United States
Disappointing earnings and de-risking hit equities Friday amid fallout from frenzied speculative trading in selected US stocks. The Dow Jones industrial average lost 2.0 percent, the S&P 500 fell 1.9 percent and NASDAQ 100 was also down 2.0 percent.
Concerns continued over forced selling by hedge funds after they suffered big losses on short positions in GameStop, AMC, and other stocks driven higher by retail traders. The turbulence around the short squeeze played into concerns that valuations were already overextended. Liquidations at month-end added to the selling pressure.
Most sectors weakened, with energy worst off on poor Chevron earnings. Technology shares lagged, as Apple was down 3.7 percent for a second straight day of losses despite blowout quarterly results. Communications services lagged, with Charter Communications down 7.2 percent after it reported slowing customer growth. Industrials were hit by weakness in transports. Financials lagged on weakness in insurers and credit cards.
Among Dow stocks, Johnson & Johnson was off 3.4 percent amid disappointment over its vaccine trial results. Chevron fell 4.3 percent, and 3M ended down 4.2 percent.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 39 cents to US$55.88 while spot gold rose 90 cents to US$1,842.87. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield rose 4 basis points to 1.84 percent while the 10-year note rose 4 basis points to 1.09 percent. Short-end Treasury yields were flat to down in the flight from risk.
Europe
Risk-off sentiment swamped European equities Friday as markets reacted to a frenzied short squeeze in selected US stocks driven by online retail traders. The Europe-wide STOXX 600 fell 1.9 percent, the German DAX lost 1.7 percent, the French CAC dropped 2.0 percent, and the UK FTSE-100 was down 1.8 percent.
Concerns about the slow rollout of Covid-19 vaccines in Europe added to the market's sour mood. Markets also reacted badly to news that Johnson & Johnson's new vaccine showed an efficacy rate of 66 percent, lower than existing vaccines, and the J&J vaccine showed varied effectiveness with different Covid strains.
Among sectors, worst off were retail, personal and household goods, and insurance. Holding up best were autos and telecom. Among companies reporting, Daimler firmed 0.7 percent and Ericsson, the Swedish telecom, surged by 7.6 percent on earnings beats. On the downside, H&M, the Swedish apparel retailer, fell 5 percent after a profits warning.
Asia Pacific
Fallout from US market turbulence and worries about tighter Chinese financial conditions hurt major Asia/Pacific markets Friday with Japanese and Korean markets hit hardest at month end.
Japan's Nikkei 225 gave back early gains to end down 1.9 percent while the broader Topix fell 1.6 percent. Investors took profits at month end and fretted about de-risking and forced selling by large investment funds caught in short squeezes by US retail investors.
South Korea's Kospi index fell 3 percent, in the biggest one-day drop in five months, as confidence was shaken by continued market turbulence.
Hong Kong's Hang Seng index fell 0.9 percent while China's Shanghai composite lost 0.6 percent as investors focused on tighter financing conditions and rising short-term interest rates, which have spurred talk of policy tightening by the Chinese monetary authorities.
Australian shares also ended down, paced by a selloff in energy and mining shares on weakness in commodities prices. The S&P/ASX 200 fell 0.6 percent, with Rio Tinto down 3.0 percent, and BHP down 1.6 percent.
In economic news, Japan's industrial production index fell 1.6 percent on the month in December, weakening from no change in November but in line with the consensus forecast for a drop of 1.5 percent. In year-on-year terms, the index fell 3.2 percent after dropping 3.4 percent previously. Separately, Japanese labor market data for December show ongoing weakness. The seasonally adjusted unemployment rate was unchanged at 2.9 percent, holding below the recent peak of 3.1 percent but still above pre-pandemic levels below 2.5 percent.
