jerome Powell. But a host of central bankers, including Fed board members Lael Brainard and Richard Clarida, have signaled the Fed isn’t in any rush to wind down its current program, under which it buys $120 billion a month in Treasuries and mortgage-backed securities. 

“Market anticipation of Fed tapering picked up sharply in early 2021, but we think a reduced pace of asset purchases could still be a year away, depending on the evolution of US growth and inflation. This likely means no taper announcement before 2H at the earliest,” Bank of America rate strategists Ben Randol and Ralph Axel Bofa said in a note last week.

Chart of the Week – There’s more to Big Tech than FAANGs

Big Tech is all the rage. The Apples, Amazons, Teslas, and Microsofts are among the best-performing stocks, not just of 2020, but of the past few years. However, valuations are high and the FAANGs aren’t the only way for investors to sink their teeth into this sector. Asia’s tech giants perform just as strongly and, with valuations that are almost half those of their New York-listed counterparts, are far less pricey.

Big Tech index performance since January 2018 rebased to 0
Big Tech index performance since January 2018 rebased to 0

Next week’s events:

Earnings

January 26 Microsoft, J&J, Visa, LVMH, NextEra, Starbucks, 3M

January 27 Apple, Tesla, Facebook, Boeing

January 28 McDonald’s

January 29 Caterpillar

 

Economic data

January 26 UK employment

January 27 Federal Reserve rate decision and press conference

January 28 Euro zone consumer confidence; US GDP – Q4 advanced

January 29 US core PCE

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S&P 500 falls for the first time this week as US stocks edge lower

Stock trader
Shares of GameStop have staged a gravity-defying rally in recent weeks.

  • US equities fell on Friday after closing at record highs and the S&P 500 fell for the first time this week.
  • GameStop finished a chaotic week in the market after retail investors thwarted short sellers and volatility prompted a trading halt.
  • Watch major indexes update live here.

US equities fell on Friday after closing at record highs as investors weighed the outlook for President Joe Biden’s nearly $2 trillion stimulus bill and grew concerned amid reports that the new coronavirus variant may be deadlier. The S&P 500 fell for the first time this week. 

There is some evidence the new variant of the coronavirus first identified in the UK may be up to 30% more deadly than previous variants, the UK government has said.

A key gauge of US business activity swung higher this month as strong demand lifted manufacturers and service businesses alike. IHS Markit’s composite output index climbed to 58 from 55.3 in an early January reading, hitting its highest level in two months.

Credit- and debit-card spending accelerated through the first two weeks of January as stimulus passed by President Donald Trump bolstered households’ balance sheets. Card spending climbed 6% from the year-ago period over the week that ended January 16, Bank of America said in a Thursday note, citing aggregated card data.

Here’s where US indexes stood at the 4 p.m. ET close on Friday:

Read more: GOLDMAN SACHS: Buy these 26 renewable-energy stocks best-positioned to benefit from increased spending as governments aim for net-zero emissions

GameStop surged as much as 78% on Friday as investors looking to thwart short sellers piled further into the stock and triggered a trading halt.

Shares of GameStop have staged a gravity-defying rally in recent weeks, with shares up as much as 307% year to date based on Friday’s intraday high.

The short seller Andrew Left of Citron Research tweeted that he was ending his bearish commentary on GameStop after he said an “angry mob” of investors harassed him and his family over the past 48 hours.

Canada’s Horizons ETF Management announced Friday that it filed its final prospectus to launch the Horizons Psychedelic Stock Index ETF (PSYK). It will be the first psychedelics ETF and begins trading on the Canadian NEO exchange on Wednesday.

Bitcoin recovered to $33,817 Friday afternoon after tumbling to about $28,000 in the early-morning hours. Comments from Janet Yellen, Biden’s Treasury secretary nominee, and a report of a “double spend” gave bitcoin investors a tumultuous week

Gold fell 0.61% to $1,854.60 per ounce. The dollar weakened against a basket of Group of 20 currencies, and Treasury yields fell slightly.

Oil prices fell but remained above the $50 support level. West Texas Intermediate crude dropped as much as 1.86% to $52.14 per barrel. Brent crude, oil’s international standard, declined 1.52% to $55.25 per barrel.

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