Market week: Short squeeze sparks volatility

Indexes lose ground on the week

Stocks markets closed Friday with losses on the week, after elevated volatility in a handful of small stocks led to a bout of selling. The volatility appeared to have been induced initially by a short squeeze on shares of video-game retailer Gamestop Corp. (NASDAQ: GME), which had been heavily shorted by a number of large hedge funds. The move appears to have been inspired by a message board on social media channel Reddit. Smaller retail investors seem to have banded together to buy shares of Gamestop using trading app Robinhood, boosting share price by 400% during the week. The strategy spread to some other heavily-shorted issues, causing further short-covering and attendant market volatility.

Investors were also poring over the latest quarterly earnings reports, fretting that the slow rollout of the Covid-19 vaccine, and concerns about its effectiveness on more virulent strains, might weigh on earnings over the next two quarters.

The result was a weekly loss of 3.3% for the S&P 500 Composite Index and a loss of 1.1% for the month. The Nasdaq Composite Index followed suit with a 3.5% loss on the week, and a 1.4% loss on the month. Toronto’s S&P/TSX Composite Index rode on U.S. market’s coattails for a 2.9% loss on the week, but only a marginal 0.6% decline on the month. Crude oil closed the week just slightly below breakeven but rose 7.5% on the month overall. Gold, meanwhile, languished with a 0.5% loss on the week and a decline of 2.5% on the month.

Monitor the main stock and commodity indices daily with the Fund Library’s interactive Markets Page.

Fund news

* Invesco launches four index fund-of-funds. Invesco Canada announced on Jan. 28 the debut of four new index mutual funds structured as fund-of-ETFs.

Invesco S&P 500 ESG Index ETF Fund tracks the S&P 500 ESG Index on a hedged^* basis. The index uses S&P DJI’s ESG criteria to select U.S. companies that meet certain ESG criteria while still offering similar overall industry group weights to the S&P 500 Index. The fund intends to directly invest in the Invesco S&P 500 ESG Index ETF (TSX: ESG.F) to achieve its investment objective.

Invesco S&P/TSX Composite ESG Index ETF Class tracks the S&P/TSX Composite ESG Index, which uses S&P DJI’s ESG criteria to select companies from the benchmark Canadian S&P/TSX Composite Index. The fund holds the Invesco S&P/TSX Composite ESG Index ETF (TSX: ESGC) to achieve its investment objective.

Invesco NASDAQ 100 Index ETF Fund tracks the NASDAQ-100 Index on a hedged* basis. It holds the Invesco NASDAQ 100 ETF (NSD: QQQM) to achieve its investment objective. 

Invesco NASDAQ Next Gen 100 Index ETF Fund tracks the NASDAQ Next Generation 100 Index on a hedged basis. The index consists of 100 of the largest non-financial companies listed on the NASDAQ Stock Market outside of the NASDAQ-100 Index. The fund holds the Invesco NASDAQ Next Gen 100 ETF (NSD: QQQJ) to achieve its investment objective.

* BMO launches 10 new ETFs. BMO Asset Management Inc. on Jan. 26 launched 10 new exchange trade funds (ETFs), including a suite of ETFs focused on innovation.

• BMO MSCI Innovation Index ETF (TSX: ZINN) with a focus on autonomous technology and industrial innovation, genomic innovation, fintech innovation, and next generation internet innovation.
• BMO MSCI Tech & Industrial Innovation Index ETF (TSX: ZAUT) looks for companies in the development of new products and services as a result of technological innovation in industrial automation, manufacturing, transportation, energy usage, energy storage, energy production as well as in artificial intelligence and machine learning.
• BMO MSCI Fintech Innovation Index ETF (TSX: ZFIN) focuses on companies in digital and mobile payments, blockchain technologies or peer to peer transactions, and digital platforms which include targeted marketing and financial services platforms.
• BMO MSCI Genomic Innovation Index ETF (TSX: ZGEN) looks for innovation in gene editing, agricultural biotechnology, molecular diagnostics, genome-related hardware for analytics and diagnostics, bioinformatics, targeted therapeutics, and gene and stem cell therapies.
• BMO MSCI Next Gen Internet Innovation Index ETF (TSX: ZINT) focuses on cloud computing, internet of things (IoT), mobile and digital payments, e-commerce, social media, blockchain or P2P, machine learning, and artificial intelligence technologies.
• BMO Clean Energy Index ETF (TSX: ZCLN) tracks the S&P Global Clean Energy Index of a diversified mix of clean energy production and clean energy equipment and technology companies.
• BMO Covered Call Technology ETF (TSX: ZWT) provides exposure to a portfolio of technology and technology related companies to generate income and provide long-term capital appreciation while mitigating downside risk through the use of covered call options.
• BMO Short Term US TIPS Index ETF (TSX: ZTIP) provides exposure to U.S. Treasury Inflation Protected Securities, while acting as an inflation hedge in portfolios.

* Fidelity launches three new funds. Fidelity Investments Canada on Jan. 26 debuted one new mutual fund and two new ETFs:

• Fidelity Multi-Asset Innovation Fund invests primarily in a mix of equity and fixed income securities of U.S. and other issuers from around the world.
• Fidelity All-in-One Balanced ETF (NEO: FBAL) invests primarily in underlying Fidelity ETFs that provide exposure to a diversified portfolio of global equity and fixed income securities. It generally follows a neutral mix of 60% global equity securities and 40% global fixed income securities.
• Fidelity All-in-One Growth ETF (NEO: FGRO) holds underlying Fidelity ETFs that provide exposure to a diversified portfolio of global equity and fixed income securities. It generally follows a neutral mix of 85% global equity securities and 15% global fixed income securities.

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