Stocks moved sharply higher Thursday afternoon, a day after sinking to their worst loss since last October.
Investors continued closely watching the volatile swings in GameStop, AMC and several other stocks which have become recent targets for hordes of online retail investors who sent them skyrocketing in recent days while taking on big hedge funds on the other side of the trade betting they would fall.
Several of those stocks fell sharply after Robinhood and other trading platforms restricted or halted their trading. The chaotic trading action is also drawing calls from Sen. Elizabeth Warren along with others in Washington and elsewhere for new government regulatory actions to curb the frenzy.
The S&P 500 had gained 1.7% as of 3:08 pm Eastern, recovering much of the ground it had lost the day earlier. The Dow Jones Industrial Average was also 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 action prompted other traders in the market to follow; accelerating the decline. Similar sentiment may have also driven 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 share price the previous day. The stock, trading at $256 a share, overnight spiked to as much as $500 a share in overnight trading. Meanwhile AMC Entertainment was down 49.8%, after gaining nearly 600% this month alone.
Investors are also focusing more on company earnings. More than 100 companies in the S&P 500 are scheduled to report earnings this week. Investors will learn how they fared during the last quarter of 2020.
Apple fell 2.2% after the iPhone maker posted a record quarterly profit, boosted by big sales in China of iPhones & Apple Watches during the holiday season. Investors focused on the fact that Apple was conservative in its full-year outlook for 2021, when the company cited economic uncertainty and the pandemic as part of their reason for such a cautious forecast.
Meanwhile, Market hopes remained high for President Joe Biden’s proposed $1.9 trillion COVID-relief package, but Market worries persist 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 face roadblocks in the U.S. Senate,” Prakash Sakpal & Nicholas Mapa, senior economists at ING, said in a report.
Markets have been meandering near record highs since last week as investors weighed solid corporate earnings results against renewed worries about troubles with COVID-19 vaccine rollouts; and additional concerns the spread of new variants of coronavirus might delay an overall recovery from the pandemic. ✪