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Shares of GameStop and several other speculative stocks like theater chain AMC rebounded Friday, extending overnight gains after online trading platform Robinhood said late Thursday it will resume limited trading of restricted securities.
The overall U.S. market slumped again, as the saga that’s captivated and confused Wall Street ramps up the drama.
The Dow Jones Industrial Average dropped 620.74 points, or 2%, to 29,982.62, after Johnson & Johnson said its one-dose coronavirus vaccine was less effective against some COVID-19 variants. Wall Street’s benchmark S&P 500 index fell 1.9% to 3,714.24, and the tech-heavy Nasdaq Composite lost 2% to 13,070.70. For the week, all three major averages shed more than 3%, their worst week since October.
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GameStop soared 67.9% to $325, clawing back most of its losses after skidding 44% to close at $193.60 Thursday. Shares of the videogame chain slumped a day earlier after Robinhood and other trading platforms took steps to curb wild trading swings in shorted stocks, which angered many customers.
Stocks of cinema chain AMC and BlackBerry that have become targets for online traders also gyrated.
The volatile moves in GameStop and other shares came after a spate of trading by small investors of the videogame vendor hurt hedge funds that bet the stock would fall. But by late Thursday, Robinhood said it would allow limited buys of these stocks.
“We’ll continue to monitor the situation and may make adjustments as needed,” Robinhood said Thursday.
GameStop has been on a 1,600% run over the past three weeks and has become the battleground where swarms of smaller investors see themselves making a stand against the 1%.
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. A couple have already essentially admitted defeat, with one saying Friday it would stop publishing reports on stocks it expects to fall.
All the wild action pushed GameStop shares as high as $483 this week, up from $18 just a few weeks ago. It was up 400% for the week.
On Thursday, shares of AMC Entertainment and BlackBerry plummeted 56% and 41%, respectively, following the trading restrictions. AMC rallied 54% Friday while BlackBerry dipped 3.8%.
David Trainer, CEO of New Constructs, an investment research firm, doesn’t expect the volatile situation with shares like GameStop to end well for some small-time investors. He anticipates that after GameStop’s meteoric rise, it will likely fall back to about $40 to $50 a share because he doesn’t think the company’s current valuation is justified due to its earnings and growth projections.