NEW YORK (AP) — 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.
GameStop shot up more than 70% in early trading, clawing back most of its steep loss from the day before, after Robinhood said it will allow customers to start buying some of the stock again. GameStop has been on a stupefying 1,800% run over the last three weeks, as it has become the battleground where swarms of smaller investors see themselves making an epic stand against the 1%.
The assault is directed squarely at hedge funds and other Wall Street titans that had made bets the struggling video game retailer’s stock would fall. A couple have already essentially admitted defeat, and the army of smaller investors is pledging to keep up the momentum for GameStop’s stock in hopes of inflicting more pain.
The moves are reverberating across the stock market. Investors say the losses for the big professional investors who had been banking on a drop for GameStop’s stock are having to sell other stocks that they own to raise cash, which is helping to pull down the broader market.
The S&P 500 was down 0.6%, as of 9:58 a.m. Eastern time. Some of the heaviest weights on the index were Apple, Microsoft and other Big Tech stocks that have been big winners for professional and other investors over the last year. It had earlier been down as much as 1.2%.
The Dow Jones Industrial Average fell 234 points, or 0.8%, to 30,376, and the Nasdaq composite was 0.6% lower.
Other forces were also weighing on the market. Johnson & Johnson fell 3.6% for one of the larger losses in the S&P 500 after it said its vaccine appears to protect against COVID-19, though not as powerfully as other rivals. Analysts said the results, which would require just one shot instead of the two required by other vaccine makers, were below expectations.
Some reports on the economy came in better than expected, including one showing that Americans’ incomes rose in December and that their spending didn’t fall by as much as economists expected.
The yield on the 10-year Treasury rallied to 1.08% from 1.03% from late Thursday.
Elsewhere, investors watched virus infection spikes in Europe and Asia, renewed travel curbs and negotiations in Washington over President Joe Biden’s proposed $1.9 trillion economic aid package.
“We are still moving towards a recovery from the pandemic, just a heck of a lot bumpier than anyone had expected,” said Stephen Innes of Axi in a report.
Stocks fell across Asian and European markets.
But Wall Street’s focus remains squarely on GameStop and other moonshotting stocks.
Most of Wall Street and other market watchers say they expect the novice and 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.
In response, many users on Reddit have said they can keep up the pressure longer than hedge funds can stay solvent, although they often use more colorful language to do that.
A day earlier, GameStop and several other downtrodden stocks that had been soaring suddenly halted their momentum after Robinhood and other trading platforms restricted trading. It caused an outcry by customers and even both Democrats and Republicans in Washington.