Dow hits record as US banks less exposed to hedge fund's liquidation
Credit Suisse and Nomura warned of significant losses due to Archegos Capital
Fairlead Strategies founder and managing partner Katie Stockton on the Archegos hedge fund, financial stocks and bitcoin.
The Dow Jones Industrial Average rallied to record highs Monday despite selling pressure in financials and elsewhere after a large hedge fund was forced to unwind billions of dollars in positions.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| I:DJI | DOW JONES AVERAGES | 43389.6 | -55.39 | -0.13% |
| SP500 | S&P 500 | 5893.62 | +23.00 | +0.39% |
| I:COMP | NASDAQ COMPOSITE INDEX | 18791.806377 | +111.69 | +0.60% |
The Dow Jones Industrial Average rose 98 points, or 0.30%, while the S&P 500 slipped 0.09% as energy stocks retreated. The Nasdaq Composite fell a steeper 0.6%.
The hedge fund Archegos Capital Management was on Friday forced to sell nearly $30 billion of holdings of U.S. media stocks and Chinese internet ADRs after facing margin calls on heavily leveraged positions.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| VIAC | NO DATA AVAILABLE | - | - | - |
| DISCA | NO DATA AVAILABLE | - | - | - |
| BIDU | BAIDU INC. | 85.42 | +0.84 | +0.99% |
The fire sale caused significant losses in ViacomCBS and Discovery Inc., as well as Baidu Inc. and Tencent Holdings, among others.
The impact was felt at investment firms Credit Suisse Group AG and Nomura Holdings, which warned of significant losses tied to the selling of Archegos' positions. Whole Dow components JPMorgan Chase & Co. and Goldman Sachs Group Inc. were among the laggards due to the fallout from the selling, reports suggest their exposure may be limited compared to their foreign counterparts.
Elsewhere, Boeing Co. provided support to the Dow after receiving an order from Southwest Airlines Co. for 100 737 Max 7 jets, which will begin being delivered in 2022. The deal includes an option for Southwest to purchase an additional 155 Max jets through 2031.
In other airline news, American Airlines reported global bookings are rebounding.
"As of March 26, the Company’s seven day moving average of its net bookings is approximately 90% of the level experienced in 2019, with a domestic load factor of approximately 80% during that same period," American Airlines said in an U.S. Securities and Exchange Commission filing.
Visa Inc. launched a pilot program that will allow customers to settle transactions using the cryptocurrency USD Coin, a stablecoin pegged directly to the U.S. dollar.
In commodities, West Texas Intermediate crude oil added 59 cents to $61.56 per barrel as the Ever Given container ship was refloated in the Suez Canal. Elsewhere, gold fell $20.10 to $1,712.10 per ounce.
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Overseas markets were mostly higher.
Germany's Dax 30 paced the advance in Europe, trading up 0.47% while France's CAC 40 rose 0.45% and Britain’s FTSE 100 slipped 0.07%.
In Asia, Hong Kong’s Hang Seng index edged up 0.01%, China’s Shanghai Composite advanced 0.5% and Japan’s Nikkei 225 climbed 0.71%.