Global Stocks Bruised by Forced Selling From Hedge Funds After GameStop Surge

Global Stocks Bruised by Forced Selling From Hedge Funds After GameStop Surge

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Greenwich, Connecticut is home to many U.S. hedge funds.


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Global stocks were bruised on Thursday, reacting to the forced selling by hedge funds after the unprecedented retail-investor push to buy heavily shorted securities.

In Asia, which has had a hot start to 2021, the

Nikkei 225

ended 1.5% lower and the

Hang Seng

dropped 2.6%.

The

Stoxx Europe 600

saw strong selling for a second day, losing 1.9%.

The

S&P 500

on Wednesday ended 2.6% lower, the worst showing since October.

The financial turmoil was caused by the organized buying of companies including videogames retailer

GameStop,

software company

BlackBerry

and movie-theater chain

AMC Entertainment,

all of which have had troubled financial performance that had led many institutional players to short their stocks.

“The retail buying forced several large hedge funds to buy the stock back ASAP in order to limit the damage. [GameStop] was the most actively traded stock in the U.S. for the second day in a row in the middle of earnings season,” said Marshall Gittler, head of investment research at BDSwiss.


GME Resources,

the Australian mining company that shares nothing in common with GameStop apart from its GME ticker symbol, rose 13% in Sydney.

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

“After a rally of this magnitude, and with stocks close to record highs, it is understandable that near-term uncertainty is leading to an increase in volatility. In our view, however, attention will likely shift back to earnings, stimulus, and the vaccine rollout. We believe the medium-term path for the market remains higher,” he said.

The GameStop-led frenzy is overshadowing a key day for earnings and economic news.


Apple

on Wednesday night reported forecast-beating earnings and revenue, thanks to demand for the technology giant’s new iPhone model as well as strong iPad and Macintosh sales.


Tesla

reported worse-than-expected earnings, though the electric-vehicle maker did beat expectations on revenue.

Social-media giant

Facebook

beat expectations on earnings as advertising revenue surged.

Results from

American Airlines,

fast-food chain

McDonald’s,

and after the close, credit-card payments company

Visa

are on tap.

The economics calendar includes U.S. gross domestic product for the fourth quarter, as well as jobless claims and new-home sales reports.

This article is auto-generated by Algorithm Source: www.barrons.com

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