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Stocks Drop on Concerns About Vaccine Rollout – The Wall Street Journal


U.S. stocks fell amid concerns about Covid-19 vaccine distribution while traders were captivated by the frenzied trading in

GameStop

and other heavily-shorted stocks.

The Dow Jones Industrial Average declined 540 points, or 1.7%, and the S&P 500 dropped 2.2%. The Nasdaq Composite lost 2%.

Delays in the rollout of Covid-19 vaccines, coupled with lingering lockdown measures, marked a “double whammy” of bad news for investors, said

Hani Redha,

a portfolio manager at PineBridge Investments.

“I think the market expected that by now we would be talking about loosening, not tightening restrictions,” he said. “On the vaccine rollout, this is very problematic for the near term. It is very critical for shaping the growth bounce back, and these issues are just adding more delay to that.”

AstraZeneca

rebutted reports Wednesday that it had pulled out of a meeting with European Union officials, as a spat between the two groups regarding a vaccine shortfall deepened.

The Biden administration said Tuesday it would purchase enough additional coronavirus shots to vaccinate most of the U.S. with a two-dose regimen by the end of summer.

While questions about the pace of vaccine rollout and the economic recovery are real, they aren’t new issues for investors, said Victoria Fernandez, the chief market strategist at Crossmark Global Investments. Given the market’s run to new highs, it isn’t surprising that investors are a bit worn out.

“I really think it’s a hodgepodge of different things and the market is saying, you know what, we’re taking a breather,” she said.

The most fascinating market dynamic, however, remains the spectacular, day-trader driven gains for heavily shorted stocks like GameStop and

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BlackBerry.

GameStop, is the most visible token in this game. Driven largely by day traders on the social-media message board Reddit, who have en masse been buying up the stock, squeezing short sellers, the stock rose 106% on Wednesday after rising 113% on Tuesday. After markets closed Tuesday, Tesla Chief Executive

Elon Musk

tweeted “Gamestonk!!” in an apparent reference to the frenzied trading

GameStop’s rise this year on its own comprises nearly a full percentage point of the small-cap S&P 600’s gains, according to S&P Dow Jones Indices. The index was up 10.2% through Tuesday. GameStop is now the index’s largest issue; at the end of 2020, less than a month ago, it ranked 287.

Another target of the day-trader crowd,

AMC Entertainment,

was up 263% on Wednesday. If the gains held to the closing bell, it would be the stock’s biggest one-day gain on record.

The Reddit crowd’s gang-piles into these stocks resembles century-old pump and dump schemes from the 1920s, said Hans Olsen, the chief investment officer at Fiduciary Trust Co.

Back then, stock operators would pool money to pump up the price of a targeted stock. Once the public caught wind of the moves and bought, the operators would sell at a profit. Those schemes of course didn’t have a convenient platform like Reddit through which traders could coordinate.

“This is old stuff coming new again,” Mr. Olsen said, “and facilitated in a way we haven’t seen, by social media.”

This kind of trading is a also warning sign that the markets—driven by central-bank policy toward risk-taking—are dangerously out of balance, Mr. Olsen said. He wondered whether the Federal Reserve addresses any of this in today’s press conference.

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“You talk about systemic risk? This is systemic risk seeding itself. They ought to address it.”

In the afternoon, the Federal Reserve said it would maintain its current monetary policies while acknowledging the economy has softened in recent weeks. Investors were also parsing comments from Chairman

Jerome Powell’s

press conference.

In corporate news, investors parsed results from

AT&T,

Blackstone

and

Boeing,

with earnings from

Apple,

Facebook

and Tesla due just after the market closes. Investors are eager to see how the tech giants fared during a quarter marked by continued lockdowns and stay-at-home orders.

“The bar for tech stocks to beat is quite high because we were still in lockdown and yet they do seem to be doing well relative to those higher expectations,” said Mr. Redha.

Shares of

Microsoft

gained 1% after the company reported record quarterly sales Tuesday. Its shares closed at a new high Tuesday.

Walgreens Boots Alliance

was up 4.8% after the drugstore chain named

Starbucks

operating chief

Rosalind Brewer

as its next chief executive.

In commodities markets, U.S. crude rose 0.9% to $53.10 a barrel. Gold prices fell 0.4% to $1,843.00. The U.S. 10-year Treasury note’s yield was down slightly at 1.01%.

Overseas, the pan-continental Stoxx Europe 600 was down 1.2%, while in Asia, stock indexes were mixed. Japan’s Nikkei 225 rose 0.3%, Hong Kong’s Hang Seng fell 0.3%, while in mainland China, the Shanghai Composite edged up 0.1%.

On Tuesday, the S&P 500 hit a new intraday high before slipping in the final minutes of trading.



Photo:

Nicole Pereira/Associated Press

Write to Will Horner at William.Horner@wsj.com and Paul Vigna at paul.vigna@wsj.com

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