The Week in Review

The Week in Review

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Key Takeaways

• Investors rotated more towards value stocks as the economy is set to reopen
• GameStop stages another extreme swing following its earnings report

Wild gyrations across asset classes marked another volatile week. The US equity market swayed in both directions as investors tried to make sense of all that was happening. Testimonies of Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen provided insight into the economic outlook. Fed Chairman forecasted GDP to grow by 6.5% this year with a drop in unemployment rate that could land it at 4.5%. Treasury Secretary Janet Yellen predicted the US could return to full employment as soon as next year.

The brighter economic outlook made real-economy stocks more attractive in the eyes of investors. That sentiment resulted in an increased appetite for the 30-stock Dow Jones Industrial Index, as opposed to the tech-focused Nasdaq Composite.
Adding more hopes for an economic reopening, Joe Biden said during his first presidential news conference he will make sure to get as many as 200 million Americans vaccinated in his first 100 days in office. The goal was upgraded from the initial one of 100 million doses administered during his first 100 days, which was achieved by the 58th day of his term.

By the end of the week, investors grew more optimistic towards the so-called value stocks, those poised to get a boost as the economy reopens, such as banks, airlines, retailers, manufacturers. Meanwhile, investors pulled money out of the tech sector, viewed as particularly vulnerable to shifts in the economy due to its highflying valuation.

One individual stock, GameStop, suddenly became active as the company released its fourth-quarter earnings report. This was the first fundamental data after GameStop became popular in January. The earnings report failed to deliver valuable content and investors initiated a sell-off wave that sent the stock down by over 30% to a close of $120 in the trading session on Wednesday. The next day, however, the stock surged 52% to reach its weekly highs of around $190 and closed at $183.75, erasing Wednesday’s losses.

On the cryptocurrency front, bitcoin was trading sideways and modestly to the downside. Even Elon Musk could not provide a sustainable buying momentum when he tweeted on Wednesday that Tesla customers in the US could now purchase Tesla cars using bitcoin as a means of payment. The world’s largest digital asset hovered between $55,000 and $52,000.