Big Tech leads stocks to broad gains, even as GameStop plummets

The New York Stock Exchange
The Standard & Poor’s 500 index rose 1.4%, extending gains from a day earlier.
(Associated Press)

Big Tech companies and banks helped power a broad rally on Wall Street on Tuesday, though shares in GameStop and other recent highflying stocks hyped by online traders plunged.

The Standard & Poor’s 500 index rose 1.4%, extending gains from a day earlier, as investors sized up the latest batch of company earnings reports. Rising crude oil prices and solid earnings results helped lift energy companies, including Exxon Mobil and Marathon Petroleum. Treasury yields rose and the VIX, a measure of fear in the market, fell sharply, a sign volatility was easing.

The wave of buying coincided with a skid in GameStop and AMC Entertainment, stocks that have been caught up in a speculative frenzy by traders in online forums and on social media who seek to inflict damage on Wall Street hedge funds that have bet these stocks would fall. The price of silver, which jumped 9% on Monday, fueling speculation the precious metal was also being hyped by online traders, sank by more than 10%.

The S&P 500 rose 52.45 points to 3,826.31. The Dow Jones industrial average gained 475.57 points, or 1.6%, to 30,687.48. The tech-heavy Nasdaq composite climbed 209.38 points, or 1.6%, to 13,612.78. The Russell 2000 index of smaller companies also rose, adding 25.28 points, or 1.2%, to 2,151.44. The major indexes remain near their all-time highs set last month.


Treasury yields rose in another sign of investor confidence. The yield on the benchmark 10-year Treasury note rose to 1.10% from 1.06% late Monday.

GameStop plunged 60% to $90 a share, and AMC Entertainment lost 41.2% to $7.82 a share. Both companies have been in the spotlight for more than two weeks as an online community of investors pushed the stocks to astronomical levels.

Trading in those and several other stocks have been restricted by the popular online trading platform Robinhood since last last week after the bouts of extreme volatility. Robinhood needed to secure funding in order to meet deposit thresholds required by organizations that handle the trading orders placed by investors on its platform.

Robinhood eased some of the trading limits on GameStop and select other stocks Tuesday. For example, it now allows users to buy as many as 100 shares and options contracts in GameStop and 1,250 in AMC. On Monday, the brokerage was limiting users to five shares in GameStop and 75 in AMC.

An online army of traders using the online site Reddit banded together for the last two weeks to snap up shares of GameStop, AMC and other struggling companies, stocks that have been heavily shorted (bets that the stock will fall) by a number of hedge funds. In the process, they’ve done heavy damage to those hedge funds in a stunning reversal of financial power on Wall Street.

But it’s not clear how much longer the Reddit traders can hold the line. Intense media and Wall Street interest pushed many traders into these stocks late last week, with GameStop going as high as $483 on Thursday. They began trading this year at just over $17. The huge run-up in the stock price appears to have little to do with the future prospects of the mall-based retailer, which has been losing money consistently.

Uber rose 7% after the company said it would buy liquor delivery service Drizly for $1.1 billion in cash and stock.


Solid earnings reports helped lift shares for several companies. Lab equipment maker Waters rose 8.4% for the biggest gain in the S&P 500 after easily beating analysts’ fourth-quarter profit and revenue forecasts. Exxon Mobil rose 1.6% and Marathon Petroleum rose 3.9%.

Investors continue to focus on Washington. President Biden invited 10 moderate Republicans to the White House to discuss his proposed $1.9-trillion economic aid plan. Republicans earlier countered with an offer of $600 billion, or less than one-third of Biden’s proposed amount.

Investors bid up stocks heading into 2021 in expectation the rollout of coronavirus vaccines would allow global business and travel to return to normal. That optimism has been dented by infection surges and disruptions in vaccine deliveries.