Wall Street Opens Lower on Boeing Loss; GameStop Doubles; Dow Down 453 Pts

This post was originally published on this site


Investing.com — Some games are too much fun to stop.

GameStop Corp (NYSE:GME) stock dominated the opening of trading on Wall Street on Wednesday, doubling in price from Tuesday’s close as a horde of retail traders continued to squeeze short sellers out of the stock. That was despite reports suggesting that Melvin Capital, the hedge fund which had appeared to be the focus of the retail traders’ attack, had closed out of its position.

The broader market opened in more muted fashion, however, overshadowed by a record annual loss reported by Boeing (NYSE:BA). Boeing stock fell 4.3%, despite the more positive news that its 737 MAX had been cleared to resume flying by European regulators.

By 9:40 AM ET (1440 GMT), the Dow Jones Industrial Average was down 453 points, or 1.5%, at 30,484 points, The S&P 500 also retreated from its record high, losing 1.6% and the Nasdaq Composite fell 1.9%. The Russell 2000, which had also surged to all-time highs earlier in the week, retraced even more, with a 2.6% drop.

Trading in other heavily shorted stocks was also volatile. BlackBerry (NYSE:BB) was halted with the stock up 18%. AMC Entertainment (NYSE:AMC) was also halted after tripling in the opening. minutes of the session. AMC earlier this week had completed a $917 million raise of capital and liquidity that effectively removed the near-term risk of bankruptcy, potentially positioning the stock for a strong recovery as and when vaccination campaigns allow lockdown measures to be eased.

The moves appear likely to attract the attention of the Securities and Exchanges Commission, in as much as a large volume of posts in the influential r/wallstreetbets chatboard on Reddit, which boasts 2.7 million members, singled out Melvin’s positions for particularly aggressive squeezing over recent days. Michael Burry, a hedge fund manager who famously shorted subprime mortgages in 2007-8 against a solid cartel of Wall Street interests, had been among one of the earliest to suggest that the short-selling of GameStop had gone too far last year, but described Tuesday’s price action on Twitter as “unnatural, insane, and dangerous.”

Burry took down his tweet after thinking better of his original impulse to namecheck @SECEnforcement, according to Bloomberg.

The fireworks overshadowed more solid gains posted by Microsoft (NASDAQ:MSFT) stock, which rose 2.7% to a new all-time high after reporting quarterly earnings that confirmed its central position in some of the biggest trends of the moment: revenue from cloud hosting services rose 50% on the year, while the company also did well out of its video gaming operations and through sales of PCs, which have burgeoned thanks to the pandemic.

The Federal Reserve, whose ultra-loose monetary policy provides the backdrop to the current extraordinary mood on Wall Street, will announce the results of its latest policy meeting at 2 PM ET, and Chairman Jerome Powell is likely to be questioned about the financial stability risks arising from the policy. Finra data quoted by the Twitter account @Hedgopia indicated margin debt on S&P 500 products rose by 18% in the last two months of the year to $778 billion.

Elsewhere, Facebook Inc (NASDAQ:FB) stock slipped 1.8% ahead of its quarterly update after the closing bell, while Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA), which also both report this evening, both edged up.