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* J&J COVID-19 vaccine 72% effective in U.S., 66% globally
* GameStop plays surge as brokerages ease restrictions
* Popular mega-cap long positions take a hit
* Dow down 1.84%, S&P 500 down 1.85%, Nasdaq down 2.05%
(Updates to mid-afternoon, changes byline)
By Chuck Mikolajczak
NEW YORK, Jan 29 (Reuters) - U.S. stock indexes slumped on
Friday as investors gauged the efficacy data of Johnson &
Johnson's COVID-19 vaccine, while a standoff between Wall Street
hedge funds and small, retail investors contributed to
volatility.
Johnson & Johnson JNJ.N fell 3.67% as one of the biggest
weights on both the Dow and S&P500 after the drugmaker said its
single-dose vaccine was 72% effective in preventing COVID-19 in
the United States, with a lower rate of 66% observed globally.
The results compare to the high bar set by two authorized
vaccines from Pfizer Inc PFE.N /BioNTech SE BNTX.O and
Moderna Inc MRNA.O , which were around 95% effective in
preventing symptomatic illness in key trials when given in two
doses. Moderna shares climbed 7.97% while Pfizer Shares were
little changed.
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 GME.N and Koss Corp
KOSS.O , which shot higher after brokers including Robinhood
eased some of the restrictions they had placed on trading.
"Until we see volatility start to come down tells us there
is still a lot of stress in the system just from the unwind of
some of these positions," said Rob Haworth, senior investment
strategist at U.S. Bank Wealth Management in Seattle.
"The catalyst was obviously stress across the system as we
think about volatility and pressure on some of the hedge funds
to start the week and there has been some follow through, and we
don't really have great catalysts to drive us higher just yet."
The U.S. Securities and Exchange Commission said it was
closely monitoring any potential wrongdoing, to both brokerages
and social media traders. The Dow Jones Industrial Average .DJI fell 563.08 points,
or 1.84%, to 30,040.28, the S&P 500 .SPX lost 70.25 points, or
1.85%, to 3,717.13 and the Nasdaq Composite .IXIC dropped
273.62 points, or 2.05%, to 13,063.54.
All the three main indexes tracked their biggest weekly fall
since the end of October and the Dow and S&P has both fallen
below their 50-day moving averages, 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 AAPL.O coming under pressure as hedge funds sell to
cover billions of dollars in losses.
Apple shares lost 4.03% while Microsoft MSFT.O fell 2.46%.
Still 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 have reported
earnings through Friday morning, 84.2% have topped analyst
expectations, well above the 75.5% beat rate for the past four
quarters, according to Refinitiv data.
Honeywell International HON.N fell 3.5% after it posted a
13% fall in quarterly profit. The first known U.S. cases of the South African COVID-19
variant, found to be partly resistant to current vaccines and
antibody treatments, was detected in South Carolina on Thursday.
Data showed U.S. labor costs rose more than expected in the
fourth quarter amid a jump in wages, supporting views that
inflation could accelerate this year, while another report
showed U.S. consumer spending fell for a second straight month
in December. Declining issues outnumbered advancing ones on the NYSE by a
3.73-to-1 ratio; on Nasdaq, a 2.95-to-1 ratio favored decliners.
The S&P 500 posted 7 new 52-week highs and no new lows; the
Nasdaq Composite recorded 59 new highs and 13 new lows.
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SEC issues warning as GameStop short-selling war resumes
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