Stocks rise in US, dollar slips as risk aversion eases

The dollar retreated and Wall Street rallied on Thursday as investors looked past weak US GDP and jobless claims data to hopes of a rosier economy ahead and welcomed restrictions on this week's social media-driven trading frenzy.

Tech heavyweights Microsoft Corp, Amazon.comand Alphabet Inc were among the biggest boosts to the S&P 500 a day after the three major US indexes suffered their biggest daily percentage drop in three months.

Online trading platforms Robinhood and Interactive Brokers restricted trading in shares of GameStop, BlackBerry and other companies whose shares soared this week after they were targeted by an army of retail buyers.

Shares of GameStop plunged almost 68 per cent from Wednesday's close at one point after hitting $483 early in the session. The stock closed down 44 per cent at $193.60; it traded below $20 three weeks ago.

Hedge funds would have had more margin calls if GameStop had kept going higher, said Thomas Hayes, managing member at Great Hill Capital LLC in New York.

"When it backed off a little bit, the market breathed a sigh of relief," Hayes said.

The main Wall Street indexes on Wednesday registered their sharpest declines in three months after a squeeze on hedge funds holding short positions in the social-media darlings.

On Thursday, MSCI's benchmark for global equity markets rose 0.31 per cent to 654.5, while the Dow Jones Industrial Average rose 0.99 per cent, the S&P 500 gained 0.98 per cent and the Nasdaq Composite added 0.5 per cent.

Stocks in Europe closed little changed as countries grappled with new variants of the coronavirus amid extended lockdowns that weigh on near-term economic growth. The broad FTS Eurofirst 300 index added 0.01 per cent to 1,554.45.

Dollar drops in choppy trading

The safe-haven US dollar fell in choppy trading and riskier currencies, including the Australian dollar, reversed early losses as stocks rebounded.

US gross domestic product grew at a 4 per cent annualised rate in the fourth quarter, in line with economists' forecasts, though for all of 2020 the economy contracted 3.5 per cent, its worst performance since World War Two.

Other data suggested a faster recovery, with a report showing US jobless claims were lower than expected at 847,000,compared with forecasts of 875,000.

The unemployment rate declined more quickly than expected at year-end 2020 and the labour force will begin to recover in mid-2021, said Ryan Sweet, head of monetary policy research at Moody's Analytics.

The dollar index fell 0.173 per cent, with the euro up 0.12 per cent to $1.2123. The Japanese yen weakened 0.11 per cent versus the greenback at 104.23 per dollar.

US long-dated Treasury yields rallied from three-week lows. The US government sold $62 billion in US seven-year Treasury notes in a well-bid auction.

"The Treasury market is operating under the assumption that we will be hitting a soft patch here in the first quarter," said Kevin Flanagan, head of fixed income strategy at Wisdom Tree."The numbers are kind of being ignored," he said.

Oil prices fell slightly on concerns that delays to vaccine rollouts and fresh travel curbs to prevent new coronavirus outbreaks will depress demand. But that was offset by the impact of a weaker dollar and big US crude inventory drawdown.

Brent crude futures settled down 28 cents at $55.53a barrel. US crude futures fell 51 cents to settle at $53.34 a barrel.

Silver prices rose about 7 per cent as the dollar weakened, making the metal cheaper for buyers outside the US.

Some traders covered short positions on speculation of a GameStop-like squeeze driven by retail investors. Calls to drive silver prices higher by buying shares in silver miners and exchange traded funds circulated on social media.

Spot gold prices fell 0.06 per cent to $1,842.96 an ounce.US gold futures settled 0.4 per cent lower at $1,837.90.

COMMENT NOW