Reddit-pumped stocks from AMC Entertainment to GameStop fell Thursday as the rest of the market soared – a reversal of the day before when retail traders in crowded chat rooms joined forces to push selected names skyward and sent the market into conniptions.
The nation’s largest exhibitor, AMC is down 50% after surging 300% yesterday as the #SaveAMC hashtag trended on several online platforms. GameStop, Blackberry, Bed Bath & Beyond and others also reversed gains. The movement in these stocks, coming from a place and with a force outside the traditional investment ecosystem, had pundits wondering if there was something structurally amiss with financial markets that had to be addressed.
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The declines came as several trading firms like Robinhood Thursday restricted customers’ ability to buy GameStop and other stocks, citing “recent volatility.” That move drew ire from the right and the left on Capitol Hill (a unique moment of agreement between AOC and Ted Cruz) for quashing what’s being called a kind of populist stock-picking revolution. Home trading among retail investors (meaning individuals, not institutions) has surged during the pandemic.
Retailer GameStop, the poster child of the message board-incited frenzy, saw its stock surge 1,500% in recent days as messages turned memes went viral. GameStop et al were heavily shorted, resulting in disastrous “short squeezes” on a whole other group of investors. (Short selling is when an investor borrows then sells shares, hoping to buy them back at a lower price and return them to the lender at a profit. Shorts sellers, in other words, bet a stock will fall and get squeezed if it rises instead and they’re forced to scramble to cover their positions.)
CNBC talking heads are well into day two of nonstop obsessing over whether this new movement is chaos or strategy or a mix of both.
In the broader market, the DIA is up 600 points, or 1.88%, with the Nasdaq and other indexes higher as well. Investors took some comfort in economic data as weekly unemployment claims came in lower than expected and U.S. GDP ended the year with a second straight quarter of growth.
Showbiz shares are mixed. NBCU parent Comcast is a standout, up nearly 8% after posting stronger than expected financial results this morning including solid growth at Peacock. Netflix and Disney are also up, respectively, 4.5% and 5.5%. Facebook is flat and Apple and A&T are down about 1% following their earnings yesterday.