US stocks plunge, “this is healthy profit taking”

Markets were mostly lower on Wednesday.

The S&P 500 plunged 2.6 percent and the STOXX Europe 600 tumbled 1.2 percent.

Earlier in Asia, the Nikkei 225 rose 0.3 percent and the Shanghai Composite rose 0.1 percent.

“We’ve run up so much and this is healthy profit taking,” said John Davi, founder and CIO of Astoria Portfolio Advisors.

FundStrat’s Tom Lee said that a “surge in heavily shorted stocks like GME and others [is] creating substantial margin calls for funds short these positions”.

The Federal Reserve left its key overnight interest rate near zero and made no change to its monthly bond purchases at its monetary policy meeting on Wednesday.

In Europe, stocks were weighed down by a downward revision in the forecast for Germany's 2021 GDP growth from 4.4 percent to 3 percent.

“It can be a bit bumpy, especially the first half of the year,” said Matthias Scheiber, global head of multi-asset solutions at Wells Fargo Asset Management in London.

However, Scheiber added that “we are generally positive on the value-oriented sectors because from a valuation perspective, they are still cheap”.