US STOCKS-Wall St drops after J&J vaccine data, GameStop effect weighs

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* J&J falls after COVID-19 vaccine trial data
* GameStop plays surge as brokerages ease restrictions
* Honeywell declines after earnings

(Updates to market close)
By Chuck Mikolajczak
NEW YORK, Jan 29 (Reuters) - U.S. stock indexes dropped,
closing out the Friday session with the biggest weekly fall
since October, as investors gauged the ramifications of Johnson
& Johnson's COVID-19 vaccine trial results, while a standoff
between Wall Street hedge funds and small, retail investors
added to volatility.
Johnson & Johnson JNJ.N fell as one of the biggest weights
on both the Dow and S&P500 after the drugmaker said its
single-dose vaccine was 72% effective in preventing COVID-19 in
the United States, with a lower rate of 66% observed globally.

The results compare to the high bar set by two authorized
vaccines from Pfizer Inc PFE.N /BioNTech SE BNTX.O and
Moderna Inc MRNA.O , which were around 95% effective in
preventing symptomatic illness in key trials when given in two
doses. Moderna shares climbed while Pfizer Shares were little
changed.
Worries of a short squeeze that began earlier in the week
resurfaced after an army of retail investors returned to trade
shares in stocks such as GameStop Corp GME.N and Koss Corp
KOSS.O , which shot higher after brokers including Robinhood
eased some of the restrictions they had placed on trading.
"The overall picture is that if there is any bad news that
suggests or indicates there could be a longer hibernation period
for us to be indoors and not consuming or spending that tends to
set the market back and a lot of people sit on the sidelines,
particularly with that news," said Sylvia Jablonski, chief
investment officer at Defiance ETFs in New York.
"And then what is going on with (Gamestop) and all that
stuff, people are a little afraid to trade."
The surge in volatility has led to a huge increase in
volume, totaling over 20 billion shares in each of the past two
sessions across U.S. exchanges for the most active trading days
on record going back to 2014, according to Refinitiv data.
The U.S. Securities and Exchange Commission said it was
closely monitoring any potential wrongdoing, to both brokerages
and social media traders. Unofficially, the Dow Jones Industrial Average .DJI fell
629.89 points, or 2.06%, to 29,973.47, the S&P 500 .SPX lost
74.61 points, or 1.97%, to 3,712.77 and the Nasdaq Composite
.IXIC dropped 273.58 points, or 2.05%, to 13,063.58.
All three main indexes suffered their biggest weekly fall
since the end of October.
Market participants have speculated that volatility caused
by the short squeezes have led to investor favorites including
Apple Inc AAPL.O coming under pressure as hedge funds sell to
cover billions of dollars in losses.
Apple shares declined while Microsoft MSFT.O also fell.
Still, while concerns about rising COVID-19 cases and bumpy
vaccine rollouts kept investors leery about a pullback and an
increase in volatility in the near-term, the start to quarterly
earnings has eased some concern about stretched stock
valuations.
Of the 184 companies in the S&P 500 that have reported
earnings through Friday morning, 84.2% have topped analyst
expectations, well above the 75.5% beat rate for the past four
quarters, according to Refinitiv data.
Honeywell International HON.N fell after it posted a 13%
fall in quarterly profit. The first known U.S. cases of the South African COVID-19
variant, found to be partly resistant to current vaccines and
antibody treatments, was detected in South Carolina on Thursday.

Data showed U.S. labor costs rose more than expected in the
fourth quarter amid a jump in wages, supporting views that
inflation could accelerate this year, while another report
showed U.S. consumer spending fell for a second straight month
in December. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
SEC issues warning as GameStop short-selling war resumes
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