Dow tumbles 620 points amid GameStop mania, with all three main indexes suffering losses
US stocks sank again on Friday as a speculative frenzy over GameStop and a handful of other stocks ramps up worries over how much damage an online revolt against Wall Street bigwigs can do to the broader market.
The Dow Jones Industrial Average ended the session down 620.74 points, or 2 per cent, to 29,982.62, while S&P 500 dropped 1.9 per cent, giving the benchmark index its biggest weekly loss since October.
Meanwhile, GameStop soared nearly 70 per cent Friday, continuing a saga that’s captivated and confused many on Wall Street and beyond.
The company is clawing back much of its steep loss from the day before, after trading platform Robinhood said it will allow customers to start buying some of the stock again.
The Dow Jones Industrial Average ended the session down 620.74 points on Friday
Meanwhile, GameStop soared nearly 70 per cent Friday, continuing a saga that’s captivated and confused many on Wall Street and beyond
GameStop has been on a stupefying 1,600 per cent run over the last three weeks and has become the battleground where swarms of smaller investors see themselves making an epic stand against the 1 percent.
The so-called ‘Reddit rally’ saw thousands of individual investors champion on social media forums such as Reddit’s Wallstreetbets, which has almost 6 million members, to inflate stock prices for GameStop and other previously downtrodden companies.
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 maniacal moves for GameStop and a few other formerly beaten-down stocks has drowned out many of the other issues weighing on markets, including the virus, vaccine rollouts and potential aid for the economy.
Most of Wall Street and other market watchers say they expect the smaller-pocketed investors who are pushing up GameStop to eventually get burned.
The struggling retailer is expected to still lose money in its next fiscal year, and many analysts say its stock should be closer to $15 than $330.
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.
‘You’ve seen a lot of volatility this week, so when you have some unknowns like what you’re seeing in the retail trading world, people are a little concerned at record highs here and taking some money off the table,’ said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors.
GameStop‘s stock is back to the races Friday, and the overall U.S. market is down again, as the saga that’s captivated and confused Wall Street ramps up the drama
The S&P 500 fell 73.14 points to 3,714.24. It ended the week with a 3.2 per cent loss, its worst week in three months. It ended January with a 1.1 per cent loss, its first monthly decline since October. The S&P 500 is still up 13.6% since the end of October.
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 per cent, to 2,073.64.
Johnson & Johnson fell as one of the biggest weights on both the Dow and S&P 500 after the drugmaker said its single-dose vaccine was 72 per cent effective in preventing COVID-19 in the United States, with a lower rate of 66 percent observed globally.
The results compare to the high bar set by two authorized vaccines from Pfizer and Moderna, which were around 95 per cent effective in preventing symptomatic illness in key trials when given in two doses. Moderna shares climbed while Pfizer Shares were little changed.
Analysts said the results, which would require just one shot instead of the two required by other vaccine makers, were below expectations.
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