Global stocks bruised by forced sale of hedge funds after GameStop surge

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Global stocks were battered Thursday, in response to the forced sell-off of hedge funds after the unprecedented push by retail investors to buy sharply short stocks. Major US stock indices were mixed, but thankfully calm after a difficult Wednesday.

Shortly after opening, the

Dow Jones Industrial Average

increased by 263 points, or 0.9%, while

S&P 500

gained 0.8% and the

Nasdaq composite

added 0.7%.

In Asia, which got off to a good start until 2021, the

Nikkei 225

completed 1.5% lower and the

Hang Seng

fell 2.6%.

The

Stoxx Europe 600

rebounded from earlier strong losses to trade 0.2%.

The

S&P 500

Wednesday finished down 2.6%, the worst performance since October.

The financial crisis was caused by the organized buying of companies, including a video game retailer

GameStop

(ticker: GME), software publisher

Blackberry

(BB) and cinema chain

AMC Entertainment

(AMC), all of which experienced difficult financial performance which led many institutional players to sell their shares.

“The retail purchase has forced several large hedge funds to buy back the stock as soon as possible in order to limit the damage. [GameStop] was the most traded stock in the United States for the second straight day in the middle of the earnings season, ”said Marshall Gittler, head of investment research at BDSwiss.

GME Resources

(GME.AU), the Australian mining company that has nothing in common with GameStop other than its ticker symbol GME, rose 13% in Sydney.

Mark Haefele, investment director for global wealth management at UBS, said the outlook remains bright, noting the S&P 500’s 68% jump from March 2020 lows.

“After a rally of this magnitude, and with stocks close to record highs, it’s understandable that short-term uncertainty leads to increased volatility. In our view, however, the focus will likely shift back to the benefits, stimulation and deployment of vaccines. We believe that the medium term trajectory for the market remains higher, ”he said.

The GameStop-led frenzy overshadows a key day for profits and economic news.

Gross domestic product rose 4% in the fourth quarter, missing estimates of 4.3%, while jobless claims improved to 847,000 from 900,000 last week and beating expectations of 875,000.

Apple

(AAPL) Shares fell 2.2% after the company said it was earning $ 1.68 per share, against estimates of $ 1.41. The company posted revenue of $ 111 billion, beating expectations of $ 103 billion.

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(TSLA) fell 5.3% after the electric vehicle maker posted a mixed quarter. The company gained 80 cents a share, missing estimates of $ 1.03 while posting revenue of $ 10.74 billion, against a forecast of $ 10.4 billion.

Facebook

(FB) gained 4.9% after the company beat revenue and profit guidance, posting earnings of $ 3.88 per share versus estimates of $ 3.22, on revenue of 28 billion dollars, exceeding expectations of 26.4 billion dollars.

Mcdonalds

(MCD) rose 0.5% even after the company missed expectations. The fast food chain said it made $ 1.70 per share, less than the estimated share of $ 1.78, on revenue of $ 5.31 billion, lower than expectations of 5.37 billion of dollars.

Twitter

(TWTR) rose 2.7% on a weak day for technology as KeyBanc improved the overweighted stock relative to the sector weight.

Write to Steve Goldstein at [email protected] and Jacob Sonenshine at [email protected]