High-Flying Stocks Tumble Out Of The Sky In An Unforgiving Week
Dec 07, 2021
Changing brand naming has always been in vogue among American corporations, often to cover up a less than innocent past. Today this trend has come to the forefront again.
The most recent is Square (SQ), which revealed that its name would be changed to Block this week. This happened following the renaming of Facebook to Meta Platforms (FB). In the past, cryptic names have included Mondelez (MDLZ), whose Ritz crackers and Oreos were initially produced by the National Biscuit Co., as it was known back when you could tell what a firm did by its name.
Be that as it may, Block's shares fell dramatically along with other former market leaders last week, and the fall was especially severe on Friday. A former beneficiary of internet sales during the pandemic, the stock is 37% below its 52-week high, following a 5.6% drop on Friday. For Meta, which was already lagging despite its name, the trade ended up closing in bearish territory, down 20% from its 52-week peak. Other rising companies also suffered losses, with the Nasdaq down 2.62% for the week.
Even Friday's October employment data, which was far more solid than the headlines suggested, which showed 210,000 more jobs, didn't have much impact on stocks. Despite being a good number most of the time, the report fell short of forecasts of 500,000-plus.
However, the unemployment rate fell to 4.2% from 4.6% for obvious reasons. According to a survey conducted by the Department of Labor, almost a million more individuals claimed to be employed. Furthermore, about 600,000 people entered the labor market, with the greatest increase among "prime-age" (25- to 54-year-old) employees.
All of this signals that the employment data will not prevent the Federal Open Market Committee from reducing asset purchases at a quicker rate, as Fed Chairman Jerome Powell stated to Congress this week. The possibility of curtailing these liquidity injections, which have assisted in holding real interest rates at record lows, implies fewer opportunities for speculators.
Standing out among these was the iShares Russell 2000 (IWM) exchange-traded fund, which tracks benchmarks of smaller-cap stocks. The ETF entered the correction zone, falling more than 12% below its high. The most significant part of the ETF, often seen as a cohort of solid domestic companies, which is widely considered as a cohort of strong domestic firms, is AMC Entertainment Holdings (AMC). This prototypical meme stock skyrocketed from less than two dollars this year to the $70 height but has since returned to $29.
Shareholders who had these companies preferred to cash out some of the chips instead of risking ruining their prospects in 2021. Option premiums soared due to rising hedging costs, with the Cboe Volatility Index, or VIX, reaching its peak points since January.
With new COVID-19 outbreaks, whether Omicron or Delta strain and the prospect of a more restrictive Fed, it's starting to look less and less like a usual year-end rally for the stock market, whatever stocks are called.