Closing Stock Market SummaryThe large-cap indices fell more than 2.0% on Wednesday, as risk sentiment was undercut by another day of extreme short squeezes and underwhelming earnings reactions. The S&P 500 (-2.6%) and Dow Jones Industrial Average (-2.1%) gave up their yearly gains in the process. The Nasdaq Composite declined 2.6%, and Russell 2000 declined 1.9%.
GameStop (GME 347.51, +199.53, +135%) remained the prominent example of the short-squeeze mania today, as shares more than doubled (again) in an apparent move fueled by an online community. AMC Entertainment (AMC 19.90, +14.94, +301%), Nokia (NOK 6.55, +1.82, +38.5%), and BlackBerry (BB 25.10, +6.18, +32.7%) were other beneficiaries.
In addition to this frenzied price action, the inability of Microsoft (MSFT 232.90, +0.57, +0.3%) to drive the market higher following its strong earnings report and upbeat guidance was cited as another headwind for sentiment. Put another way, investors took some money off the table ahead of more mega-cap earnings after the close.
Every sector in the S&P 500 closed sharply lower with losses ranging from 1.4% (energy) to 3.8% (communication services). The CBOE Volatility Index surged 61.6% to 37.21 amid increased interest to hedge against further equity weakness.
Starbucks (SBUX 97.87, -6.82, -6.5%), Boeing (BA 194.03, -8.03, -4.0%), Adv. Micro Devices (AMD 88.84, -5.87, -6.5%), and Texas Instruments (TXN 162.93, -8.54, -5.0%) were notable laggards following their earnings reports. On a related note, Starbuck's COO left to become the CEO of Walgreens Boots Alliance (WBA 51.18, +1.99, +4.1%).
In the afternoon, Fed Chair Powell preferred not to comment on the day's market activity, although he said that expectations for fiscal policy and vaccines, instead of monetary policy, have been driving asset prices in recent months. The central bank made no changes to its accommodative policy stance, as widely expected.
U.S. Treasuries finished with modest gains amid the weak performance in the stock market and were less influenced by the Fed today. The 2-yr yield declined one basis point to 0.12%, and the 10-yr yield declined three basis points to 1.01%. The U.S. Dollar Index rose 0.5% to 90.65. WTI crude futures increased 0.4% to $52.84/bbl amid bullish inventory data.
Reviewing Wednesday's economic data:
- New orders for durable goods increased 0.2% m/m in December (consensus 0.9%) following an upwardly revised 1.2% increase (from 0.9%) in November. Excluding transportation, orders rose 0.7% m/m (consensus 0.5%) following an upwardly revised 0.8% increase (from 0.4%) in November.
- The key takeaway from the report is that manufacturing activity for durable goods held up reasonably well in December despite the surge in coronavirus cases and restrictive measures aimed at curbing the spread.
- The MBA Mortgage Applications Index decreased 4.1% following a 1.9% decline in the prior week.
Looking ahead to Thursday, investors will receive the advance estimate for Q4 GDP, weekly Initial and Continuing Claims, New Home Sales for December, the Conference Board's Leading Economic Index for December, and advance December readings for Intl Trade in Goods, Retail Inventories, and Wholesale Inventories.
- Russell 2000 +6.8% YTD
- Nasdaq Composite +3.0% YTD
- S&P 500 -0.1% YTD
- Dow Jones Industrial Average -1.0% YTD