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Oil Squeeze, Jobless Claims, GameStop Hearing - What's up in Markets

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·4 min read
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By Geoffrey Smith

Investing.com -- Texas power outages continue to hit households – and the state’s oil output. Jobless claims and housing market data are due, and the House of Representatives holds a hearing on the GameStop (NYSE:GME) short squeeze. Stocks are lower as the great reflation trade takes a breather and Facebook (NASDAQ:FB) finds itself in more trouble with Australia. Here’s what you need to know in financial markets on Thursday, February 18th.

1. Oil comes off highs but Texas is still frozen

Crude oil prices retreated from 13-month highs as the outages in Texas continued to keep some 40% of U.S. oil output offline.

The outages can still be largely offset by drawing on inventories that are still above historic averages, even though they have fallen sharply in recent weeks. American Petroleum Institute data showed a draw of 5.8 million barrels on U.S. crude stockpiles last week, far more than the 2.1 million expected. Government inventory data are due at 10:30 AM ET (1530 GMT).

Texan grid operator ERCoT says that rolling blackouts are likely to continue into Thursday, and still hasn’t give a firm deadline for restoring power across the state. The outages have affected not only the state’s oil and gas fields and pipelines, but also the refineries that process the state’s crude, as well as gas supplies to Mexico.

The spike overshadowed a Wall Street Journal report on Thursday saying that Saudi Arabia is looking at reversing its unilateral decision to pull an extra 1 million arrels a day of output, starting in April.

2. GameStop hearing in the House

The U.S. House Financial Services Committee will hear testimony from the heads of Robinhood, Citadel, Melvin Capital and Reddit later Thursday, as regulators try to get to the bottom of what drove the spike in GameStop, AMC Entertainment (NYSE:AMC) and others a couple of weeks ago.

The committee is looking for signs of manipulation in the market for a handful of heavily-shorted stocks that were the subject of an intense squeeze apparently orchestrated by users of a Reddit chatboard, r/wallstreetbets.

One of those giving testimony will be Keith Gill, known to Reddit users as Roaring Kitty. Gill was the subject of a class action lawsuit alleging securities fraud filed on Wednesday. The suit was filed by the securities class action firm Hagens Berman Sobol Shapiro on behalf of Christian Iovin of Washington state and similarly situated individuals, Bloomberg reported.

3. Stocks set to open lower; Facebook courts trouble in Oz

U.S. stock markets are set to open lower as the vigorous rally driven by ‘reflation’ and ‘reopening’ trades takes a breather.

By 6:35 AM ET, Dow Jones futures were down 84 points, or 0.3%, while S&P 500 futures were down 0.4% and NASDAQ Futures were down 0.8%.

Nasdaq futures were struggling against a backdrop of growing concern about valuations, and of widespread expectations that investors will rotate out of expensive tech names into ‘value’ ones: a trade prefigured by Berkshire Hathaway’s partial rotation out of Apple (NASDAQ:AAPL) and into Chevron (NYSE:CVX), Cerizon and Marsh&McLellan.

Other stocks likely to be in focus include Facebook, which caused fresh controversy overnight by banning the sharing of news in Australia in response to the country’s new law that forces it to pay publishers for what it displays.

Additionally, Walmart kicked off the day's earnings barrage with one of the season's higher-profile misses, earning only $1.39 a share rather than the $1.51 expected.

4. Jobless claims, Housing starts, Philly Fed

The U.S. labor market gives its weekly reality check, with most analysts expected another fall in the number of initial jobless claims. The expected total of 765,000 would represent a two-month low, while still being higher than anything witnessed in recent pre-pandemic times.

In addition to the claims data, there will be housing starts and building permit data or January, all at 8:30 AM ET along with the Philadelphia Federal Reserve’s monthly business survey.

The numbers come a day after much stronger-than-expected retail sales data for January that reassured the market about the strength of consumer demand.

Atlanta Fed President Raphael Bostic is due to speak at 10 AM ET.

5. Airbus sees flat deliveries in 2021; Boeing (NYSE:BA)'s board shake-up

Airbus (OTC:EADSY) said it expects airplane deliveries to remain flat this year, after an unprecedented drop in 2020.

The European aerospace giant’s revenue fell 30% last year and it swung to an operating loss of 510 million euros ($612 million).

Airbus’ big rival Boeing had posted much bigger losses due to company-specific problems with its 737 MAX program. Boeing said on Wednesday that directors Susan Schwab and Arthur Collins would step down from the board and not seek re-election this year.

Elsewhere, Air France KLM SA (OTC:AFLYY) said it expects more government support after sliding to a net loss of over 7 billion euros last year.

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