The major averages fell sharply on Friday, wrapping up a roller-coaster week on Wall Street as heightened speculative trading by retail investors continued to unnerve the market. The Dow Jones Industrial average lost 620 points, or 2%, to 29,982, the first time the 30-stock gauge has closed below the 30,000 mark since Dec. 14. The S&P 500 fell 1.9% to 3,714 as 10 sectors registered losses. The Nasdaq Composite slid 2% to 13,070 as Apple dropped 3.7% and other major tech names slipped.
All three major averages dropped more than 3% this week, posting their worst week since October. For January, the blue-chip Dow and the S&P 500 fell 2% and 1.1%, respectively, suffering their first negative month in four. The tech-heavy Nasdaq eked out a 1.4% gain on the month.
Shares of GameStop jumped 67.9% after Robinhood said it would allow limited buying of the stock and other heavily shorted names after restricting access the day before. Robinhood raised more than $1 billion from its existing investors overnight, in addition to tapping bank credit lines, to ensure it had the capital required to allow some trading again in volatile stocks like GameStop.
Investors are concerned that if GameStop continues to rise in such a volatile fashion, it may ripple through the financial markets, causing losses at brokers like Robinhood and forcing hedge funds who bet against the stock to sell other securities to raise cash.
Meanwhile, new trial results from Johnson & Johnson's coronavirus vaccine disappointed some investors because it was less effective on some variants, also hurting market sentiment.
J&J said its one-dose vaccine demonstrated 66% effectiveness overall in protecting against Covid-19. The vaccine was 72% effective in the United States, 66% in Latin America and 57% in South Africa after four weeks, the company said. The vaccine however offered complete protection against Covid-related hospitalizations. Shares of JNJ dropped 3.6%.
Stocks had rallied to record highs on the hope that vaccines would be effective against Covid to allow a smooth economic reopening before the end of the year. New mutations more resilient to vaccines could upend that rosy outlook for invesors.
Volatility spiked this week as the retail trading frenzy kept Wall Street on edge. The Dow lost more than 600 points on Wednesday, suffering its worst sell-off in three months. Then the blue-chip benchmark rebounded by 300 points on Thursday amid a broad market rally. The Cboe Volatility Index, known as the VIX, jumped above 33 Friday.
Interestingly, longer-dated Treasuries traded lower despite the weakness in equities, which was symptomatic of cash-raising efforts. The 10-yr yield increased four basis points to 1.09%, while the 2-yr yield decreased one basis point to 0.11%. The U.S. Dollar Index increased 0.1% to 90.55. WTI crude futures decreased 0.2%, or $0.12, to $52.18/bbl.
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