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Dow Futures Climb As Reddit Retail Grip Fades; GameStop, AMC Plunge

Investor focus on Wall Street returns to quarterly earnings and economic recovery prospects Tuesday as the recent Reddit-fueled grip on markets fades and volatility eases.

The Tuesday Market Minute

  • Global stocks extend gains as the retail investor grip on Wall Street eases and investors focus shifts to vaccine rollout improvements and progress on stimulus talks.
  • The CBOE's market volatility gauge tumbles as retail-fueled short-squeezes run out of steam, with key stocks such as GameStop, AMC Entertainment and Koss Corp retreating sharply in pre-market trading.
  • CDC data suggests that as many Americans have received at least one vaccine dose as have tested positive for COVID-19, a key benchmark in the government's ambition to eradicate the virus before the end of the year.
  • European stocks climb on extended stimulus bets after a dismal reading of December retail sales in Germany, with the euro falling to a seven-week low against the U.S. dollar.
  • Oil prices add to recent gains, with Brent crude marching towards $60, as energy markets look to a big second-half surge in global demand. 
  • U.S. equity futures suggest a firmer open on Wall Street following quarterly earnings from Pfizer, UPS, Exxon and Alibaba before the bell and tech giants Amazon and Alphabet after the close of trading. 

U.S. equity futures extended gains Tuesday, while retail investor-focused stocks such as GameStop  (GME)  and AMC Entertainment  (AMC)  continued to plunge, as investors switched focused from market volatility to improving vaccine and recovery prospects for the world's biggest economy. 

With short interest tumbling and the Reddit-lead rally that has gripped Wall Street for the past week slowly fading, market volatility tumbled in overnight trading, with the CBOE's VIX index falling nearly 20% to 27.31 points, allowing investors to creep back into riskier assets amid improving vaccine rollout prospect and stimulus bets.

President Joe Biden, in fact, looks set to push ahead with his $1.9 trillion COVID relief package after meeting with Republican lawmakers in the White House yesterday. Biden's Press Secretary, Jen Psaki, told reporters that the President "will not slow down work on this urgent crisis response, and will not settle for a package that fails to meet the moment." 

Market sentiment was also boosted by what could be a key turning point in the fight against the coronavirus pandemic. Data from the Centers for Disease Control suggest that around 26.1 million people have received at least one dose of the two approved vaccines, a figure that essentially matches the number of Americans who have tested positive for COIVD-19 over the past year. 

Johnson & Johnson  (JNJ)  is also likely to seek Emergency Use Authorization for its one-shot vaccine early this week, adding to hopes of a so-called 'vaccine glut' that will accelerate inoculations over the first half of the year.

Futures contracts tied to the Dow Jones Industrial Average suggest a 245 point opening bell gain while those linked to the S&P 500 are indicating a 34 point advance for the broader benchmark. Nasdaq Composite futures, meanwhile, are priced for a 110 point bump ahead of quarterly earnings from Amazon  (AMZN)  and Alphabet  (GOOGL)  after the close of trading.

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Pfizer Inc.  (PFE) , United Parcel Service Inc.  (UPS) , Alibaba Group Holding Co.  (BABA)  and Exxon  (XOM)  will all publish quarterly updates before the opening bell. 

Pfizer missed Street earnings forecasts, but said its newly-approved COVID vaccine would generate around $15 billion in sales this year, allowing it to boost 2021 profit forecasts. Exxon, meanwhile, beat earnings forecasts with an adjusted profit of 3 cents per share, and unveiled a new low-carbon business that will draw $3 billion in company investments.

GameStop shares were marked 43% lower from their Monday close at $129.00 each, while AMC shares slumped 32% to $9.00. Koss Corp  (KOSS)  also extended yesterday's sharp decline, falling another 25% to $26.50 each.

In Europe, a dismal reading for retail sales in Germany, the region's largest economy, over the month of December underscored the ongoing struggle for the world's biggest trading bloc to overcome its pandemic-lead downturn that triggered bets on extended stimulus from the European Central Bank. 

That pushed the euro to a seven-week low of 1.2045 against the U.S. dollar, but gave regional stocks a solid Tuesday boost, with the Stoxx 600 rising 1.3% in Frankfurt and Germany's DAX index adding 1.36%. In Britain, firmer oil and commodity prices offset a stronger pound, helping the FTSE 100 into an early 0.9% gain.

Oil prices have been marching higher for much of the past six months, with Brent crude now approaching the $60 mark as traders bet on renewed energy demand from major economies over the second half of the year.

WTI contracts for March deliver were seen $1.07 higher in early European trading at $54.62 while Brent contracts for April, the global benchmark, rose $1.06 to $57.41 per barrel.