Short sellers on Wall Street are aware of a single risk that could spoil their party: A surprise rate cut or even liquidity injection from the Federal Reserve. That’s according to IPO Edge Editor-in-Chief John Jannarone, who joined Cheddar TV live at the closing bell late Thursday as the S&P 500 and Dow Jones Industrial averages notched their largest point declines in history. Jannarone pointed out that most of the wild movement in stocks this week was likely driven by computer programs responding to news headlines rather than any changes in company fundamentals.
“The market is trading on news events not fundamentals,” Jannarone said, adding that it would be very risky to purchase stocks based on fundamentals such as earnings while the market remains in a tailspin. Jannarone also cited hedge fund legend Charles Gradante, who said that the absence of the uptick rule, which limits serial short sales, could allow stocks to fall extremely quickly.
Jannarone also weighed in on Beyond Meat, Inc., which reported fourth-quarter results during the interview. While the company beat estimates across the board, the stock fell sharply in afterhours trading, indicating even the best news isn’t enough to protect stocks. “These guys could not have done much better,” he said.
Watch the full interview here.
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John Jannarone, Editor-in-Chief
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