By midday trading, the Dow Jones industrial average was up nearly 562 points, or nearly 1.9 percent. The S&P 500 climbed 60 points, or 1.6 percent, while the tech-heavy Nasdaq added 197 points or nearly 1.5 percent. Last week, broad anxiety over the consequences of the market chaos and worrying economic data fueled widespread losses. But optimistic investors eyeing resilient corporate earnings and discussions in Washington over another covid-19 rescue package are driving a comeback.
The GameStop rally that shook the institutional powers of Wall Street, provoking fresh scrutiny of the financial services industry and a new ecosystem of social media-powered retail stock trading, is losing steam, with the video game retailer’s stock losing more than half its value in two days.
As the broader market swelled in anticipation of robust earnings reports from tech giants Amazon and Alphabet, GameStop shares moved in the opposite direction, falling 52 percent, to $109.24, and piling on Monday’s 30 percent nosedive. Other assets and securities that had attracted intense investor interest in recent days, including AMC, BlackBerry and the precious metal silver, also posted morning losses, sliding 41 percent, 19 percent and 9 percent, respectively.
But many WallStreetBets investors are still determined to hold on to their GameStop shares and positions in other shorted companies that have largely tumbled since last week’s mind-blowing rally.
Jake Graham, 25, a mobile diesel technician in Lubbock, Texas, started investing to help pay off his student loans. When he first joined the subreddit r/WallStreetBets in July, he was hesitant to follow the advice of investor members — but when the GameStop rally started in January, he realized what the online forum had predicted had some truth to it.
Graham now holds nearly 47 shares of GameStop and seven shares of AMC, which he said he plans to hold onto for as long as he can despite today’s declines.
“Back in 2008 when it crashed, you see videos of Wall Street just up in their buildings and laughing at people protesting. Billions of dollars were lost and they didn’t care. They were sipping their champagne and laughing,” he said, explaining why the risk is worth it to him to see how long retail investors can prevail. “I’m not that worried now.”
As of Tuesday morning, the popular trading platform Robinhood maintained its list of restricted stocks, including GameStop, AMC and BlackBerry. The app limits customers who already own those brands in sufficient numbers from purchasing more and bars new customers from buying those stocks above a certain number of shares.
Robinhood has played a central role in the Wall Street drama as a key facilitator for an army of retail trailers and, conversely, for acting as a chokepoint in the middle of the speculative frenzy. Like other stock trading apps, Robinhood temporarily froze customers’ ability to buy GameStop and other highly sought-after shares, prompting a wave of selling and a vocal backlash from customers, lawmakers and business leaders.
The company has since announced it has taken in $3.4 billion in investments to secure its own financials. And the trading app, in a flurry of crisis management public relations, has stated in tweets and blog posts that it limited stock buying in volatile securities to ensure that it met rules on capital requirements.
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