The war between retail traders on Reddit and Wall Street short-sellers continues, with GameStop set to double again at the opening. Jerome Powell will hold his first press conference since Joe Biden was sworn in as President, with Janet Yellen now confirmed as Treasury Secretary. Microsoft’s earnings set a high bar for Apple, Tesla and Facebook, all of which report after the close, and the EIA releases U.S. oil inventory data. Here’s what you need to know in financial markets on Thursday, January 27th.
Reddit rally continues
The extreme volatility generated by the tussle between Wall Street short sellers and the retail trading community clustered around the Reddit chatboard r/wallstreetbets shows no sign of easing up.
GameStop stock, which has been at the center of attention is indicated up another 107% in premarket trading, after daily gains of 22% on Monday and 93% on Tuesday. That gives the loss-making seller of video games, consoles and accessories a valuation of more than $20 billion.
Movie theater operator AMC Entertainment is also indicated up over 110%, while apparel retailer Express is indicated up 35% and Blackberry up 10%. The chatboard’s users appear to have targeted the short positions of Gabe Plotkin’s Melvin Capital increasingly as a battle of wills and resources. Melvin raised $2.75 billion in fresh funds from hedge fund veterans Steven Cohen and Ken Griffin on Tuesday, via their Point72 and Citadel funds.
Fed set to steer unchanged course
The Federal Reserve will conclude the latest meeting of its Federal Open Markets Committee. As no change in either interest rates or the pace of asset purchases is expected, the focus will be on Chairman Jerome Powell’s press conference, which starts at 2:30 PM ET (0930 GMT).
Confidence in the Fed’s commitment to keeping up the pace of quantitative easing has returned in recent days, with a broad consensus that the Fed is more afraid of tightening policy too soon than too late. The yield on the 10-year Treasury note has fallen back to 1.04% from a high of 1.16% last week.
Stocks set to open mixed; durable goods due
U.S. stocks are set to open mixed later, with tech outperforming on the back of another very strong set of quarterly numbers from Microsoft.
By 6:30 AM ET (1130 GMT), Dow Jones futures were down 149 points, or 0.5%, while S&P 500 futures were down 0.4%. Nasdaq futures were however up 0.3%, which Microsoft indicated up 2.7% at a new all-time high.
Aside from the Fed, earnings are likely to take precedence over macro developments, with the market largely ignoring news from Donald Trump’s impeachment process. Durable goods orders for December are the only numbers of note, due at 8:30 AM ET.
Overnight, consumer confidence in France and Germany fell sharply under the weight of spreading lockdown measures, while China’s industrial profit growth accelerated.
Microsoft sets stage for strong tech earnings
Cloud hosting, PC purchases, remote working and video gaming created a potent trifecta for Microsoft in the last quarter, which reported a rise of 30% in profit for the second quarter of its fiscal year. Sales rose by a staggering 17% to $43.1 billion, beating expectations by nearly 10%.
The numbers set the stage for more of the same from Big Tech over next 24 hours, with Apple, Facebook and Tesla all set to report after the close.
To start the day, there will be updates from AT&T , Abbott Labs, Boeing , General Dynamics , Corning and Hess , among others.
Oil steady as Gulf tensions rise
Crude oil prices stayed at elevated levels after reports that the U.S. is preparing to increase its military presence in Saudi Arabia, against a backdrop of rising tension with Iran. The reports come a day after explosions heard in the Saudi capital Riyadh whose origins have still not been firmly identified.
The Islamic Republic has begun enriching uranium again in an apparent attempt to strengthen its negotiating position ahead of an expected re-engagement by the Biden administration with the Joint Comprehensive Plan of Action that was abandoned by Donald Trump.
By 6:45 AM ET, U.S. crude prices were flat at $52.63 a barrel, while Brent futures were up 0.1% at $55.70 a barrel. The Energy Information Administration will release its latest data on U.S. inventories at 10:30 AM ET, as usual.