South Florida Sun-Sentinel (Sunday)
As GameStop keeps soaring, markets slump
Another bout of selling gripped the U.S. stock market Friday, as anxiety mounts over whether the frenzy behind a swift, meteoric rise in GameStop and a handful of other stocks will damage Wall Street overall.
The S&P 500 dropped 1.9%, giving the benchmark index its biggest weekly loss since October. The Dow Jones Industrial Average and Nasdaq each fell 2%.
GameStop shot up nearly 70%, clawing back much of its steep loss from the day before, after Robinhood said it will allow customers to start buying some of the stock again. GameStop has been on a stupefying 1,600% run over the last three
weeks and has become the battleground where swarms of smaller investors see themselves making a stand.
The assault is directed squarely at hedge funds and other Wall Street titans that had bet the struggling video game retailer’s stock would fall. Those firms are taking sharp losses, and other investors say that’s pushing them to sell other stocks they own to raise cash. That, in turn, helps pull down parts of the market completely unrelated to the revolt underway by the cadre of smaller and novice investors.
The moves for GameStop and a few other formerly beaten-down stocks has drowned out many of the other issues weighing on markets, including potential aid for the economy.
“Our consideration is whether this is something that is a longterm influence or contained within a handful of companies,” said Tom Hainlin, national investment strategist at U.S. Bank Wealth Management.
Meanwhile, calls for regulators to step in are growing louder on Capitol Hill, and the Securities and Exchange Commission says it’s carefully monitoring the situation.
The S&P 500 fell 73.14 points to 3,714.24. It ended the week with a 3.2% loss, its worst week in three months. It ended January with a 1.1% loss, its first monthly decline since October. The S&P
500 is still up 13.6% since the end of October.
Some of the heaviest weights on the index were Apple, Microsoft and other Big Tech stocks that have been big winners for professional and other investors over the last year.
The Dow lost 620.74 points to
29,982.62, while the tech-heavy Nasdaq composite slid 266.46 points to 13,070.69. The Russell
2000 index of smaller companies gave up 32.97 points, or 1.6%, to
2,073.64.
Wall Street’s focus remains squarely on GameStop and other moonshot stocks. AMC Entertainment jumped 53.7%, and headphone company Koss vaulted 52.5%. After their success with GameStop, traders have been looking for other downtrodden stocks in the market where hedge funds and other Wall Street firms are betting on price drops.
By rallying together into these stocks, they are triggering something called a “short squeeze.” In that, a stock’s price can explode higher as investors who had bet on price declines scramble to get out of their trades.
The smaller investors, meanwhile, have been crowing about their empowerment and saying the financial elite are simply getting their comeuppance.
“We’ve had their boot on our necks for so (expletive) long that the sudden rush of blood to our brains when we have just a *chance* of getting free has made me feel ... well, it’s made me feel,” one user wrote on a Reddit discussion about GameStop stock.