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Weekly Updates

Volatility Returns Last Week, Wild Ride for GameStop & AMC

Weekly Update – January 29, 2021

  • The S&P 500 index fell 3.3% last week, pulling the index into the red for the month, as erratic trading in stocks including GameStop (GME) and AMC Entertainment (AMC) stirred up worries about market stability and potential manipulation at a time when new variants of COVID-19 and stumbles with vaccine distributions are also weighing.
  • The market benchmark ended January at 3,714.24, down from last Friday’s closing level of 3,841.47 and marking a 1.1% drop from where it ended 2020.
  • Going into Friday’s session, the S&P 500 index had been up 0.8% for the month and year to date, but a 1.9% Friday drop sent it into the red.
  • Earlier in the month, the index reached new record highs amid optimism for new President Joe Biden and the distribution of vaccines to help the US economy recover from the COVID-19 pandemic. However, Friday’s tumble came amid continued erratic trading in stocks including GameStop and AMC after momentum was generated earlier this week on online platforms including Reddit and Discord. Some retail brokerages restricted activity but later removed some limits as regulatory and legal questions were raised.
  • Meanwhile, health authorities identified COVID-19 cases in the US with the variant first detected in South Africa. The finding added to concerns at a time when preliminary research has indicated existing treatments and vaccines for COVID-19 may be less effective against the South African variant. Vaccine distribution, meanwhile, continues to move more slowly than some anticipated.
  • All of the S&P 500’s sectors fell this week, led by a 6.5% drop in energy and a 5.0% slide in materials. Among other hard-hit sectors, financials, consumer discretionary and industrials were down by more than 4% each. The smallest drop was recorded by real estate, down by just 0.2%.
  • The energy sector’s decliners included Hess (HES), whose shares fell 9.9% on the week. The company reported a loss for Q4 although it was narrower than its year-earlier loss and narrower than analysts expected. The oil and gas producer’s revenue fell year over year but also surpassed Street expectations.
  • In materials, shares of Freeport-McMoRan (FCX) tumbled 11.7% this week as the mining company reported Q4 adjusted earnings per share slightly below the Street view although still up significantly from the year-earlier period while revenue rose more than expected.
  • Helping keep the decline in real estate minimal, shares of Prologis (PLD) rose 2.0% on the week as the real estate investment trust reported Q4 core funds from operations up from a year earlier and above analysts’ expectations. The REIT’s revenue was also above year-earlier results and the Street view and it forecast 2021 core funds from operations above analysts’ expectations.
  • Companies reporting next week include Alphabet (GOOG, GOOGL), (AMZN) and Exxon Mobil (XOM) on Tuesday and Ford Motor (F) and Merck (MRK) on Thursday.
  • The economic calendar, meanwhile, includes data on manufacturing and services sectors earlier in the week although January employment figures are likely to garner the most attention. Private-sector data will come Wednesday from ADP while the Labor Department will release its January jobs data Friday.
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