Dow Slumps as Volatility Sideline Bulls; GameStock Jumps Despite RobinHood Limits

By Yasin Ebrahim

Investing.com -   The Dow slumped Friday, paced by energy and technology stocks as the ongoing short-squeeze triggered a sharp jump in volatility and prompted investors to pause their bullish bets on the final trading day of the month.

The Dow Jones Industrial Average fell 1.57%, or 479 points, but was down more than 700 points intraday. The S&P 500 was down 1.46%, while the Nasdaq Composite fell 1.57%.

Easing trading restrictions on several platforms prompting retailer traders to put the squeeze on short-sellers once again. GameStop Corp (NYSE:GME) jumped 70% to lead the pack of  short-squeeze stocks including AMC Entertainment Holdings Inc (NYSE:AMC), Express Inc (NYSE:EXPR), BlackBerry (NYSE:BB), Nokia Corp ADR (NYSE:NOK) Bed Bath & Beyond (NASDAQ:BBBY).

The CBOE Volatility Index – or so-called fear gauge – jumped more than 23% to a nearly three-month high, giving investors further reason to hit pause on stocks into month-end.

Johnson & Johnson (NYSE:JNJ), meanwhile, slumped 3% after its released accine data showing its single shot single-dose vaccine candidate demonstrated a 66% overall efficacy rate in preventing moderate to severe COVID-19.

The trials, however, included newly emerging coronavirus strains from South Africa and the U.K. The vaccine was also shown to be 85% effective in preventing hospitalization and severe illness.

Top U.S. infectious disease specialist Anthony Fauci said the Johnson & Johnson’s vaccine news was "very encouraging" in controlling Covid-19, though added that the highly transmissible variants were a "wake up call" for the public.

Cyclical stocks including financials and energy led the broader market slump, with the latter getting hit from sluggish oil prices on fears prolonged Covid-19 restrictions will continue to hamper demand.

The broader sentiment on risk was also hurt by signs of ongoing slack in the recovery as the consumer spending fell for the second-straight, while the pace of inflation inched higher.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, fell 0.2% last month, but economists suggest the spending will rebound as the reopening of the economy will boost services activity.

"[T]he recent soft patch in spending was driven by goods rather than services … the good news is that both sources of weakness - fiscal policy and COVID - are no longer an issue as we look ahead to Q1 and beyond," Jefferies (NYSE:JEF) said in a note.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

Big tech also played a role in the day of selling on Wall Street as the Fab 5 sold off sharply. 

Amazon.com (NASDAQ:AMZN), Facebook (NASDAQ:FB), Google-parent Alphabet (NASDAQ:GOOGL) and Microsoft  (NASDAQ:MSFT) traded higher, while Apple (NASDAQ:AAPL) fell more than 1%.