"Leading Big Brother" will also take you on a two-day tour? U.S. stock CPI carnival day, retail investors speculated on stocks and fell sharply

Finance Associated Press

2024-05-16 10:41Published on the official account of Cailianpress, a subsidiary of Shanghai Poster Industry Group

Finance Associated Press, May 16 (edited by Xiaoxiang) Just when the S&P 500 index hit its 23rd all-time high this year and the Dow Jones approached 40,000 points for the first time, many market traders found that in the carnival of U.S. stocks overnight, there was a lack of some of the most shining "figures" recently: that is, those retail investors who only glowed with the "second spring" two days ago......

Market data showed that the stock price of GameStation fell sharply by nearly 19% on Wednesday, the biggest one-day drop since 2021, while AMC fell 20%. The two stocks had more than doubled in the first two days of the week, but Wednesday's decline wiped out their combined market capitalization of about $3 billion, and the week's gains nearly halved.

In addition to the two most typical retail stocks, several other well-known Internet celebrity stocks also underperformed on Wednesday: PV maker SunPower closed down about 29% on Wednesday, Koss closed down 19.2%, and BlackBerry closed down 6.9%.

The Waterloo-like movements of these stocks clearly stand in stark contrast to the strength of the broader US stock market overnight following the release of CPI data. The S&P 500, Dow and Nasdaq Composite hit all-time highs on the same day on Wednesday for the first time since March 21. At the close, the S&P 500 rose 1.2% and the Dow rose about 350 points, or 0.9%, and the index was less than 100 points away from the 40,000-point mark.

There is no doubt that the rally of the above-mentioned Internet celebrity stocks, which has been soaring for two days, came to an abrupt end on Wednesday against the backdrop of no warning, and even the overall rally of the broader market, which is inevitably reminiscent of the crazy memories that enveloped the market in early 2021 when the "retail investors vs. Wall Street" enveloped the market.

At the time, GameStop soared by more than 1,000% in just a few weeks, followed by a group of the most smelly groups quickly unwinding most of their gains. Before the retail frenzy finally dissipated, GameStation's stock price continued to fluctuate for several months, but still did not fully recover to its early highs.

This scene has obviously shaken many American retail investors: is the new wave of retail investors driving the stock market driven by the "leading big brother" on social media just a "two-day tour"?

"Leading Big Brother" will also take you on a two-day tour?

As we have previously introduced, the rally in this round of Internet celebrity stocks is driven by the return of retail "big brother" Keith Gill, who goes by the screen name "Roaring Kitty", to social media. Three years ago, it was Gill who actively posted on the Wallstreetbet section of the Reddit forum, encouraging a large number of American retail investors to flood GameStation stocks, thus triggering the "retail investors shorting Wall Street" incident that shocked the world.

On Sunday night, an X account linked to Gill posted for the first time in nearly three years: a photo of a man sitting in a seat leaning forward. For now, many people are still keeping a close eye on Jill's X account, which has been posting obscure videos on a regular basis since Monday morning. The videos contain clips from movies, TV shows, and TikTok, but there isn't anything specific about the stock yet.

(The big brother who took the lead has only been posting some inexplicable videos in recent days)

Ben Laidler, global market strategist at eToro, said that the conditions that drove stock prices soar like those in 2021 no longer exist.

"This time the situation is different, the lockdown period of the pandemic is over. Most of consumers' excess savings have been spent. The short positions in these stocks, while not small, are much smaller than they were at the time. Interest rates are much higher," Laidler noted.

This is actually the same situation as we mentioned in our report on Wednesday, compared to three years ago, Wall Street has learned better, while in the United States, retail investors have no money, no time, and higher interest rates. Marco Iachini, senior vice president at Vanda Research, wrote in a research note on Tuesday that "quant/hedge funds are better equipped to handle these situations today." If anything, we believe they will participate in the short squeeze with retail investors first, but will also operate in reverse, with a high probability of exiting these trades en masse before retail traders. ”

Judging from the trading volume, as the general rise in U.S. stocks has given investors more choices, the trading volume of the above-mentioned retail stocks on Wednesday was significantly lower than the previous two days, showing a shrinking trend.

Of course, on the news side, the fall of retail investors, especially AMC, on Wednesday is not unrelated to the news that AMC took advantage of the soaring stock price to announce an additional issuance.

AMC disclosed in a new filing on Wednesday that it will issue 23.3 million shares to replace notes due 2026 with a principal amount of $164 million. As a result, the price increase of AMC junk bonds has expanded. The shares for the private transaction are valued at $7.33 per share, based on the principal amount and accrued interest on the exchange. AMC closed at $5.48 on Wednesday.

(Finance Associated Press Xiaoxiang)

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