US stocks ended sharply higher on Monday after speculative trading in a set of small, heavily traded companies last week saw markets recording their worst loss since October. All three major indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) added 0.8% or 229.29 points to end the day at 30,211.91. The bluechip index had at point hit an intra-day high of 30,335.91.
The rally was led by strong gains in Mastercard Incorporated
MA
and Visa, Inc.
V
. Shares of Mastercard and Visa gained 1.7% and 2.6%, respectively. Visa has a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
The S&P 500 advanced 1.6% or 59.62 points to finish at 3,773.86, recording its best percentage gain since Nov 24. Consumer discretionary and technology sectors were the biggest gainers on the index. The Consumer Discretionary Select Sector SPDR (XLY) lost 3.3%, while the Technology Select Sector SPDR (XLK) gained 2.6% and 2.5%, respectively. All the 11 sectors of the benchmark index closed in positive territory.
The tech-heavy Nasdaq jumped 2.6% or 332.70 points to end the day at 13,403.39 points.
The fear-gauge CBOE Volatility Index (VIX) dropped from its three-month high by 8.6% to 30.24. A total of 15.92 billion shares were traded on Monday, higher than the last 20-session average of 15.6 billion. Advancers outnumbered decliners on the NYSE by a 3.67-to-1 ratio. On Nasdaq, a 3.44-to-1 ratio favored advancing issues.
Market Volatility Eases
Stocks bounced back on Monday after a volatile week wherein several retail investors started trading shares in heavily sorted stocks that added to worries of inflated stock valuations. This frenzy led hedge funds to take off risk across the board despite not being directly involved in the trading.
The aggressive selling last week ignited fears that further forced selling in heavily sorted stocks could lead building pressure on markets. However, the volatility somewhat eased on Monday after online brokerage Robinhood said that it has managed to raise another $2.4 billion from investors after the aggressive trading made its clearing house to increase deposit requirements last week.
GameStop Corp.
GME
, AMC Entertainment Holdings
AMC
and Koss Corp
KOSS
, which saw their shares surge 277%, 400% and 1,816% slowed down on Monday. GameStop’s shares plummeted 30.8%, while AMC Entertainment closed flat on Monday.
Focus Shifts to Silver
The frenzy, however, seems to be shifting other areas of the markets now. Users on Reddit forum WallStreetBets seem to be shifting focus to the $1.6 trillion silver market. Silver prices have been on a rally lately after users on Reddit WallStreetBets continued to post “short squeeze” muck like they did last week that sent GameStop’s shares on a rally.
This saw silver prices hit an eight-year high of $30 per ounce before it pared gains. Meanwhile, investors have also been closely watching progress on Joe Biden’s proposed $1.9 trillion coronavirus relief package. A group of 10 Republicans had urged the President on Sunday to consider a smaller proposal of $600 billion.
Economic Data
Manufacturing actively in the United States somewhat slowed in January. The Institute of Supply Management’s (ISM) manufacturing index dropped to 58.7 in January from last month’s reading of 60.5.
However, construction spending increased 1% in December to a seasonally adjusted annual rate of $1.49 trillion.
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