Major indexes regain lost ground; GameStop, AMC swing wildly
Stocks were moving sharply higher Thursday afternoon, a day after sinking to their worst loss since October.
Investors continued to closely watch the wild swings in GameStop, AMC and several other stocks which have become targets for hordes of online investors who have sent them skyrocketing in recent days, taking on big hedge funds who have bet they will fall.
Several of those stocks fell sharply after Robinhood and other trading platforms restricted trading in them. The chaotic trading action is drawing calls from Sen. Elizabeth Warren and others in Washington and elsewhere for regulatory action to curb the frenzy.
The S&P 500 was up 1.7% as of 3:08 p.m. Eastern, recovering much of the ground it lost a day earlier. The Dow Jones industrial average was up 486 points, or 1.6%, to 30,790. The Nasdaq composite was up 1.3%.
Mike Zigmont, director of trading and research at Harvest Volatility Management, said the cascade on Wednesday likely began when larger institutions started taking steps to reduce their exposure to risk at the same time, partly because of the sharp and questionable gains in several stocks. That prompted others in the market to follow suit, accelerating the decline. Similar sentiment may be driving shares higher Thursday.
“You listen to your models and suddenly everybody is de-risking together and everything cascades.” he said. “Then you sleep on it and things don’t look so bad.”
Gamestop was was down 26% after more than doubling in price the day before. The stock, trading at $256 a share, overnight was worth as much as $500 a share. Meanwhile AMC Entertainment was down 49.8%, after rising nearly 600% this month alone.
Investors are also focusing on company earnings. More than 100 companies in the S&P 500 are scheduled to tell investors this week how they fared during the last three months of 2020.
Apple fell 2.2% after the iPhone maker posted a record quarterly profit, helped by big sales of iPhones and Apple Watches during the holiday season. Investors focused on the fact that Apple was conservative in its full-year outlook for 2021, which the company cited economic uncertainty and the pandemic as part of the reason for the forecast.
Meanwhile. hopes are high for President Joe Biden’s proposed a $1.9 trillion COVID-relief package, but worries are growing the plan might also be scaled back. Adding to caution, the Federal Reserve said Wednesday it would keep its low interest rate policies in place, but it also released a sobering assessment of the gradual recovery ahead.
“Investors will likely focus on the pace of vaccinations around the globe while also keeping an eye on the progress of President Biden’s fiscal rescue plan that may be facing some roadblocks in the U.S. Senate,” Prakash Sakpal and Nicholas Mapa, senior economists at ING, said in a report.
Markets had been meandering near record highs since last week as investors weighed solid corporate earnings results against renewed worries that troubles with COVID-19 vaccine rollouts and the spread of new variants of coronavirus might delay a recovery from the pandemic.