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Wall Street Opens Flat Amid Concern Over Hedge Fund Fiasco; Dow up 20 Pts

Stock MarketsMar 29, 2021 09:48AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- U.S. stock markets opened mixed in narrow ranges on Monday, amid concern about further volatility stemming from the unwinding of trades reportedly held by Archegos Capital Management, the family office of former hedge fund manager and convicted insider trader Bill Hwang.

By 9:45 AM ET (1445 GMT), the Dow Jones Industrial Average was up 27 points, or 0.1%, at 33,100, holding above the 33,000 level that it breached for the first time on Friday. The index was supported by heavyweight Boeing (NYSE:BA), which rose 2.8% after a large order for its 737 MAX planes from Southwest Airlines (NYSE:LUV). 

However, the S&P 500 was down 0.2% and the Nasdaq Composite was down 0.3%, amid fears that some of Archegos' trades still need to be unwound.  The stocks of the two banks that led the selling on Friday, Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS), were both underperforming, down 4.1% and 1.6% respectively, both at their lowest in a month.

Overnight, Credit Suisse (SIX:CSGN) had warned of a "substantial" hit to its earnings from losses related to its prime brokerage relationship with Archegos, and had also noted that "other banks are still exiting" positions tied to its client. That raised some doubt as to how much further any of the stocks affected in Friday's rout may still have to fall. 

Many of the most prominent losers in early trading were part of Hwang's portfolio: GSX Techedu  (NYSE:GSX) stock fell 11.7%, while Baidu (NASDAQ:BIDU) ADRs fell 4.6% and Vipshop stock (NYSE:VIPS) fell 5.1%. ViacomCBS (NASDAQ:VIAC) stock was also down 4.5%, while Farfetch (NYSE:FTCH) stock was down 3.0%. 

On a day when the earnings and the data calendars were largely empty, market participants have had time to concentrate on the implications of Friday's fiasco, when Archegos' lenders liquidated the stock they had taken ownership of after calling in the fund's margin loans. Reports have indicated that Hwang, who pleaded guilty in 2012 to securities fraud charges after insider trading on Chinese bank stocks, had avoided disclosing the extent of his positions in various stocks by holding them through opaque structures such as equity swaps and contracts for differences. 

Arguably the most worrying element of Friday's trading was the level of leverage implicit in the volume and scale of the price drops. Data from FINRA show that margin debt has exploded in the last year, rising from $545 billion in February 2020 to over $813 billion as of last month.

Hwang has not yet commented publicly on the events of last week and could not be reached for comment on Monday.

Elsewhere, Tesla (NASDAQ:TSLA) stock dipped briefly below the optical support level of $600 for the first time in three weeks. The stock had suffered on Friday from a video compilation released on Youtube and other social media that detailed the gap between CEO Elon Musk's promises on delivering autonomous driving and the current state of Tesla's technology. The video included leaked excerpts from Tesla emails to the National Highway Traffic Safety Administration that confirms the current software package is not likely to progress beyond Level 2 autonomy. 

Wall Street Opens Flat Amid Concern Over Hedge Fund Fiasco; Dow up 20 Pts
 

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Comments (3)
Bryan Lee
Bryan Lee Mar 29, 2021 11:28AM ET
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Evergiven has continued on its journey, not good for salty America
mat connors
mat connors Mar 29, 2021 11:00AM ET
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Opened flat and then dropped lol
Mitchel Pioneer
Mitchel Pioneer Mar 29, 2021 10:12AM ET
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The predictable, flagrant pump at the open.  Remarkable how the US Ponzi Scheme doesn't plunge when it opens in the green.  Another criminal week in the greatest financial fraud in history, and biggest investment joke in the world.  Assume the position America.
 
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