Market Struggles To Pare Back Losses As Meme Stock Volatility Continues - Forbes

Topline

Technology stocks continue to underperform the broader market as precarious signals abound, including meme stocks that are maintaining their meteoric levels, and another jobs report showing the labor market recovery is far from where it should be.

Key Facts

At 9:45 a.m., the Dow Jones industrial average, which sank 120 points Wednesday, was up 120 points, or 0.3%, while the S&P 500 ticked up 0.2%, and the tech-heavy Nasdaq–which far underperformed the broader market Wednesday–was virtually flat.

Among firms heading up gains in the S&P, shares of Kroger are up 2.5% after the grocer shattered Wall Street expectations with sales growth of nearly 11% and profits of about $837 million thanks in part to an expansion of its home-delivery and in-store pickup services.

Meanwhile, Thursday morning jobs data show another 745,000 people filed new claims for benefits last week–an increase of nearly 10,000 from the previous week but largely in line with economist forecasts.

On the deal front, shares of payments fintech Square are down nearly 2% after the firm–led by billionaire Jack Dorsey–announced it will acquire a majority stake in entertainment mogul Jay-Z's embattled music service, Tidal, for $297 million.

The broader market's ongoing tepidness continues to be outshined by pockets of trading mania: Tanger Outlet shares are soaring 20% as Reddit traders plow back into the meme stock, pushing it past a late-January peak and more than doubling its return this year.

Meanwhile, GameStop, down 2%, is still up more than 200% since last week, mortgage lender Rocket Companies is falling another 2% after plunging 30% from a peak on Tuesday and AMC is still up 300% this year.

Key Background

Wall Street is laser-focused on the impending economic recovery that should kick into overdrive once the nation nears herd immunity. That's led investors to rotate away from the technology stocks heading up market gains last year and into cyclical stocks in sectors hit hard by the pandemic. Meanwhile, concerns over rising Treasury yields have left the three major indexes floundering since closing at record highs in February. The Nasdaq and S&P are about 8% and 3% off their mid-February peaks, respectively, while the Dow has ticked down 2% from a late-February high.

Crucial Quote

"The violent rotation will continue as more stimulus arrives, herd immunity is achieved and growth booms," says Vital Knowledge Media Founder Adam Crisafulli, who notes that meme-stock trading patterns could become a core macroeconomic concern as the "nonsense activity" spreads to more serious firms like Rocket Companies. In the meantime, "Covid beneficiary stocks and high-multiple momentum names will face ongoing valuation headwinds while investors flock to traditional cyclical stocks along with those levered to reopening."