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Dow Ends at Record as Wall Street Weighs Hedge Fund Default

The Dow closes at a record as investors weigh the fallout of the forced liquidation of positions held by U.S.-based hedge fund Archegos Capital.

The Dow Jones Industrial Average on Monday closed at a record in mixed trading as investors weighed the uncertain fallout of the forced liquidation of positions held by U.S.-based hedge fund Archegos Capital.

The Dow finished up 98 points, or 0.3%, to 33,171, the S&P 500 slipped 0.09% and the Nasdaq was down 0.6%.

Credit Suisse  (CS) - Get Credit Suisse Group American Depositary Shares Report and Nomura Holdings  (NMR) - Get Nomura Holdings Inc ADR American Depositary Shares Report warned they face potentially significant losses from their exposure to the massive unwinding of leveraged equity bets by Archegos Capital.

Nomura estimated its claim was about $2 billion. Nomura shares saw their biggest one-day drop in years.

“A significant U.S.-based hedge fund defaulted on margin calls made last week by Credit Suisse and certain other banks,” Credit Suisse said. 

“Following the failure of the fund to meet these margin commitments, Credit Suisse and a number of other banks are in the process of exiting these positions.”

Goldman Sachs  (GS) - Get Goldman Sachs Group Inc. (The) Report has been telling shareholders and clients that any losses it faces from Archegos were likely to be immaterial, a person familiar with the matter told Bloomberg. The stock fell 0.5% on Monday. 

Morgan Stanley  (MS) - Get Morgan Stanley Report also has been reported as offering block trades; the stock finished down 2.6%.

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The more than $20 billion of positions that Archegos sold to meet margin calls included ViacomCBS  (VIACA) - Get ViacomCBS Inc. Class A Report and Discovery  (DISCA) - Get Warner Bros Discovery Inc Com Ser A Report, which dropped 26% and 27%, respectively, on Friday.

ViacomCBS on Monday finished down 5% and Discovery shares gave up 1.6%.

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The container ship stuck in Egypt's Suez Canal, one of the world's most important waterways for trade, has been pulled free. The 1,300-foot long vessel was freed from its six-day grounding and the world's busiest trade waterway has been reopened to traffic.

About 12% of global trade by volume flows through the canal.

Oil prices settled higher Monday, with West Texas Intermediate crude, the U.S. benchmark, up 0.95% to $61.56 a barrel. OPEC members will be meeting in Vienna later this week and they are expected to hold their production-cut agreement in place.

Stocks finished higher on Friday as investors cheered progress on vaccine distribution and optimism about the prospects that the economy would recover strongly from the coronavirus pandemic grew. The Dow and S&P 500 posted record closes.

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