The market recovered some of yesterday’s sharp losses on Thursday as we prepare to close out the first month of 2021.
To be completely frank, January was looking a whole lot better before Wednesday’s melee. Everything was going along just fine while waiting for vaccines and stimulus. And then all of a sudden each of the major indices plunged by more than 2% in easily the worst session of the year so far.
The Dow got about half of it back today by rising 0.99% (or around 300 points) to 30,603.36. That breaks a five-day losing streak, but still leaves the index a few points in the red for January heading into the month’s final session.
The S&P was up 0.98% 3787.38, while the NASDAQ rose 0.50% (or about 66 points) to 13,337.16.
In their first session since reporting earnings, Apple (NASDAQ:AAPL) was down 3.5% and Facebook (NASDAQ:FB) was off 2.6%. These tech giants beat on both the top and bottom lines last night, but strong reports haven’t been leading to higher prices this earnings season.
You know what had been leading to higher prices? Short squeezes! However, that changed today.
Several of the stocks that experienced the speculative buying in recent days moved sharply lower on Thursday, including GameStop (NYSE:GME, -44.3%), AMC Entertainment (NYSE:AMC, -56.6%), Bed Bath & Beyond (BBBY, -36.4%) and many others.
The big news of the day is that popular trading platform Robinhood restricted transactions for these names. In other words, they would not allow customers to buy GME, AMC or the like.
Needless to say, traders are pretty angry. In fact, “furious” or “livid” may be more appropriate descriptions. Many of them considered the move to be cheating, and they’re getting support from prominent members of both political parties.
However, shares of GME and AMC are soaring approximately 51% and 40%, respectively, afterhours as of this writing. Apparently, Robinhood will be allowing limited trading of these names on Friday. So a crazy week gets crazier.
In more normal and more welcomed news, jobless claims last week came in at 847,000. That’s well below expectations of 875K and marks the first reading under 900K in three weeks.
Today's Portfolio Highlights:
Insider Trader: The market is not rewarding strong earnings reports this season. Even record quarters and encouraging outlooks are being sold. Therefore, Tracey played it safe on Thursday and took profits in three positions before they go to the plate. All of them bring double-digit returns to the portfolio. Inovalon Holdings (NASDAQ:INOV) lost momentum after reporting preliminary fourth-quarter results earlier this month, so the editor sold it on Thursday for a 24.8% return in less than three months. She also halved the volatile Myers (MYE) and Hanesbrands (NYSE:HBI) positions for gains of 14.2% and 14%, respectively. In other news, this portfolio had the best performer of the day among all ZU names as Coeur Mining (NYSE:CDE) jumped approximately 16%.
Counterstrke: "Robinhood, the popular trading platform among the youth, simply shut off the ability to buy stocks like GameStop (GME) and AMC Entertainment (AMC). This created some furious customers, but also brought major selling in those stocks and others that have been squeezed. Robinhood and a few other brokers essentially stopped the squeeze, potentially risking their business. Why would they do that? The internet blowback was amazing and I could go through twitter all day just reading the angry, the funny and the insane posts.
"Here is my view on this:
"The guys we fight every day were on the ropes. Collectively, these Redditt guys, some bigger funds, and traders like me were going for the knockout. And then the ref stopped the fight so they could gather themselves and fight back. It is totally unfair and we should all be mad about it. The market was working fine, it just wasn't working for the guys that always win, so they cheated. I hate the precedent this sets: THEY CAN TURN OFF ONE SIDE OF THE ORDER BOOK TO FACILITATE PRICE IN THE DIRECTION THEY WANT." -- Jeremy Mullin
Until Next Time,
Jim Giaquinto
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