Wall Avenue depends on massive tech power, temporary squeeze worries are easing
© Reuters. FILE PHOTO: Traders wearing masks work on the first day of in-person trading since closing during the coronavirus disease (COVID-19) outbreak on NYSE floor in New York
By Devik Jain and Shreyashi Sanyal
(Reuters) – Wall Street major indices surged Thursday as mega-cap tech stocks sought to regain ground after a sharp sell-off after fears that hedge funds might sell long positions to a short squeeze to cover, would have subsided.
Shares in GameStop Corp. (NYSE 🙂 and AMC Entertainment (NYSE 🙂 Holdings Inc fell as trading platforms like Robinhood and Interactive Brokers (NASDAQ 🙂 restricted trading in stocks that soared this week in a social media-driven trading frenzy that rocked stock markets.
“If it (GameStop) had continued to rise, it would only have meant more hedge funds had margin calls. I think when it pulled back a little the market breathed a sigh of relief,” said Thomas Hayes, executive director of Great Hill Capital LLC in New York.
All 11 major sectors were higher in the early afternoon.
Heavyweights including Microsoft Corp. (NASDAQ :), Facebook Inc. (NASDAQ :), Netflix Inc (NASDAQ 🙂 and Alphabet (NASDAQ 🙂 Inc saw gains after US stock indices suffered their worst day in three months on Wednesday.
With the quarterly earnings season in full swing, market participants have now begun to wonder if companies like Apple Inc (NASDAQ :), Facebook, and Tesla (NASDAQ 🙂 Inc can maintain their high ratings.
“Investors are digesting the gains made overnight and this morning, taking a look at the fundamentals of developments in specific companies and the prospects that can be used to justify valuations,” said Brian Vendig, general manager at MJP Wealth Advisors in Westport, Connecticut.
Apple reported sales and earnings for the vacation quarter that exceeded Wall Street’s expectations. However, the iPhone maker’s shares fell 2%.
Facebook rose 0.7% after significantly beating quarterly sales estimates, while Tesla lost 3.2% after posting disappointing fourth-quarter results and not giving a clear target for vehicle delivery in 2021.
A report from the Commerce Department showed that gross domestic product rose 4% year on year, as expected, in the fourth quarter as the virus and lack of another spending package slowed consumer spending.
A separate report found that last week there were likely 847,000 more people filing jobless claims, which is below expectations of 875,000.
Concerns about a slowdown in economic recovery due to rising coronavirus cases, increased stock market valuations, and an uneven distribution of vaccine launches have kept investors on short-term notice of a retreat and an increase in volatility.
At 12:02 p.m. ET, the S&P 500 rose 597.54 points, or 1.97%, to 30,900.71, the S&P 500 rose 69.83 points, or 1.86%, to 3,820.60, and the S&P 500 rose 162 .39 points or 1.22% to 13,432.99.
Comcast Corp (NASDAQ 🙂 added 6.9%, among other things, after posting better-than-expected revenue in the fourth quarter as broadband demand continued to offset pandemic weakness in its theme park and movie entertainment businesses.
Progressive issues outpaced declines at a ratio of 2.33 to 1 on the NYSE and a ratio of 1.20 to 1 on the Nasdaq.
The S&P index made nine new 52-week highs and no new low, while the Nasdaq made 74 new highs and eight new lows.