Markets “In a Nutshell” for February 3, 2021
Investment Week at a Glance
Stocks finished down for the week. The Dow Jones Industrial Average was down 3.27%, the S&P 500 fell 3.31%, the New York Stock Exchange Composite (2,000 stocks) fell 3.71% and the average investors index (Value Line Index) was down 3.79%. Foreign stocks (DJ Global ex U.S.) were down 3.65%. Bond prices were lower for the week, with the 10-year U.S. Treasury ending the week 1 basis point higher at 1.11%. (Data source: Wall Street Journal)
GameStop Headlines Volatile Week
Stocks had their worst week since October, but the news flow of the week was dominated by the combination of a massive online trader movement to take advantage of a “short squeeze” in GameStop’s stock. In general, online message board, Reddit, has served as a platform for online day traders to find stock tips since the pandemic began. GameStop’s particular situation involving bets by hedge funds against the price of the stock allowed for online traders to bid up the price of the stock and cause these bets against the stock to unravel and accelerate the stock even higher. In what has resulted in billions of dollars of gains for some and losses for others, GameStop management remained largely quiet on the matter as the sleepy videogame retailer still struggles to find its future in a post-COVID world. While nearly every other news story was ignored, stocks broadly fell for the week even though S&P 500 companies have produced impressive earnings for the 4th Quarter that would have been expected to be received positively if it were a “normal” week in the market. (Barron’s)
COVID-19 Spread Decreases
The spread of the COVID-19 virus has decreased precipitously across the nation in recent weeks as the vaccine rollout begins to accelerate and herd immunity becomes a more hopeful reality for 2021. Daily vaccinations are getting closer to averaging 1.5 million per day and at some point this week, more people will have gotten at least one vaccination than have tested positive for the virus in the U.S. While that is only a psychological accomplishment and not necessarily a meaningful breakthrough to stopping the spread of the virus, it does speak to how quickly healthcare professionals are vaccinating the public since approval in early and mid-December. The federal government also announced that it was able to buy 200 million more doses of the Pfizer and Moderna vaccines, while Johnson & Johnson reported that it’s vaccine was 72% effective against the spread of the virus. (Barron’s)
As of January 29th, what has been the year-to-date performance of GameStop?
Have a Great Week!
4. GameStop has risen a staggering 1,750% as the result of an unprecedented combination of a short squeeze and online retail trader movement. (Wall Street Journal).