Wall Street Opens Mixed in Febrile Atmosphere; Dow Down 175 Pts By Investing.com

By Geoffrey Smith 

Investing.com — U.S. stock markets opened mixed on Monday in febrile mood, with signs of increasing investor mania in a handful of stocks while the broader market cooled off amid fears that U.S. and global growth estimates may have to be revised down due to lingering pandemic effects. 

By 9:55 AM ET (1435 GMT), the Dow Jones Industrial Average was down 177 points, or 0.6%, at 30,820 points. However, the S&P 500 was up 0.2% while the Nasdaq Composite posted a gain of 1.2%.

Early trading was dominated by what appeared to be driven by retail investor-driven surges in a number of stocks which had been driven to the verge of bankruptcy by the pandemic.

GameStop (NYSE:GME) stock surged another 39% after its 51% rise on Friday, when the momentum of buying generated by retail investors squeezed hedge fund Citron Research and other short-sellers. This victory over the skeptics appeared to encourage similar pile-ons in other stocks, despite evidence of their being in long-term decline long before the pandemic.

AMC Entertainment (NYSE:AMC) stock soared 24% after the embattled movie theater operator said it had raised over $900 million in fresh debt and equity, a recapitalization that effectively removes any near-term threat of Chapter 11.

Finally, apparel retailer Express skyrocketed 73%, adding to gains it made after securing a liquidity lifeline earlier this month.

The moves epitomized the increasing influence of small-scale investors in a market that has become increasingly decentralized and – to some at least – democratized by technology. They were accompanied by widespread reports of retail brokerages experiencing problems due to what may have been extraordinarily heavy order flow. The service Downdetector said E*Trade, Vanguard, Robinhood, Merrill Lynch, Charles Schwab (NYSE:SCHW) and Vanguard users were all reporting problems. 

“A year ago, when I first described the latest investment craze as a “flash mob” with money I never imagined how accurate the phrase would become,” said Financial Insyghts founder Peter Atwater via Twitter. “It truly has become a parade through the mall. Friday it was GameStop and today it’s AMC. So, tomorrow, do they all head to Macy’s?”

Another stock making outsize gains was BlackBerry (NYSE:BB), which rose 40%. The software group and former maker of handheld devices recently settled an intellectual property dispute with Facebook (NASDAQ:FB). 

The current euphoria has been emboldened by confidence that the Federal Reserve and the new administration of President Joe Biden will keep liquidity easy, throwing money at efforts to contain the pandemic and its chilling effect on household spending. The Fed’s policy-making committee meets this week and Chairman Jerome Powell will comment on its decisions at his press conference on Wednesday.

Elsewhere, Moderna (NASDAQ:MRNA) stock rose 9.6% after it said that its vaccine appeared effective against new strains of the Covid-19 virus. It’s still going to start work on modifications to address a particularly troublesome new strain first identified in South Africa. However, Merck, widely considered a leading force in immunology before the Covid-19 pandemic, fell 0.8% after saying it will abandon its experimental Covid drug following disappointing test results.