War on Wall Street, GDP & Jobless Claims, Earnings Deluge - What's up in Markets

The tug of war continues between Wall Street hedge funds and an army of exuberant and sometimes grievance-driven retail traders. The first reading of U.S. fourth-quarter GDP is due, as are weekly jobless claims. Apple (NASDAQ:AAPL), Tesla (NASDAQ:TSLA) and Facebook (NASDAQ:FB) stock all struggle despite strong results, and oil has a tightening physical market to thank for withstanding the sell-off in stocks. Here's what you need to know in financial markets on Thursday, January 28th

1 The Great Stonks Revolt

Buckle (NYSE:BKE) up, it’s going to be another wild day in the Great Stonks Revolt of 2021. Monday and Tuesday saw one of the biggest gross reductions in exposure to the market by hedge funds in the last decade, according to Morgan Stanley (NYSE:MS).

That’s down to the licking given to hedge funds and other pros by the army of retail traders organizing on Reddit and other social media. How long the movement can last isn’t clear. Unless the day traders actually want to be the long-term owners of failing game stores and debt laden, empty movie theaters, the urge to take profits may very soon start to become irresistible.

2. GDP, Jobless Claims due

For those still attached to the quaint notion that the state of the economy has any role in price formation for financial assets, the U.S. will announce its preliminary reading of fourth-quarter gross domestic product at 8:30 AM ET (1330 GMT).

Analysts expect the economy to have grown at an annualized pace of 4%, a sharp slowdown from the 33% seen in the third quarter. Core personal consumer expenditures, the favored measure of inflation at the Federal Reserve, are seen rising 1.5% year-on-year.

At the same time, more timely data on the labor market will be released. Initial jobless claims are expected to have stayed at a high level of 875,000 last week. New home sales data for December completes the data roster.

3. Stocks set to open mixed

U.S. stock markets are set to open mixed after their sharpest one-day sell-off in weeks on Tuesday.

By 6:35 AM (1135 GMT), Dow Jones futures were up 10 points, less than 0.1%. S&P 500 futures were down 0.2%, while Nasdaq futures were down 0.8%.

The deluge of earnings continues, with both Mastercard (NYSE:MA) (early) and Visa (NYSE:V) (late) reporting, along with Comcast (NASDAQ:CMCSA), McDonald’s (NYSE:MCD), Altria (NYSE:MO) and Dow, Stanley Black & Decker (NYSE:SWK) and three of the country’s biggest airlines – American, JetBlue and Southwest.

4. Tesla, Apple can’t meet high expectations

Tesla recorded its first ever full year of profits, and Apple recorded its first ever quarter of $100 billion in revenue, but neither could live up to the sky-high expectations implicit in their current stock prices.

Tesla stock was marked down 4.9% in premarket trading after forecasting growth of only 50% in both of the next two years, while Apple stock was indicated down 2.3%, despite raising the average selling price of its iPhone from $803 to $879 in the space of a year.

Facebook, the other megacap to report after the bell on Wednesday, fell 0.5% after warning of regulatory challenges to its dominance of the online ad market, accompanied by some highly critical comments of Apple by its CEO, Mark Zuckerberg.

5. Oil steady despite pressure on risk assets

The selling pressure in the stock market had only a limited effect on crude oil prices, which remain well supported by a steady drawdown in global inventories – illustrated by a sharp drop in U.S. stockpiles announced by the Energy Information Administration on Wednesday.

By 6:35 AM ET, U.S. crude futures were down 0.2% at $52.77 a barrel, while Brent futures were down by a similar amount at $55.41 a barrel.

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