Big Tech leads stocks to broad gains

GameStop, AMC tank even though volatility may be easing, experts say

Big Tech companies and banks helped power a broad rally on Wall Street Tuesday, though shares in GameStop and other recent high-flying stocks hyped by online traders plunged.

The S&P 500 rose 1.4%, extending gains from a day earlier, as investors sized up the latest batch of company earnings reports. Rising crude oil prices and solid earnings results helped lift energy companies, including Exxon Mobil and Marathon Petroleum. Treasury yields rose and the VIX, a measure of fear in the market, fell sharply, a sign volatility was easing.

The wave of buying coincided with a skid in GameStop and AMC Entertainment, stocks that have been caught up in a speculative frenzy by traders in online forums and on social media who seek to inflict damage on Wall Street hedge funds that have bet these stocks would fall. The price of silver, which spiked 9% Monday, fueling speculation the precious metal was also being hyped up by online traders, sank by more than 10%.

“Certainly, there’s been some profit-taking in these names,” said Ross Mayfield, investment strategist at Baird. “You saw with silver, there was an attempt to try a similar cornering of the market, and that didn’t even last two days.”

The S&P 500 index rose 52.45 points to 3,826.31. The Dow Jones Industrial Average gained 475.57 points, or 1.6%, to 30,687.48. The tech-heavy Nasdaq composite climbed 209.38 points, or 1.6%, to 13,612.78. The Russell 200 index of smaller companies also rose, adding 25.28 points, or 1.2%, to 2,151.44. The major indexes remain near their all-time highs set last month.

Treasury yields rose in another sign of investor confidence. The yield on the benchmark 10-year Treasury note rose to 1.10% from 1.06% late Monday.

GameStop plunged 60% to $90 a share, and AMC Entertainment lost 41.2% to $7.82 a share. Both companies have been in the spotlight for more than two weeks as an online community of investors pushed the stocks to astronomical levels.

Trading in those and several other stocks have been restricted by the popular online trading platform Robinhood since last last week following the bouts of extreme volatility.

Robinhood needed to secure funding in order to meet deposit thresholds required by organizations that handle the trading orders placed by investors on its platform.

Robinhood eased some of the trading limits on GameStop and select other stocks Tuesday. For example, it now allows users to buy up to 100 shares and options contracts in GameStop and 1,250 in AMC. On Monday, the brokerage was limiting users to 5 shares in GameStop and 75 in AMC.

An online army of traders using the online site Reddit banded together for the past two weeks to snap up shares of GameStop, AMC and other struggling chains, stocks that have been heavily shorted (bets that the stock will fall) by a number of hedge funds. In the process, they’ve done heavy damage to those hedge funds in a stunning reversal of financial power on Wall Street.

But it’s not clear how much longer the Reddit traders can hold the line. Intense media and Wall Street interest pushed many traders into these stocks late last week, with GameStop going as high as $483 last Thursday. They began trading this year at just over $17 a share.