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Shares of GameStop and several other speculative stocks like theater chain AMC and BlackBerry rebounded Friday, extending overnight gains after online trading platform Robinhood said late Thursday it will resume limited trading of restricted securities.
GameStop soared nearly 72% to $336, 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.Â
Stocks of cinema chain AMC and BlackBerry that have become targets for online traders also gyrated.
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The move 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.Â
“We’ll continue to monitor the situation and may make adjustments as needed,†Robinhood said Thursday.
It’s been a dizzying week for GameStop. All the wild action pushed GameStop shares as high as $483 this week, up from $18 just a few weeks ago. It is up 198% for the week heading into Friday.
On Thursday, shares of AMC Entertainment and BlackBerry plummeted 56% and 41%, respectively, following the trading restrictions. AMC rallied 50% Friday and BlackBerry climbed 8%.
Elsewhere, the Dow Jones Industrial Average dropped 390 points 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 also opened lower, falling 1.1%.
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.Â
“The action in GameStop’s stock is a game of musical chairs and my advice for investors is to sell before the music stops,†Trainer said in a note. “As fickle as the trading mob has been to select GameStop as one of their favorite stocks, they could be just as fickle as to when to let the stock drop.â€
“While I don’t think the surge in GameStop shares is a signal of euphoria in the broader stock market, the illumination of this reckless and unethical trading environment may be the catalyst behind a near-term stock market correction,†Trainer added.
Investors watched virus infection spikes in Europe and Asia, renewed travel curbs and negotiations in Washington over President Joe Biden’s proposed $1.9 trillion economic aid package. Hopes are high for Biden’s aid package, but worries grew that the plan might be scaled back under pressure from Republican legislators.
In early trading, the FTSE 100 in London fell 1% to 6,457.27 while Frankfurt’s DAX lost 1.1% to 13,510.71. The CAC 40 in Paris tumbled 1.3% to 5,441.20.
In Asia, the Shanghai Composite Index lost 0.6% to 3,483.70 and the Hang Seng in Hong Kong sank 0.6% to 28,369.67.
Contributing: The Associated Press
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