US Equities Talking Points:
- Markets fell as Fed Chair Powell and Treasury Secretary Yellen testified in front of the House
- Rising cases and botched vaccine rollouts in Europe spook investors, US crude declined by 6%
- GameStop missed on both the top line and bottom line, in the first earnings report since the “squeeze”
GameStop reported disappointing Q4 earnings after the bell on Tuesday, in the first earnings report since the infamous “short-squeeze” that dominated markets earlier this year. GameStop reported adj. EPS of $1.34 vs estimates of $1.43. Revenues totaled $2.12 billion against estimates of $2.24 billion. In immediate after-hours trade, GameStop shares rose by 7%.
GME Chart
Chart created with TradingView.
Despite the focus on the earnings release, the speculative mania that gripped the markets in early 2021 appears to have dissipated. Many thought that another round of stimulus checks, which are being sent out right now, may ignite another round of speculative trading in heavily shorted stocks. So far, this has not come to fruition. Markets have instead churned under the surface and gyrated near all-time highs. It seems for now the speculative mania which contributed to broader-market volatility has slowly slipped into the shadows, allowing for natural market forces to reestablish control."
For more on the recent speculative wave, read Christopher Vecchio, CFA ‘s piece here.
Powell, Yellen Testimony
Investors cast one eye away from their screens on Tuesday as both Fed Chair Jerome Powell and Secretary of the Treasury Janey Yellen testified in front of the House Financial Services Committee. Chair Powell noted that while there have been recent upticks in employment and inflation measures, policy must remain accommodative for now.
Federal Reserve Balance Sheet
Recent stimulus, Powell noted, is unlikely to fuel “out of control” longer-term inflation. When pressed on tapering asset purchases, Powell kept his cards close to his chest and stated that markets will be told “well ahead of time.”
| Change in | Longs | Shorts | OI |
| Daily | 10% | 2% | 5% |
| Weekly | -7% | 3% | -1% |
Secretary Yellen fielded more politically charged questions, focusing on the Biden Administration’s vision for near-term fiscal policy. Yellen commented that President Biden, once the pandemic is over, will look to make long-term investments in the economy to make it “more productive.” She continued on to say that those initiatives will be partially funded through tax hikes, saying that the corporate tax rate may return to 28%.
Chair Powell and Secretary Yellen are slated to testify together again tomorrow in front of the Senate Banking Committee.
--- Written by Brendan Fagan, Intern for DailyFX
To contact Brendan, use the comments section below or @BrendanFaganFX on Twitter
