By Peter Nurse
Investing.com - U.S. stocks are seen trading lower Friday, with the week’s volatile trading, sparked by retail traders’ activism, set to continue.
At 7:05 AM ET (1205 GMT), the Dow Futures contract was down 153 points, or 0.5%, S&P 500 Futures traded 23 points, or 0.6%, lower, and Nasdaq 100 Futures dropped 124 points, or 1%.
The main U.S. equity indices are on course for their worst week since the end of October, amid heightened volatility spurred by speculative trading from retail investors.
The week’s selloff had a break Thursday after several online brokers, including the popular site Robinhood, took steps to curb the deliberate buying of heavily-shorted names.
However, these hot stocks, such as GameStop (NYSE:GME), Koss (NASDAQ:KOSS) and AMC Entertainment (NYSE:AMC), have rallied in premarket trading after Robinhood said it will allow limited buying on Friday.
The problem is if the likes of GameStop continue to soar, it may result in hefty losses at the hedge funds which have shorted these companies, forcing them to sell other securities to raise cash.
Robinhood itself has been forced to raise more than $1 billion of additional cash from investors, as the stock market’s central clearing hub demanded large sums of collateral given the extreme volatility.
Aside from the drama surrounding these so-called Meme stocks, the earnings season continues Friday, as heavy equipment maker Caterpillar (NYSE:CAT), oil major Chevron (NYSE:CVX), drug maker Eli Lilly (NYSE:LLY) and industrial conglomerate Honeywell (NYSE:HON) all reported before the bell.
In Washington, investors will continue to focus on the passage of President Joe Biden’s $1.9 trillion Covid relief bill through Congress, as some Republican lawmakers question the size of the package.
Economic data due for release Friday includes personal income and personal spending for December, at 8:30 AM ET (1230 GMT), and the Michigan Consumer Sentiment survey at 10 AM ET.
Oil prices edged higher Friday, boosted by upcoming supply cuts from Saudi Arabia, the largest exporter of oil in the world, as well as falls in U.S. crude stockpiles.
Saudi Arabia is set to cut output by 1 million barrels per day in February and March in an attempt to balance a market hit by travel restrictions as the globe battles a rise in coronavirus cases, while U.S. oil inventories dropped last week by the most since July, to their lowest level since March.
U.S. Crude futures traded 0.5% higher at $52.62 a barrel, while the international benchmark Brent contract rose 0.9% to $55.59.
Elsewhere, gold futures rose 1.5% to $1,869.10/oz, while EUR/USD traded 0.2% higher at 1.2142.