US STOCKS-Stocks slump to worst day in three months in wake of Fed statement

N Citron

27/01/2021 21:39

(For a Reuters live blog on U.S., UK and European stock
markets, click LIVE/ or type LIVE/ in a news window)
    * Boeing falls on record annual loss, to delay 777X jet
    * Microsoft rises after upbeat quarterly results
    * GameStop rally quashes hedge funds, sparks short squeeze
    * Dow down 2.05%, S&P 500 down 2.57%, Nasdaq down 2.61%

 (Adds percentage changes, volume, market breadth)
    By Chuck Mikolajczak
    NEW YORK, Jan 27 (Reuters) - U.S. stocks suffered their
biggest one-day percentage drop in three months on Wednesday,
adding to losses after the latest Fed statement as major indexes
were also pressured by a slump in Boeing and a selling of long
positions by hedge funds.
    Shares of videogame retailer GameStop Corp  GME.N  and movie
theater operator AMC Entertainment Holdings Inc  AMC.N  each
more than doubled on Wednesday, continuing a torrid run higher
over the past week, as amateur investors again piled into the
stocks, forcing short-sellers such as Citron and Melvin to
abandon their losing bets.  urn:newsml:reuters.com:*:nL8N2K22EA urn:newsml:reuters.com:*:nL1N2K221Y
    "It's a dangerous game to play from both sides of the
spectrum, whether you're long or short," said Matthew Keator,
managing partner in the Keator Group, a wealth management firm
in Lenox, Massachusetts. "You get close enough to the fire
you're going to get burned."
    After briefly paring losses, declines accelerated in the
wake of the policy statement from the Federal Reserve. The
central bank kept overnight interest rate near zero and made no
change to its monthly bond purchases, as was widely expected,
and pledged to keep that support intact until a full economic
rebound is in place.  urn:newsml:reuters.com:*:nL1N2K21TK
    "Given the continued concerns around COVID and
disappointingly slow rollout of the vaccine, the US economy is
likely to lose momentum in the first quarter of the year," said
Seema Shah, chief strategist at Principal Global Investors in
London.
    "Yet with fiscal stimulus having taken over from monetary
policy as the only game in town, it was always doubtful the Fed
would announce any new actions this month."
    The Dow Jones Industrial Average  .DJI  fell 633.87 points,
or 2.05%, to 30,303.17, the S&P 500  .SPX  lost 98.85 points, or
2.57%, to 3,750.77 and the Nasdaq Composite  .IXIC  dropped
355.47 points, or 2.61%, to 13,270.60.
    Each of the three major U.S. indexes saw their biggest daily
percentage decline since Oct. 28. The declines also pushed the
benchmark S&P index into negative territory for the year. 
    Boeing Co  BA.N  fell 3.97% and was among the top drags on
the Dow after the planemaker took a hefty $6.5 billion charge on
its all-new 777X jetliner due to the COVID-19 pandemic and the
aftermath of a two-year safety crisis over its 737 MAX.
 urn:newsml:reuters.com:*:nL4N2K232P
    In a week packed with quarterly earnings from mega-cap
companies, Microsoft Corp  MSFT.O  initially rose after its
results as the software maker continues to benefit from remote
working and learning trends globally but erased most of those
gains as part of the broader market slump and ended up 0.25%.
 urn:newsml:reuters.com:*:nL4N2K13VK
    Microsoft's results did set a positive tone, however, for
other technology-related companies including Apple Inc  AAPL.O 
and Facebook Inc  FB.O , which reported quarterly numbers after
the closing bell.
    Facebook shares edged up 0.68% while Tesla fell 2.10% after
the close as the social media giant and electric automaker
reported results. Apple  AAPL.O  shares also dipped in extended
trade after its results.  urn:newsml:reuters.com:*:nL1N2K22EX urn:newsml:reuters.com:*:nL4N2K24EB urn:newsml:reuters.com:*:nL4N2K24CR
    These heavyweight majors have recently come back into favor
after blowout results from streaming giant Netflix Inc  NFLX.O ,
and as investors dumped economy-linked banks, energy and
small-cap stocks.
    But concerns about heightened stock market valuations,
rising coronavirus cases and uneven distribution of vaccine
rollouts have heightened investor worry about a pullback and
increase in volatility in the near-term.
    The CBOE Market Volatility index  .VIX , often used as a
gauge for investor anxiety, closed at a high of 37.21, its
highest since Oct 30.     
    Walgreens Boots Alliance Inc  WBA.O  was a bright spot on
the day, as shares rose 4.05% after the drugstore chain named
the outgoing chief operating officer of Starbucks, Roz Brewer,
as its CEO.  urn:newsml:reuters.com:*:nL1N2K201B
    Volume on U.S. exchanges was 23.42 billion shares, well
above the 14.31 billion average for the full session over the
last 20 trading days.  
    Declining issues outnumbered advancing ones on the NYSE by a
4.91-to-1 ratio; on Nasdaq, a 5.36-to-1 ratio favored decliners.
    The S&P 500 posted 27 new 52-week highs and no new lows; the
Nasdaq Composite recorded 158 new highs and 22 new lows.  
  
    

 (Additional reporting by Stephen Culp in New York; Devik Jain
and Shreyashi Sanyal in Bengaluru; editing by Diane Craft)
 ((charles.mikolajczak@tr.com; @ChuckMik; Reuters Messaging:
charles.mikolajczak.thomsonreuters.com@reuters.net))