Meme-stock frenzy returns; AMC and Bed Bath & Beyond boosted

Retail traders who lurk in forums like Reddit’s WallStreetBets are back to betting against Wall Street pros and the Federal Reserve as rallies for meme stocks like Bed Bath & Beyond and AMC Entertainment show shades of last year’s mania.

The home-good retailer nearly tripled at one point during its nineday winning streak while the movietheater firm capped a 65 percent rally of its own as speculative pockets of the stock market surge. The pair have powered a basket of 37 meme stocks tracked by Bloomberg higher by 10 percent over the past week while the most-hated stocks tracked by a Goldman Sachs basket is up roughly 17 percent over the same period.

The resurgence of more speculative areas of the market is likely fueled in part by individual traders’ willingness to jump on riskier trades and bet against hedge funds. A rally in tech shares and other growth stocks at one point on Monday pushed the Nasdaq 100 Index up 20 percent from a June low amid alarms from some on Wall Street that the Federal Reserve is set on fighting inflation regardless of the pain for the stock market.

The “smart guys” are “confused, baffled, and fighting short positions from a position of weakness in terms of momentum and firepower,” said Mark Taylor, a sales trader at Mirabaud Securities. “The lack of real understanding of why a sudden resurrection of the meme-entum bid could lead to some nefarious speculation about things being manipulated but what would be as much sour grapes speculation as anything real.”

Bed Bath & Beyond’s taking of the meme stock baton resulted in a 40 percent rally Monday as a record 120.5 million shares changed hands with the stock being the second-most bought asset on Fidelity’s platform. AMC Entertainment was among the five most purchased stocks on the platform and saw trading volume triple what’s been normal over the past month. Both company tickers, along with GameStop, were the most mentioned on Reddit’s WallStreetBets platform.

“These meme stock rallies that are emerging will only last if US stocks broadly continue to head higher,” said Ed Moya, senior market strategist at Oanda. “After AMTD Digital reminded the WallStreetBets crowd of the potential skyrocketing moves, many retail traders are scanning their favorite plays and are looking to get back in.”