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Big Tech leads stocks to broad gains Tuesday; GameStop collapses, down 60%

Financial Markets Wall Street stock market Dow Nasdaq S&P
Posted at 1:33 PM, Feb 02, 2021
and last updated 2021-02-02 17:00:01-05

Stocks closed broadly higher on Wall Street, adding to the market's gains from a day earlier with solid contributions from Big Tech companies, banks and other sectors. Meanwhile, GameStop stock is way down.

The S&P 500 rose 1.4%, while the Dow Jones Industrial Average and the Nasdaq each rose 1.6%.

GameStop plunged 60% in the latest wild swing for the stock and several others that have become caught up in a speculative frenzy by online traders seeking to inflict damage on Wall Street hedge funds who bet the stocks would fall.

GameStop rose to nearly $470 last Thursday, part of a huge rally triggered by amateur traders who follow a stock market-focused Reddit page.

GameStop has been on a stupefying run this month and become the battleground where swarms of smaller investors see themselves making an epic stand against the financial elite. Noticing a large amount of investors were betting against GameStop, counting on the gaming store's stock to fall also called a "short", smaller investors pushed the stock up.

As a result, GameStop's stock soared from about $18 a share to nearly $400 a share in a matter of weeks. According to Reuters, the Wall Street professionals that attempted to short GameStop's stock have lost an estimated $7 billion in a matter of days.

Ahead of Thursday's high, Robinhood, an app used to trade stocks, halted buying of GameStop stock, along with other stocks seen as targeted by these smaller investors, which included AMC, Bed Bath Beyond, and others.

Tuesday, GameStop's stock closed below $100.

The New York Attorney General Letitia James said in a statement her office was reviewing trading on the Robinhood app relating to GameStop.

“We are aware of concerns raised regarding activity on the Robinhood app, including trading related to the GameStop stock,” James said. “We are reviewing this matter.”

Lawmakers from both sides of the aisle have called for investigations into Robinhood and the traders participating in the GameStop situation.