Succinct Summation of Week’s Events for 1.29.21 (plus Capitol Riot Arrests)

Below is the usual weekly summation, the main positive this week being that 27 million doses of vaccine have been given with a daily average of 1.2 million, the main negative being the market crashes of Wednesday and Friday, the worst since October. The bonus this weekend is a telling graphic that sums up in one eyeshot the overall national participation in the riot of January 6th. Of course, these are just the 116 arrests to date and there will be likely many more coming. But there is some consolation that so few people from each state were involved and that it even took an assemblage from most of the 50 states to put together that mob of one thousand. Hope everyone had a great weekend.  

8 Top Reddit Stocks Gaining Buzz

For your weekend, I submit below the other side of the great Wall Street Story of the Week -- the debacle with Reddit, GameStop, and the hedge funds, as presented by yesterday's edition of U.S. News Invested. I suspect that the SEC will ultimately determine that this group of so-called retail investors are not democratizing the market at all  but engaging in market manipulation. 

Wall St drops after J&J vaccine data, GameStop effect weighs

The “bad boys” buying up Gamestop were back in action again after Robinhood, among others, eased restrictions thus again crushing the hedge funds with their shorting issues and causing the markets to crash again, all of which is being investigated by the SEC for suspected stock manipulation.  Other factors contributing to the sell off include news casting some doubts on the upcoming J&J vaccine, the dangers of the South African variant, labor costs rising and consumer spending falling.  What is continuing to save the day is positive Q4 reporting with 84% of 184 companies now beating estimates.  Volume continues to spike with 17.1 billion shares traded. 

Wall St. rebounds as earnings heat up, short worries cool

As was easily predicted, there was a very quick recovery today of more than half of ysterday’s losses and a much more detailed explanation below for yesterday’s panic, far better than the simplistic “the Fed disappointed.”   It seems the sell off was due to a labyrinth of factors including fears of a poor Q4 and hedge funds dramatically increasing the sale of long positions in order to cover a dramatic increase in shorts.  But positive Q4 reports today, particularly from such heavyweights as Microsoft, Amazon and Alphabet, put those fears to rest, at least for the day.  But at valuations running now at 22.7x, this could change.  The really good news is that in an environment where positive surprises have come to be expected, for Q4 we are now seeing more than the usual.  With 159 companies having reported, 83% have beaten estimates and the latest government data shows Q4 GDP increasing 4 percent. Volume was again huge at nearly 19.6 billion. 

Stocks slump to worst day in three months in wake of Fed statement

Yesterday it was noted that expectations are so biased towards the upside right now that even the smallest hiccup can cause stocks to get slammed. It was really the smallest of hiccups that caused the biggest slam since October with the Dow diving a whopping 633 points and the other indexes not far behind. What was the hiccup? The Fed simply did not announce further stimulus for the coming month. Since no one expected them to, this should have not have caused any waves. But it did and was taken as a signal that with the slow rollout of the vaccine, Q1 is not going to go well.  There has of course been the continuing concern that stocks are way overvaluated and the markets are looking for Q4 cues to evaluate this. Even though no cues came today, the Fed statement (or lack thereof) sparked a massive sell off with the VIX at 37, its highest since October 30^th. Volume was completely off the charts at a massive 23.4 billion shares traded. I can’t remember the last time it was even near that.  But is there any doubt that in another day or two investors will realize this was a gross overreaction and rally again?  

S&P, Nasdaq slip from record levels as earnings season gains speed

The markets spent almost the entire session today in the black if only modestly so only to dip briefly and modestly into the red just minutes before close. Microsoft did well with its Q4 report after beating Wall Street estimates but the negative impact of the pandemic on such stalwarts as American Express and Verizon made their marks felt. Upside has become the expectation so any sign of weakness will see stocks getting slammed. But big eyes will remain on Q4 to see if the currently very high 22x valuations are justified. Volume remains above average at 14.3 billion. 

Stimulus jitters dent Wall Street's early gains; Nasdaq, S&P at records

It was another quite volatile day with the Dow down a good 400 points just before noon on concerns that the new stimulus bill may not pass for several more weeks. As today’s expert summed it all up, “stimulus – that is what it is all about. The market loves money, whether it is fiscal or monetary, and right now you have both. So if you pull the rug out from stimulus plans, that might be a problem, but they aren’t going to do that.”  The Dow rebounded in the afternoon to close down just 36 points and, once again, concerns about a quick recovery shifted buyers back to the “stay at home” tech winners. Microsoft will turn in its Q4 tomorrow and, besides the tech winners, the defensive sectors outperformed the day. Volume was back way above the 4-week average at just under 16.4 billion.