GameStop tumbles as Big Tech dominates
GameStop losses piled up Tuesday, with shares tumbling 60 percent while the broader market got another bounce from another batch of promising corporate earnings and ongoing stimulus talks.
U.S. stocks built on Monday’s momentum, clawing back some losses from a chaotic January marked by a burst of speculative trading fueled by the Reddit forum WallStreetBets and other online trading communities.
The Dow Jones industrial average closed up Tuesday nearly 476 points, or nearly 1.6 percent, to 30,687.81. The S&P 500 climbed 52 points, or nearly 1.4 percent, to 3,826.27, while the tech-heavy Nasdaq added 209 points, or nearly 1.6 percent, to settle at 13,612.78. Last week, broad anxiety over the consequences of the market chaos and worrying economic data fueled widespread losses. But optimistic investors eyeing resilient corporate earnings and discussions in Washington over another COVID-19 rescue package are driving a comeback.
“The broader market, where there was this shaking in the boots about systemic risks of this last week, clearly this week it’s kind of shaking that off,” said Michael Mussio, president of FBB Capital Partners. He pointed to investors’ hopeful attitudes about vaccine distribution and corporate earnings from Amazon, Google and Chipotle, companies he called “growth drivers of the economy.”
The GameStop rally that shook the institutional powers of Wall Street, provoking fresh scrutiny of the financial services industry and a new ecosystem of social mediapowered retail stock trading, is losing steam, with the video game retailer’s stock losing more than half its value in two days.
As the broader market swelled in anticipation of robust earnings reports from tech giants Amazon and Alphabet, GameStop shares moved in the opposite direction, falling almost 60 percent, to $90.21. The losses piled on to the retailer’s 30 percent nosedive on Monday, and analysts say it signals a cooling off of the rally — while Reddit investors argue it’s a sell-off panic created by brokerage firms placing restrictions on buying shares.
Other assets and securities that had attracted intense investor interest in recent days, including AMC, BlackBerry and the precious metal silver, also lost ground Tuesday, sliding 41 percent, 21 percent and nearly 9 percent, respectively.
Silver also retreated, falling more than 9.6 percent after surging more than 7 percent Monday.
As of Tuesday afternoon, the popular trading platform Robinhood maintained a list of five restricted stocks: GameStop, AMC, Nokia, Naked and Express. The app limits customers who already own those brands in sufficient numbers from purchasing more and bars new customers from buying those stocks above a certain number of shares.