US STOCKS-Wall St falls after J&J vaccine data; GameStop effect weighs

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* J&J COVID-19 vaccine 72% effective in U.S., 66% globally
* GameStop plays surge as brokerages ease restrictions
* Popular mega-cap long positions take a hit
* Indexes down: Dow 1.32%, S&P 1.26%, Nasdaq 1.05%

(Adds comments, updates prices throughout)
By Devik Jain and Shreyashi Sanyal
Jan 29 (Reuters) - U.S. stock indexes fell on Friday after
COVID-19 vaccine data from Johnson & Johnson hurt sentiment,
while a standoff between Wall Street hedge funds and small,
retail investors weighed.
Johnson & Johnson JNJ.N fell 3.9% 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.
"While it's good to have another entrant, the question is
the efficacy. The concern is if it's a lot less effective, then
investor and consumer confidence will be substantially lower,"
said Sam Stovall, chief investment strategist at CFRA Research.
Moderna jumped 8.1%, helping the Nasdaq Biotechnology index
.NBI add 1.4%.
Worries of a short squeeze grew after an army of retail
investors returned to trade shares in GameStop Corp GME.N and
Koss Corp KOSS.O . The stocks sky-rocketed after brokers
including Robinhood eased some of the restrictions they had
placed on trading.
The U.S. Securities and Exchange Commission warned both
brokerages and social media traders that it was closely
monitoring potential wrongdoing. Investor favorites including Apple Inc AAPL.O were sold
off recently by hedge funds to cover billions of dollars in
losses.
Shares in Apple, Amazon.com Inc AMZN.O , Microsoft Corp
MSFT.O , Facebook Inc FB.O , Netflix Inc NFLX.O , Tesla Inc
TSLA.O and Alphabet Inc GOOGL.O fell between 0.8% and 3.2%.
"I think a lot of investors were discounting the effects of
retail to some extent, so they were taken by surprise," said Max
Gokhman, head of asset allocation at Pacific Life Fund Advisors
in Newport Beach, California.
"The fact that it did create dislocations for a lot of large
hedge funds, definitely caused at least some degree of
additional market correction."
Concerns over stretched valuations, new coronavirus variants
and rising cases kept investors on edge about a pullback and an
increase in volatility in the near-term.
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.
At 12:00 p.m. ET the Dow Jones Industrial Average .DJI was
down 404.60 points, or 1.32%, at 30,198.76, the S&P 500 .SPX
was down 47.75 points, or 1.26%, at 3,739.63, and the Nasdaq
Composite .IXIC was down 139.68 points, or 1.05%, at
13,197.48.
All the three main indexes tracked their biggest weekly fall
since the end of October.
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. Honeywell International Inc HON.N fell 2.5% after it
posted a 13% fall in quarterly profit. Declining issues outnumbered advancers for a 1.98-to-1 ratio
on the NYSE and a 1.28-to-1 ratio on the Nasdaq.
The S&P index recorded six new 52-week highs and no new low,
while the Nasdaq recorded 53 new highs and 11 new lows.

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