The Fed
By Thu, Jan 28, 2021
Hey Scoopers,
The Fed’s report on the state of the economy dampened the market’s mood. — More on that in the “Overall Market” section.
Beyond the overall market, the short squeeze continued, and the overall market downward movement brought down a few recent high flyer stocks. — More on that in the “What’s Up?” and “What’s Down?” sections.
Oh, by the way, the SEC is on the case. — More on that in the “Water Cooler” section.
But, first, here is a recap of what happened in the market yesterday:
Market Recap
- U.S. markets: The stock market indices finished the day in the red once again. Scroll down to the “Overall Market” section to read more.
- Cryptocurrency: Bitcoin’s price was down to $30,000 per coin by Wednesday evening as last week’s rally has fully subsided.
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The Fed
The stock market indices unanimously fell at least 2% on Wednesday. The market decline feels more painful because the stock market has been on a steady upward trend in the last three months.
The main reason behind the decline is the Federal Reserve’s update on the state of the economy and maintaining the interest rate at its current level. Investors took that update as a negative sign and sent the market downward.
Short Squeeze Continued
So, what happened?
The battle between wall street institutions and, presumably, the retail investors led by Reddit’s WallstreetBets continued and expanded into any stock that is heavily shorted. Investors are systematically going after any stock with a high percentage of its outstanding shares shorted and trying to push the stock high enough for the short squeeze to prop up the stock price even higher.
A good example of such new short squeeze stocks is KOSS Corp (Ticker: KOSS) were up more than 680% in one day.
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Brought Down by the Market
So what happened?
Shares of Shopify (Ticker: SHOP) and Netflix (Ticker: NFLX) were both down by more than 6%. It’s not too surprising after seeing more than a 2% decline by the overall market indices.
The SEC is Monitoring
So what happened?
The story of the Reddit WallStreetBets members vs. institutional investors has become a topic of heated discussions on several stock market forums. The issue of whether what’s happening is legal or not is one of those discussion topics.
Today, the SEC issued a statement on market volatility and confirmed that it is monitoring the situation. It is challenging for the SEC to make a definitive statement on the situation as of yet. Separating which thread is just freedom of speech and which discussion on the internet is an intentional and coordinated effort to manipulate the market is a time-consuming task. Not to forget that the agency needs to verify whether there have been any other participants trying to take advantage of the situation.
This is a rapidly evolving situation that we will be monitoring closely as the story pans out in the days to come.
If you have any questions, or suggestions let us know by emailing us at members@tradestocks.com. We look forward to hearing from you.
About the Author
The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card
