Investors brace for fallout after hedge fund default reportedly triggered $20 billion fire sale of stocks - Financial Post

With a number of banks said to be exposed to Archegos, investors are on the lookout for signs of contagion

Author of the article:

Reuters

Devik Jain and Medha Singh

Publishing date:

Mar 28, 2021  •  45 minutes ago  •  2 minute read  •  40 Comments

Contracts on the S&P 500 declined along with Nasdaq 100 futures following revelations that Archegos Capital Management LLC — the family office of Bill Hwang — was behind a $20 billion spree of block trades on Friday. Photo by Angela Weiss /AFP via Getty Images

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Discovery Inc, ViacomCBS, U.S.-listed shares of Baidu and VIPShop, all linked to Archegos, dropped between 2 per cent and 9 per cent. Theses stocks lost between 30 per cent and 50 per cent of their value last week.

Wall Street’s fear gauge rose 2.57 points to 21.50 points.

“It’s a black eye for the financial industry because it suggests that there still may not be a full handle on risk control when it comes to leveraged trading,” said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.

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“This seems like a pretty specific case. It could lead to increased regulation … but the impact on broader markets is going to be small.”

The Dow and the S&P 500 hit record closing highs on Friday on optimism about speedy vaccinations and record stimulus, while the tech-heavy Nasdaq is still 7.1 per cent from its February all-time closing high.

Financials, energy and technology fell the most among S&P sectors. Utilities, the best performing sector this month, firmed 1 per cent.

“It’s true that the market in the short-term may be slightly overbought. We are probably starting to get used to the good news (but) the trend is clearly positive,” said Marco Pirondini, U.S. head of equities at Amundi Pioneer in Boston.

The Nasdaq is set to post its first monthly decline in five while the S&P 500 and Dow are headed for their second consecutive monthly gains.

At 10:04 a.m. ET, the Dow Jones Industrial Average was down 0.24 per cent, at 32,992.56, the S&P 500 was down 0.45 per cent, at 3,956.57, and the Nasdaq Composite was down 0.93 per cent, at 13,016.32.

Planemaker Boeing Co rose 2.2 per cent after reaching a deal with U.S. budget carrier Southwest Airlines Co for a variant of the 737 MAX aircraft. Southwest’s shares gained 0.5 per cent.

Bitcoin prices added 3.8 per cent after Visa Inc said it would allow the use of the cryptocurrency USD Coin to settle transactions on its payment network.

Declining issues outnumbered advancers 2.6-to-1 on the NYSE and 3.5-to-1 on the Nasdaq.
The S&P index recorded 62 new 52-week highs and no new low, while the Nasdaq recorded 96 new highs and 56 new lows.

© Thomson Reuters 2021

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2021-03-29 16:54:20Z
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