US stock indices dropped, closing out the Friday session with the biggest weekly fall since October last year, as investors gauged the ramifications of Johnson & Johnson’s (J&J) COVID-19 vaccine trial results, while a standoff between Wall Street hedge funds and small, retail investors added to volatility.
Johnson & Johnson fell 3.56 percent as one of the biggest weights on the Dow and S&P500 after the drugmaker said that its single-dose vaccine was 72 percent effective in preventing COVID-19 in the US, with a lower rate of 66 percent observed globally.
The results compare with the high bar set by two authorized vaccines from Pfizer Inc/BioNTech SE and Moderna Inc, which were about 95 percent effective in preventing symptomatic illness in key trials when given in two doses. Moderna shares climbed 8.53 percent, while Pfizer shares edged up 0.11 percent.
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Worries of a short squeeze that began earlier in the week resurfaced after an army of retail investors returned to trade shares in stocks such as GameStop Corp and Koss Corp, which shot higher after brokers including Robinhood Markets Inc eased some of the restrictions they had placed on trading.
“The overall picture is that if there is any bad news that suggests or indicates there could be a longer hibernation period for us to be indoors and not consuming or spending, that tends to set the market back and a lot of people sit on the sidelines, particularly with that news,” said Sylvia Jablonski, chief investment officer at Defiance ETFs in New York. “Then what is going on with [Gamestop] and all that stuff, people are a little afraid to trade.”
The surge in volatility has led to a huge increase in volume, totaling more than 20 billion shares in each of the past two sessions across US exchanges for the most active trading days on record going back to 2014, Refinitiv data showed.
Volume across US exchanges on Friday was 17.13 billion shares, compared with the 15.26 billion average for the full session over the past 20 trading days.
The US Securities and Exchange Commission said that it was closely monitoring any potential wrongdoing, regarding brokerages and social media traders.
The Dow Jones Industrial Average fell 620.74 points, or 2.03 percent, to 29,982.62, the S&P 500 lost 73.14 points, or 1.93 percent, to 3,714.24 and the NASDAQ Composite dropped 266.46 points, or 2 percent, to 13,070.69.
All three main indices recorded their biggest weekly fall since the end of October, as the Dow lost 3.27 percent, the S&P fell 3.31 percent and the NASDAQ declined 3.49 percent.
Both the S&P 500 and Dow closed below their 50-day moving average, seen as a technical support level.
Market participants have speculated that volatility caused by the short squeezes have led to investor favorites including Apple Inc coming under pressure as hedge funds sell to cover billions of US dollars in losses.
Apple shares declined 3.74 percent, while Microsoft Inc fell 2.92 percent.
However, while concerns about rising COVID-19 cases and bumpy vaccine rollouts kept investors leery about a pullback and an increase in volatility in the near-term, the start to quarterly earnings has eased some concern about stretched stock valuations.
Of the 184 companies in the S&P 500 that had reported earnings through Friday morning, 84.2 percent topped analysts’ expectations, well above the 75.5 percent beat rate for the past four quarters, Refinitiv data showed.
Honeywell International lost 3.68 percent after it posted a 13 percent fall in quarterly profit.
Declining issues outnumbered advancing ones on the NYSE by a 2.88-to-1 ratio; on the NASDAQ, a 2.38-to-1 ratio favored decliners.
The S&P 500 posted seven new 52-week highs and no new lows, while the NASDAQ Composite recorded 64 new highs and 16 new lows.
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