GameStop Steals Spotlight Amid Wall Street’s Subdued Performance
February 1 2021 - Team Stockal
Wall Street’s main indexes closed a stormy week on a lower and a volatile note that comprised a David vs Goliath battle between retail investors and major financial institutions holding short positions on stocks such as GameStop (GME). The likes of GameStop and AMC Entertainment (AMC) were at the centre of the retail-buying frenzy, worrying analysts of such trades spilling over to other names.
An army of retail investors traded in GameStop, among others, and shares gained traction after brokers such as Robinhood eased restrictions in their trading. The U.S. Securities and Exchange Commission has also said it was closely monitoring any potential wrongdoing.
For the week, the Dow (DOW) shed 3.28%, the S&P 500 (GSPC) fell 3.31% and the Nasdaq (IXIC) slid 3.49%, marking their biggest weekly fall since end-October, while for January, all three indexes recorded a drop between 1.12% and 2.04%.
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GameStop extends surge amid regulators, gov’t officials watching volatility
GameStop shares continued to surge after a short breather during the week, with the stock rising 68% on Friday. Inflows into the stock rose after brokers such as Robinhood eased some curbs on trading of the stock.
GameStop has been the centre of a major retail-buying frenzy for the past couple of weeks as retail investors on online forums such as Reddit continued to take on major financial institutions that had shorted the stock. The news assumes significance at a time when GameStop short sellers have incurred losses of nearly $20 billion so far this year, data from S3 Partners showed, with about $11.2 billion short interest shares in the offing.
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December quarter earnings, along with annual 2020 results, for U.S. companies are being tracked by investors to get a complete picture of the extent of the damage done by the COVID-19 pandemic, while the management commentary provides a timeline or trajectory for them to bet for or against the stock. The pandemic has disrupted businesses, economies and earnings from the fundamental aspect for any substantial moves in the market. Trends and data emerging from this earning season holds the key for investors, going forward.