Market Snapshot: Dow comes off session highs as Wall Street tries to shake off GameStop jitters

United States

U.S. stocks were holding on to gains midday Monday as the market attempted to recover from its worst weekly loss since October after frenzied trading in videogame retailer GameStop Corp. and others fueled a ripple of selling on Wall Street.

How are stock markets performing?
  • The Dow Jones Industrial Average DJIA, +0.51% was up 54 points, or 0.2%, to 30,037, after hitting an intraday high of 30,259.83.
  • The S&P 500 SPX, +1.02% added 22 points, or 0.6%, to trade near 3,737.
  • The Nasdaq Composite COMP, +1.56% gained 130 points, or 1%, at 13,201.

Stocks on Friday registered their worst weekly declines since the period ended Oct. 30. The Dow closed 3.2% lower for the week, the S&P 500 was down 3.3% and the Nasdaq Composite finished with a weekly slide of 3.5%.

For the month, the Dow lost 2%, the S&P 500 shed 1.1% and the Nasdaq Composite gained 1.7%.

What’s driving the market?

Stock-market bulls were attempting to bounce back from an epic short squeeze that gripped Wall Street and Main Street last week, adding to worries about inflated stock valuations.

The three major indexes posted their worst week and calendar month since October on Friday, as volatile trading in bricks-and mortar retailer GameStop GME, -20.84% and movie chain AMC Entertainment Holdings AMC, +8.83% prompted fears that further forced selling in highly leveraged and heavily shorted areas of the market would put pressure on prices.

Last week, shares of GameStop soared 400% and AMC Entertaintment ended 277% higher and Koss Corp. KOSS, -39.71% rallied 1,816%, amid extreme trading volume and volatility that forced many brokerages to curb trading activity in certain names. GameStop shares were down 22% Monday.

“The mayhem on Wall Street has already attracted the attention of regulators and lawmakers but until action is taken, it is looking unlikely that the frenzy will settle down,” wrote Raffi Boyadjian, senior investment analyst at XM, in a daily research note.  

Indeed, last week’s moves compelled brokerages, including Robinhood Markets, to limit trading on its platforms. The wild trading in stocks by individual investors also drew the attention of the White House, Congress and regulators, including the Securities and Exchange Commission.

Read: Robinhood slims restricted list to 8 stocks, but users can still only buy 1 share of GameStop

Meanwhile, the social-media community appears to have turned its attention to the $ 1.6 trillion silver market SI00, +7.14%. Silver has rallied in recent trading sessions after users on Reddit’s WallStreetBets forum posted about executing a “short squeeze” similar to ones credited with fueling GameStop’s surge.

Stock-market gains come amid a recent decline in U.S. COVID-19 cases, with newly reported coronavirus cases down Sunday from a day earlier, as were hospitalizations and deaths.

Investors continue to watch the progress of President Joe Biden’s proposed $ 1.9 trillion economic aid package. Hopes for aid, along with the Federal Reserve’s pledge to keep low-cost credit plentiful, have buttressed financial markets. CNBC reported over the weekend that a group of 10 Republican senators, in a letter, called on Biden to consider a smaller proposal of $ 600 billion.

In corporate quarterly results, around 100 S&P 500 companies were set to report earnings this week, including Inc. AMZN, +2.95% and Google parent Alphabet Inc. GOOG, +2.25% GOOGL, +2.23% due Tuesday.

In economic reports, the Institute for Supply Management’s manufacturing index for January slipped to 58.7 in January from 60.5 in the prior month. Any number above 50 represents an expansion in industrial activity.

“The nation’s factories are still humming, despite the uncertainty created by the slowing economy.  Normally, you’d expect to see softer manufacturing conditions against the weaker economic backdrop that has developed in recent months,” said Jim Baird, chief investment officer for Plante Moran Financial Advisors.

Meanwhile, outlays for construction projects rose 1% in December at a seasonally adjusted annual rate of $ 1.49 trillion.

Which companies are in focus?
  • Shares of Thermo Fisher Scientific Inc. TMO, +1.66% rose 1.2% after the health care diagnostics and therapies company reported a big earnings beat and revenue.
  • Northrop Grumman Corp. NOC, +1.30% said Monday it has entered a $ 2 billion accelerated share buyback agreement with Goldman Sachs & Co. The defense company’s shares were up 1.2%.
  • Shares of Otis Worldwide Corp. TMO, +1.66% were up 0.7% Monday, after the elevator and escalator maker reported fourth-quarter profit and sales that rose above expectations, and provided an upbeat full-year outlook.
  • Shares of Eaton Corp. ETN, +1.61%  rose 1.4% after the power management company announced an agreement to buy Cobham Mission Systems in a deal valued at $ 2.83 billion.
  • Shares of Apple Inc. AAPL, +1.21% gained 0.4% after the company said it would sell bonds for general corporate purposes, which could include share buybacks.
How did other assets perform?
  • U.S. crude-oil futures CL.1, +0.98% climbed 1.1% to $ 52.76 a barrel, on the New York Mercantile Exchange. In precious metals, gold futures GC00, +0.76% climbed 1% to $ 1,876.90 an ounce.
  • The 10-year Treasury note yield TMUBMUSD10Y, 1.066% was down 1.7 basis points to 1.077%. Bond prices move in the opposite direction of yields.
  • The greenback strengthened 0.2% against its major trading partners, based on the ICE U.S. Dollar Index. DXY, +0.37%
  • The Stoxx Europe 600 index SXXP, +1.22% gained 1.2%, while the U.K.’s FTSE 100 UKX, +0.89% rose 0.9%. In Asia, the Nikkei NIK, +1.55% closed 1.6% higher and China’s CSI 300 index 000300, +1.23% added 1.2% and the Shanghai Composite SHCOMP, +0.64% gained 0.6%.