#Market Snapshot: Dow futures edge higher after steep Wall St. selloff; GameStop underlines worries about market froth

What’s driving the market?

Stocks gave up 2021 gains as investors fretted that the equity rally had gone too far as corporate earnings and the economy feel the impact of the the COVID-19 pandemic.

Worries about speculative froth were underlined by the surge in shares of GameStop, which has been the most heavily traded stock on Wall Street for two days, as part of a battle between an army of individual investors organized on platforms like Reddit and short selling hedge funds.

Analysts said equity weakness also reflected fears that some hedge funds were scrambling to exit long positions in a bid to offset losses on shorts against stocks like GameStop and AMC Entertainment Holdings Inc.
AMC,
+301.21%.
GameStop shares were up another 32% in volatile premarket trade Thursday.

“The GameStop short squeeze saga has sparked worries that certain investment firms are rushing for the exit to obtain cash to nurse any painful losses they are enduring. Within the past 24 hours, the mood has changed a lot as there is now a feeling that stocks across the board are in for further losses as a cut-and-run mentality is being adopted by some dealers,” said David Madden, market analyst at CMC Markets UK, in a note.

While overshadowed by the GameStop saga, analysts said remarks Wednesday by Federal Reserve Chairman Jerome Powell underlining that the economy remains a long way from recovery and that some sectors already damaged by the coronavirus pandemic were experiencing another round of pain were also a drag on the market.

A first estimate of fourth-quarter U.S. economic growth is due at 8:30 a.m. Eastern. Economists surveyed by MarketWatch, on average, expect gross domestic product to show annualized growth of 4.3%.

Weekly data on jobless benefit claims will provide investors a look at the state of the labor market. First-time claims are expected to fall to 875,000 from 900,000 a week earlier.

December wholesale and retail inventories data is also due at 8:30 a.m., while December new home sales and the December leading economic indicators report are both due at 10 a.m.

Which companies are in focus?

• Apple shares were lower in premarket trade after reporting its highest quarterly revenue total yet as the new iPhone 12 powered the company to its first $100-billion quarter in sales though its outlook disappointed

• Tesla shares fell 5% in premarket trade after the electric vehicle maker reported its sixth-straight quarter of profit and a sales beat, but fell short of Wall Street expectations and disappointed investors who hoped for a clear-cut sales goal for the year.

• Facebook shares were weaker in premarket trade after the social media giant delivered better-than-expected fourth-quarter results but warned of “significant uncertainty as we manage through a number of cross currents in 2021.”

• McDonalds Corp.
  MCD,
  -3.89%
  shares were down slightly in premarket trade after falling short of Wall Street forecasts on earnings and revenues.

• Shares of Southwest Airlines Co.
  LUV,
  -3.62%
  were up slightly in premarket trade after the airline reported its first annual loss since 1972 and offered bleak guidance for the first few months of the year as the pandemic continues to weigh on travel activity.

• American Air Lines Group Inc.
  AAL,
  +6.63%
  shares soared after the carrier reported a narrower-than-expected fourth-quarter loss, and revenue and load factor that beat expectations.