U.S. stock futures fell, prompting Wall Street to widen losses amid investor concerns about the economic slowdown and foaming markets, exemplified by wild trade at retailer GameStop.
Futures linked to the S&P 500 fell 0.8% after the benchmark indicator recorded the biggest two-day decline since October. Contracts for the Nasdaq-100 fell 1.2% after earnings from several tech giants, including Apple, disappointed investors last Wednesday. Futures tied to the Dow Jones industrial average, which has fallen for five consecutive days in its longest loss streak since February, fell 0.5%.
The stock stumble follows a strong start to the year that some investors say has pushed stock prices beyond levels justified by corporate fundamentals. The sale has come amid wild alterations in individual stocks, including GameStop and AMC Entertainment,
AMC 301.21%
fueled by a battle between day traders and hedge fund professionals.
“There is some excitement in the market,” said Olaf van den Heuvel, chief investment officer of Aegon Asset Management in the Netherlands, noting the example of GameStop action. “It was a bubble territory.”
Shares of GameStop fell 8.5% ahead of the New York bell, after firing 135% on Wednesday. AMC fell 23%, reducing Wednesday’s gains by more than 300%.
The slow deployment of vaccines and restrictions on Covid-19 in major economies have motivated investors to withdraw money from the table, van den Heuvel added. He said Aegon would likely consider the sale as an opportunity to buy risky assets when markets are established.
Technological actions fell ahead of the bell in New York. Shares of Apple fell 3.4% after the iPhone maker reported its three most profitable months, but did not provide any specific guidance on revenue for the current quarter.
Facebook,
which recorded a record net profit, but warned that uncertainty from regulatory probes and ad targeting limits could create negative business winds, fell 2.2% in premarket trading. Tesla fell 5.9% after the electric vehicle maker, whose shares have risen in recent months, posted its first full-year profit, but lost Wall Street expectations.
In a sign of growing risk aversion, the yield on the 10-year U.S. Treasury benchmark fell below 1% for the first time since Jan. 6, to drop to 0.998%, according to Tradeweb.
Bond yields fall as prices rise. Falling yields are often an indicator that investors are weakening their economic outlook.
The dollar strengthened against several currencies, including the Australian and Korean dollars. The WSJ Dollar index, which measures the green dollar against a basket of other currencies, rose 0.2%.
Investors will analyze data on unemployment claims (which will be posted at 8:30 a.m. ET and are expected to show that the number of workers seeking benefits has declined last week) to gain new clues as to how the economy resists the pandemic.
The Federal Reserve on Wednesday maintained its easy money policies, saying business activity has softened with the resurgence of Covid-19 cases.
“Any withdrawal of the fiscal stimulus at some point soon could lead to a deterioration in the recovery,” said Mary Nicola, portfolio manager at PineBridge Investments.
Ms Nicola is optimistic about the outlook for stocks in the US and elsewhere, saying vaccines will fuel more gains over the next 18 months.
“It’s hard to say that markets are overvalued or that what’s happening in the markets is frothy,” when comparing stocks to the low yields available on bonds, he said.
The sale of US shares spread abroad. The mainland Stoxx Europe 600 fell 2%, led by the shares of oil and gas companies, technology and health.
Shares of several very short European stocks that soared on Wednesday, as short-term pressure spread beyond the United States, came under pressure. Commercial real estate company Unibail-Rodamco-Westfield lost 4.7% and German pharmacist Evotec fell 5.5%.
Prudential fell 6.5%, among other individual companies, after the insurer said it weighed in on a equity offering and would separate its Jackson National arm in the United States. .
Markets retreated widely in Asia. Hong Kong’s Hang Seng fell 2.6%, Shanghai’s composite index fell 1.9% and Japan’s Nikkei 225 fell 1.5%. Container shipping giant Cosco Shipping caused losses in mainland China, down 10%.
As a sign of turmoil in Chinese markets, money market rates continued to rise. Shanghai’s week-on-year interbank rate rose 0.012 percentage points to 2.981%, the highest since 2015, according to FactSet.
Short-term debt costs have risen in recent days as the People’s Bank of China unexpectedly disqualified funds from the financial system. Earlier this week, a major business newspaper also published statements by Ma Jun, a central bank adviser, who warned of the emergence of asset bubbles due to loose monetary policy.
Xing Zhaopeng, China’s market economist at ANZ in Shanghai, said Chinese market outflows and the central bank’s stance had contributed to sales in Shanghai and Shenzhen.
“International investors are reducing their risk positions because of the concern about bubbles, including land stocks and bonds,” Xing said.
Tai Hui, chief market strategist at JP Morgan Asset Management, said new coronavirus outbreaks in China had also toned down investor sentiment.
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