U.S. stock indexes are trending lower today on a variety of issues with the Dow Jones Industrials, S&P 500 and Nasdaq all down 2%. The bright spot is the small caps with the Russell 2000 trading lower by around 1/2 of the other indexes.
The volatility index is higher by over 20% as the selling continues throughout the day.
The Game is back on with GameStop, AMC and other heavily shorted stocks winning back their ability to trade. Brokerages are allowing limited trading in these names again and it's off to the races higher (again). The buying mania in these stocks is concerning to the overall market because it could signal a bubble and euphoric buying, which is often seen at the tops of market cycles. It's also a new phenomenon so the market isn't quite sure WHAT to make of it all. #GME is currently up 70% and #AMC is up 60% while the rest of the market is in selling mode... 🤷♂
China tightened liquidity overnight in the hopes of deflating any asset bubbles and this sent the Shanghai index to a 4-week low. Markets don't like to see the flow of money being tightened because it leads to higher interest rates and higher interest rates means people and companies borrow less. We'll see if these policies continue or if they lighten up.
U.S. economic data came in bullish for stocks as personal spending was stronger than expected and personal income rose stronger than expected as well. The Q4 2020 employment index also rose higher so the overall economic picture just keeps getting better. The lingering fears of Covid lockdowns and new cases are always front and center for stocks. A new strain of the virus and vaccine shortages are making the headlines and this news always leads to a selloff day.
It's still a tug-of-war-market as good economic data pulls on one side and lockdowns and Covid news pulls on the other. The economy will win this game eventually but in the short-term there will be a lot of pulling in opposite directions.
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*Buy and Sell signals are not recommendations and are a starting point for further analysis.
Here's the S&P 500 so far today with most stocks in the red.