Stock futures steady after recovery rally

by Jonathan Adams
Stock futures

Shares of some of the heavily shorted stocks that had become popular among members of the r/wallstreetbets forum surged after sliding during the regular session

Stock futures traded slightly lower Thursday evening, steadying after a recovery rally during the regular session.

Contracts on the Dow fell about 50 points, or 0.2%, shortly after the overnight session began on Thursday. The index had closed higher by 1%, or 300 points, earlier in the day, led by shares of Disney and Intel.

Shares of some of the heavily shorted stocks that had become popular picks among members of Reddit’s r/wallstreetbets forum surged anew in late trading after sliding during the regular session and giving back steep gains from earlier this week. GameStop shares nearly halved during regular trading on Thursday before rocketing higher by more than 50% in the after-hours session. Shares of AMC also soared in late trading after a regular-session slide, as did shares of BlackBerry, Express, Bed Bath & Beyond and Nokia.

During Thursday’s session, online brokerages including Robinhood, Webull Financial and E-Trade Financial blocked buying of many of these recently volatile shares, drawing the ire of users, criticism from lawmakers and a class action lawsuit against Robinhood for the trading restrictions.

Elsewhere, recent prints on the U.S. economy came in better than expected, pointing to a tentative improvement in the economic landscape as investors await widespread vaccinations and a lasting economic reopening. Weekly unemployment claims dipped below 900,000 for the first time in three weeks, albeit while remaining at a historically elevated level.

I think what we’re looking at is, we’ve got pockets around the market that are decidedly showing signs of bubble-ness so to speak, whether that comes from what we saw [Wednesday], which was really a side-show of the markets, related to these shorted stocks that were driven up higher by individual investors, John Stoltzfus, Oppenheimer chief markets strategist, told Yahoo Finance on Thursday.

He said, the other side of it would be on a fundamental basis, what we are seeing is an economy that is positioning itself for a recovery process. And that means your core equities are likely to have an opportunity to move higher.

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