The trigger for a seismic stock-market slump Thursday and Friday that has erased weeks of gains for a frothy U.S. stock market, may have been embattled investment firm SoftBank
On Thursday, the Dow Jones Industrial Average DJIA, -0.56% ended with a loss of 807.77 points, or 2.8%, at 28,292.73, after dropping more than 1,000 points at its session low. The S&P 500 index SPX, -0.81% closed 125.78 points lower, down 3.5%, at 3,455.06. The Nasdaq Composite COMP, -1.26% tumbled 598.34 points, or 5%, to end at 11,458.10. The declines marked the biggest one-day drops for all three indexes since June.
On Friday, The Nasdaq Composite COMP,tumbled 582 points, or 5%, before climping back to end at 11,313.
he Wall Street Journal wrote on Friday that SoftBank bought options tied to billions of dollars worth of individual tech stocks, which may have included bullish bets on Tesla TSLA, +2.78% and Apple AAPL, +0.06%.
The Journal wrote that regulatory filings show the investor bought nearly $4 billion of shares in technology companies in the spring. They said that not included in those disclosures were the massive options trades, which were reportedly bought to pay off if the stock market rises to a certain level and then lock in gains, the paper said citing people familiar.
The world’s third-largest economy shrank an annualised 28.1% in April-June, more than a preliminary reading of a 27.8% contraction, revised gross domestic product (GDP) data showed on Tuesday, suffering its worst postwar contraction.
The record drop roughly matched a median market forecast of a 28.6% contraction in a Reuters poll.
The main culprit behind the revision was a 4.7% drop in capital expenditure, much biggest than a preliminary 1.5% fall, suggesting the COVID-19 pandemic was hitting broader sectors of the economy.
The data will put the new prime minister, to be elected in a ruling party leadership race on Sept. 14, under pressure to take bolder economic support measures.
Many analysts expect the BOJ hold off on ramping up stimulus for now as steps to spur demand could get people moving more freely into shops and risk spreading the virus.
“Even though restrictions to economic activity have been relaxed, some of them will remain under the new lifestyle forced upon by the pandemic,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
“It will probably take a long time for the economy to normalise and return to levels before the pandemic.” _
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