Stock futures are falling as the volatile Wall Street week continues


Traders on the floor of the New York Stock Exchange.

Source: The New York Stock Exchange

US stock futures fell in overnight trading Thursday as the volatile week continued on Wall Street.

Dow futures fell around 40 points. S&P 500 futures fell 0.2% and Nasdaq 100 futures lost 0.15%.

On Thursday, the Dow Jones Industrial Average rose 300 points thanks to gains at Disney, Intel and American Express. The S&P 500 rose nearly 1%. Thursday’s rally follows Wednesday’s worst Dow and S&P sell-off in three months. The Nasdaq Composite closed 0.50% on Thursday.

Thursday’s rally was a reverse of recent weakness in stocks triggered by market volatility from speculative trading with retail investors. Several e-brokers have taken steps to curb deliberate purchases of severely shortened names, giving investors a breather from the remarkable, if seemingly synthetic, moves in names like GameStop.

However, the stationary game retailer and AMC Entertainment’s shares were in expanded trading Thursday after Robinhood announced it would allow limited purchases of some of the restricted securities on Friday.

Investors are concerned that any further surge in GameStop could result in larger losses for hedge funds, which in turn could lead to market volatility as these funds are forced to sell other securities to raise cash. At the same time, there are concerns that the GameStop mania is a sign of a bigger bubble in the market and that its dissolution could also cause turmoil and hit private investors hard.

“From a regulatory perspective, we’ve seen a phenomenon where retail investors are pouring into new trading mechanisms,” Hercules Investments’ James McDonald told CNBC’s Fast Money. “We saw this during the ramp-up of dotcom, and practices that were limited to the rules of day trading came about. There will be limits to how I can give instructions or recommendations, those rules will apply and then the brokers will follow.”

Strong corporate earnings continued to roll after Thursday’s bell. Payment giants Visa, Mondelez, Western Digital and Skyworks Solutions rose in expanded trading after reporting better-than-expected earnings and sales for their quarterly results.

Caterpillar, Chevron, Eli Lilly and Honeywell all report profits before the bell on Friday.

In the vaccines space, biotech company Novavax announced Thursday that its coronavirus vaccine was more than 89% effective against Covid-19 in its UK Phase 3 clinical trial.

Subscribe to CNBC PRO for exclusive insights and analysis as well as live business day programs from around the world.