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Market Recap (February 2 2021)

February 02, 2021
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Last week was a volatile one for Wall Street and the markets experienced the highest trading volume in years. The week began with mixed returns as the markets digested earnings reports and the likely outcome of the newly proposed COVID-19 Relief Package. On Monday both the S&P 500 and the NASDAQ posted new all-time highs. Wednesday saw a significant drop as the Federal Reserve issued a pessimistic view of the current economy, earnings reports disappointed, and pandemic concerns weighed on investors. Stocks rallied on Thursday, but Friday saw another significant drop.
 
Overall the Dow Jones industrial Average ended the week down 1,014 points (3.27%), the S&P 500 lost 127 points (3.31%) and the NASDAQ posted a drop of 472 points (3.49%). 
 
Much attention is being paid to the previously little-known company GameStop. Indeed much of the overall market volatility can be traced to the ridiculous trading of this small company. Newbie day traders using social media have driven the share price to outlandish levels and fueled massive intra-day price sways. Peter Boockvar, chief investment officer at Bleakley Advisory Group summed it up well, “This is not investing. This is not planning for one’s retirement with a diversified portfolio. This is not a prudent analysis of stocks…and these traders forget that buying a stock is buying a piece of a company, but instead, they are just speculating on a stock symbol in the ultimate game of hot potato.”
 
The real concern centers on whether this volatility will ultimately impact just a small number of stocks and hedge funds or bleed through into the market in general. We remain optimistic and agree with Rich Ross, a technical analyst at Evercore ISI, who said, “The bullish backdrop for stocks is strong, intact and so much bigger than [GameStop]; and when the latter stops going up, the former will stop going down.”