U.S. Market Wrap and Forecast for Friday

Major benchmarks sold off at the start of Thursday’s session while a congressional committee debated the implications of last month’s Gamestop Inc. (GME) frenzy. Risk-adverse instruments surged to monthly highs in the first half of the day, shaking out a few weak hands. An afternoon bounce pushed a few points above opening prints but SP-500 Volatility Index (VIX) held firmly in the green into the closing bell.

Mean Reversion

Traders sold many stocks that had rallied to unsustainable price levels, including Tesla Inc. (TSLA), squaring positions ahead of Friday’s options expiration finale. GME and its companions sold off as well, hitting 4-week lows. High yield plays perked up, attracting buying interest for the first time in 2021.  FAANG stocks ticked lower in unison, displaying none of the leadership that generated impressive 2020 returns.

Marriott International (MAR) closed higher despite a 59% year-over-year revenue decline, with executives hoping vaccines translate into a booking resurgence and travel season that keeps hotels from going bankrupt. Fauci said vaccines were reducing COVID-19 infections this morning, which we assumed long before he reached that conclusion. That now needs to translate into baby boomers leaving their caves and spending billions in their favorite destinations this summer.

Friday Expiration

Friday options expiration is often sloppy and uncomfortable, with position squaring more important to the ticker tape than short-term price patterns. Limited exposure makes sense during this period but stocks that have sold off into popular strikes could offer good trade entries into Monday’s options hangover. Twitter Inc. (TWTR) comes to mind in this regard, dropping three or four points this week before bouncing just above the 70 strike.

Home Depot Inc. (HD) highlights next week’s earnings calendar, with the Dow component grinding through the sixth month of a narrow range price pattern. Macy’s Inc. (M) is also on the schedule, shining a light on one of the fallen angels of last month’s Gamestop squeeze. Sadly, M and the mall anchor group have no future, beyond the lipstick put on the pig in recent months, because e-commerce is an unstoppable monster.

For a look at all of today’s economic events, check out our economic calendar.