Dow closes at record high as market impact of Archegos liquidation seen as limited

AP Photo/Richard Drew

  • The Dow Jones industrial average closed at a record high on Monday as investors saw the fallout of the Archegos liquidation as mostly limited.
  • Archegos was forced to liquidate its positions on Friday, leading to sizable declines in a handful of US and Chinese stocks.
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The Dow Jones industrial average closed at a record high on Monday as investors viewed the market impact from a forced liquidation of Archegos Capital, a family office run by the former Tiger Management trader Bill Hwang, as limited. The S&P 500 and Nasdaq 100 both ended lower.

Mohamed El-Erian told CNBC in an interview that the Archegos margin-call situation was a "one-off," but warned that it could lead to tightening financial conditions if banks become more cautious as a result.

Archegos was hit with a margin call that led to the unwinding of more than $20 billion in stocks on Friday, erasing up to $35 billion in market valuation for a handful of stocks. Eight stocks plummeted on Friday as million-share block trades hit the market.

On Monday, after Archegos' margin call, Nomura and Credit Suisse warned of significant exposure to the trades. A source told Bloomberg that Goldman Sachs' losses were immaterial.

Here's where US indexes stood at the 4:00 p.m. ET close on Monday:

  • S&P 500: 3,971.28, down 0.08%
  • Dow Jones industrial average: 33,171.77, up 0.3% (98.89 points)
  • Nasdaq composite: 13,059.65, down 0.6%

While El-Erian views the Archegos saga as a one-off, Reddit investors who were under the microscope amid the GameStop short-squeeze believe the $20 billion margin-call highlights the systemic risk Wall Street institutions can still pose to markets.

The blockage of the Suez Canal ended on Monday, as the stuck ship Ever Given was refloated and dislodged from the side of the canal.

Fly Leasing spiked 26% on Monday after the Carlyle Group agreed to acquire the aircraft leasing firm for $2.36 billion.

Visa said it would allow the use of a dollar-backed cryptocurrency to settle payment transactions on its network, signaling a growing adoption of crypto by major institutions. The decision by Visa led to a 4% and 7% jump in bitcoin and ether, respectively.

Oil prices moved higher. West Texas Intermediate crude jumped about 1%, to $61.56 per barrel. Brent crude, oil's international benchmark, rose by 0.7%, to $65.02 per barrel.

Gold fell 1.3%, to $1,709.50 per ounce.

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