Dow falls 350 factors amid disappointing vaccine information and ongoing issues over the commerce frenzy

U.S. stocks fell Friday after Johnson & Johnson’s coronavirus vaccine trial disappointed some investors while concerns about retail frenzy lingered.

The Dow Jones Industrial average lost 370 points, or 1.2%. The S&P 500 lost 0.9% as all 11 sectors were in the red. The Nasdaq Composite was down 1%.

JNJ said its single-dose vaccine had shown an overall 66% effectiveness in protecting against Covid-19. The vaccine was 72% effective in the US, 66% in Latin America, and 57% in South Africa at four weeks. The vaccine provided full protection against hospital stays related to Covid. JNJ’s shares were down 3.6%.

Stocks had rebounded to hit record highs in hopes that vaccines against Covid would be effective to allow for a smooth economic reopening before the end of the year. New mutations that are more resistant to vaccines could improve the bright outlook for investors.

Increased speculative trading by private investors also continued to worry the market. GameStop’s shares doubled after Robinhood announced it would limit purchases of the stock and other heavily abbreviated names after restricting access the previous day. Robinhood raised more than $ 1 billion overnight from its existing investors and also used the banks’ credit lines to ensure that the capital was in place to start trading the volatile stocks again.

Investors are concerned that if GameStop continues to rise in such volatility, it could penetrate financial markets and cause losses at brokers like Robinhood and force hedge funds that bet against the stock to sell other stocks to raise cash.

There are also fears that the GameStop mania is a sign of a bigger bubble in the market, and that its dissolution could also create turmoil and hit retail investors hard. A number of lawmakers also called for an investigation into the chaotic trade. The Securities and Exchange Commission announced on Friday that it will review the regulated agency’s actions to see if the decisions have affected disadvantaged investors.

“Between calling for hearings and reports in Washington, Robinhood was forced to not only draw on its credit lines but also raise $ 1 billion from existing investors. The whole situation continues to undermine market confidence,” said Adam Crisafulli, founder of Vital Knowledge, note in a Friday.

It’s been a volatile week on Wall Street. The Dow lost more than 600 points on Wednesday and suffered its worst sell-off in three months. Then the blue chip benchmark rallied 300 points on Thursday amid a broad market rally. All three major averages have lost at least 1% this week.

The market also saw its highest trading volume in years as the mania heated up. On Wednesday, the total market volume reached more than 23.7 billion shares, surpassing the level at the height of the financial crisis in 2008. On Thursday, there was also extremely strong trading with more than 19 billion shares that changed hands.

A wave of retailers motivated each other on the red-hot WallStreetBets Reddit forum to pile into the most hated names of hedge funds, resulting in massive short-bruising of stocks. GameStop is up more than 1,000% in January, while AMC Entertainment is up over 500% this month.

“This smaller capitalization rally would likely destabilize and lead to inefficiencies,” Christopher Harvey, senior equity analyst at Wells Fargo, said in a note. “Stocks are ultimately fundamentals – and reversals can be very painful, both up and down.”

However, some believe that the overall market impact should be limited for now, as retail volume is concentrated on just a handful of names.

“While we believe there will be more pain, we remain optimistic that it will likely stay local,” said Maneesh Deshpande, head of equity derivatives strategy at Barclays. “Long-short hedge funds have relatively little market exposure, which indicates little impact on the overall market due to deleveraging.”

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