The Dow closed lower Friday, suffering its worst weekly decline since October after a jolt of volatility swept through markets as the short-squeeze trade resumed even as trading platforms hampered retail traders.
The Dow Jones Industrial Average fell 2.03%, or 620 points, but was down more than 700 points intraday. The S&P 500 was down 1.93%, while the Nasdaq Composite fell 2%.
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) and Bed Bath & Beyond (NASDAQ:BBBY).
The short-squeeze stocks eased from their highs, but held the bulk of their gains even after Robinhood reduced the number of the short-squeeze stocks traders could buy to a single share. Robinhood later expanded the list of shares with trading restrictions, including 50 names such as Starbucks Corporation (NASDAQ:SBUX) and Beyond Meat (NASDAQ:BYND),
The CBOE Volatility Index – or so-called fear gauge – jumped rose 9%, giving investors further reason to hit pause on stocks into month-end.
Johnson & Johnson (NYSE:JNJ), meanwhile, fell 4% after it released vaccine data showing its single-shot single-dose candidate demonstrated a 66% overall efficacy rate in preventing moderate to severe Covid-19.
Despite having a lower efficacy than established mRNA vaccines from Pfizer Inc (NYSE:PFE) and Moderna Inc (NASDAQ:MRNA), JNJ's vaccine was shown to be 85% effective in preventing severe disease and hospitalizations/death, which, are "two primary drivers of the lockdowns/restrictions," BofA said in a note.
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.
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) closed more than 1% lower.