Dow Falls 400 Points Amid ‘Market Nonsense’ With Apple, Facebook, Tesla Earnings On Deck

Topline

The massive short squeeze fueling rampant retail buying continues Wednesday as earnings season trudges along, revealing some big losers last year and crippling the broader market ahead of a busy slate of reports after the closing bell.

Key Facts

Shortly after the market open, the Dow Jones Industrial Average fell 388 points, or 1.4%, while the S&P 500 also fell 1.1%, and the tech-heavy Nasdaq shed 0.8%.

Bucking the trend, shares of big tech firms Amazon, Apple and Microsoft are among firms posting gains Wednesday, with Microsoft up more than 2% after a fourth-quarter earnings report that handily beat Wall Street expectations, pulling in revenue of $43.1 billion–up 17% year over year and exceeding expectations by nearly 10% thanks to continued cloud adoption. 

Heading up losses in the S&P, shares of apparel giant VF Corp, which last month completed an acquisition of streetwear staple Supreme, are down nearly 5% after the firm provided full-year earnings guidance solidly below analyst expectations as pandemic store closures and lower demand pulled revenue down by about 10% last quarter.

Boeing shares are down 3% after the aircraft manufacturer posted a record $11.9 billion loss last year and delayed the rollout of its 777X program until late 2023.

Meanwhile, shares of massively shorted stocks with big retail interest are still seeing eye-popping gains, with GameStop up more than 100%, after climbing 93% Tuesday, and embattled movie theater chain AMC Entertainment up a staggering 340%.

“The same phenomenon” fueling those sharp gains is occurring in Europe too, notes Vital Knowledge Media Founder Adam Crisafulli; the United Kingdom’s FTSE 100 is down 1.6%, and Germany’s DAX Index falls 2.3%, while Japan’s Nikkei 225 ended the day up 0.3%.

Crucial Quote 

“Wednesday’s price action can’t be blamed on fundamentals, but instead comes down to crowded positioning, expensive valuations, the [uncertain] stimulus narrative and market nonsense,” says Crisafulli. “The extreme short squeezes, the ongoing dump of fresh supply each and every day and the examples of froth are all slowly eroding confidence.”

What We Don’t Know

The timing for stimulus remains unclear. Congressional Democrats are looking to push ahead on relief measures through a special Senate process, called budget reconciliation, that would effectively bypass the need for Republican support, but some are already calling the move “irresponsible.” Crisafulli says “the largest risk facing stocks is that fundamentals stay so positive that stimulus gets dialed back.”

What To Watch For

Apple, Facebook and Tesla post earnings after the close.

Further Reading

Schumer Says Democrats Will Move Forward On Stimulus With Or Without Republicans—And It Could Be As Soon As Next Week (Forbes)

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