GameStop Shares Surge as Restrictions Are Lifted: Dwell Updates

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Credit…Gabriela Bhaskar for The New York Times

GameStop shares doubled in premarket trading on Friday, the latest turn in a week of wild price swings in companies that have been bid up in a frenzy of activity by small investors.

This week, shares in GameStop — a stock Wall Street had given up on — have reached as high as $483 and fallen as low as $61.

GameStop had ended the regular trading session down 44 percent on Thursday but had risen 61 percent in after-hours trading. The drop earlier in the day had come as Robinhood and other trading platforms said they would limit the ability to buy certain securities, including AMC Entertainment and BlackBerry. Then the trading app reveresed some of the restrictions.

“We plan to allow limited buys of these securities” starting Friday, Robinhood said in blog post on Thursday afternoon. “We’ll continue to monitor the situation and may make adjustments as needed.”

Robinhood called its move “a risk-management decision,” and later said it had raised $1 billion to cover the costs of the high volume of transactions so it wouldn’t need to reimpose restrictions.

Other brokerage firms have also limited trading of some of the same stocks. The Securities and Exchange Commission said Wednesday it was “actively monitoring” the volatile trading.

Other stocks spurred on by day traders in Reddit forums like “Wall Street Bets” include AMC Entertainment, the movie-theater train that has narrowly avoided bankruptcy four times in the past nine months, which rose 53 percent in premarket after dropping 57 percent on Thursday. On Wednesday, its share price jumped 300 percent to $19.90. And BlackBerry, once an industry leader in smartphones. Its share price has climbed 121 percent this year. It was also trading higher on Friday.

A spraypainted sign near the New York Stock Exchange. GameStop’s stock surge has been carried by a populist message.Credit…Gabriela Bhaskar for The New York Times

GameStop started the week as a curiosity — an illustration of how markets may have become detached from reality and how small traders can use options to drive stock prices.

By Tuesday, the story of the stock had become an obsession, as it nearly doubled in price. Groups of renegade investors on forums such as Reddit and Discord were trying to force a short squeeze — pushing up the price of stocks that hedge funds had bet would go down.

On Wednesday, GameStop was the most actively traded stock, with $24 billion worth of shares switching hands as prices rose 135 percent. Brokerages started to worry about their exposure, with some limiting customers from purchasing shares on margin — with borrowed funds. Both Elon Musk and Chamath Palihapitiya egged on the crowd via Twitter. The Securities and Exchange Commission said it was “actively monitoring the ongoing market volatility.”

The surge of GameStop and other stocks — AMC Entertainment and American Airlines were two other favorite targets — was starting to take a toll on hedge funds. Melvin Capital had to raise a $2.75 billion bailout from Citadel and Point72 early in the week, and its founder, Gabriel Plotkin, confirmed to CNBC that he was throwing in the towel and had exited his position.

Point72’s returns were down nearly 15 percent for the year as of Wednesday, and returns at Citadel were down by single digits.

The stock had its first daily drop of the week on Thursday, as the apps that many traders relied on limited action. Robinhood, among others, temporarily prevented its users from buying new positions in GameStop and other companies. The announcement infuriated users, who felt that the platform had betrayed them to satisfy big investors. “They call themselves Robinhood, but they’re helping the wealthy take money back from the middle class,” said a protester outside Robinhood’s headquarters.

Robinhood said it would reallow some trades on Friday, potentially setting up another day of wild swings. It said it had placed the limits because of “financial requirements” and was raising an infusion of $1 billion to ensure it wouldn’t need to further limit transactions.

Analysts expect GameStop to report a loss from continuing operations of $465 million for 2020, on top of the $795 million it lost in 2019.

Stocks on Wall Street were set to drop on Friday when the market opens, following European and Asian indexes lower, the latest turn in a volatile week of trading. A frenzy in the markets has been spurred by an army of day traders whipping around a handful of stocks, forcing losses on hedge funds and earning the attention of regulators and senators.

The S&P 500 index is set to open half a percent lower. It is already down 1 percent on the week, its worst performance since the end of October.

Shares in GameStop and AMC Entertainment surged in premarket trading on Friday after the retail trading app Robinhood said that it would lift some of the restrictions to allow new buy transactions. Both stocks had plummeted on Thursday after the trading restrictions were imposed.

The meme-inspired surge in trading has picked up in cryptocurrencies, where wild price swings aren’t uncommon. Dogecoin, a cryptocurrency that started as a joke, has surged 800 percent in the past day. Elon Musk spurred some of the interest on Thursday by tweeting another meme, a fake magazine cover showing a picture of a dog. The billionaire also made his Twitter bio simply “#bitcoin,” and the cryptocurrency has jumped 15 percent.

Away from the world of retail trading and cryptocurrencies, institutional investors have been parsing through updates on the global economy’s response to the pandemic. On Friday, data showed the German and French economies performed better at the end of last year than analysts expected. Germany, Europe’s largest economy, even managed to grow slightly. But a struggle to increase the region’s supply of vaccinations has damped optimism about this year’s economic recovery. Spain on Wednesday became the first E.U. country to partly suspend immunizations for lack of doses.

In the United States, Janet L. Yellen was sworn in as Treasury secretary on Tuesday. She will be at the helm of the Biden administration’s push to pass a large stimulus package as data showed on Thursday that the U.S. economy had faltered in the last quarter.

  • The Stoxx Europe 600 index tumbled nearly 1 percent, with the steepest losses in financial and consumer stocks. The FTSE 100 in Britain dropped about 1 percent and the DAX in Germany fell 0.8 percent.

  • Nokia shares rose more than 6 percent after Trade Republic, a German stock trading app, lifted its restrictions on certain stocks, including Nokia, GameStop and BlackBerry.

  • Asian stock markets closed lower. The Nikkei 225 in Japan declined 1.9 percent and the Hang Seng in Hong Kong ended the day 0.9 percent lower.

  • Hong Kong’s economy contracted 6.1 percent in 2020, slightly worse than analyst expectations with a slowdown in the fourth quarter.

A market in Paris this month. The French economy shrank 8.3 percent overall in 2020, but performed better than expected in the October-December quarter.Credit…Ludovic Marin/Agence France-Presse — Getty Images

Severe recessions in Germany and France last year, caused by the coronavirus pandemic, began to improve slightly toward the end of 2020, as a second series of lockdowns had a milder impact on their economies, those governments reported on Friday.

But prospects for a hoped-for recovery this year in Europe’s two largest economies may be delayed as a new variant of the virus circulates and as problems emerge in the rollout of vaccines, economists warned.

The French economy shrank by 8.3 percent last year as two sets of national lockdowns, lasting months, dealt strong blows to business activity, the national statistics agency reported on Friday.

But the overall contraction was less than expected. By reducing the strictness of the nation’s second lockdown, which went into effect in October and was mainly limited to restaurants and cultural events, the government avoided a worse economic hit, the statistics agency said. Growth in the fourth quarter fell 1.3 percent, compared with the same period a year ago — far less than the 4 percent contraction forecast by many economists.

In a note to clients, the Dutch bank ING wrote, “The big question now is whether France will manage to avoid a second recession in 15 months.”

“Given the current health situation, another recession looks all but certain,” the bank added.

The economy in Germany grew 0.1 percent in the fourth quarter compared with the third quarter, the country’s Federal Statistical Office said. That compared to growth of 8.5 percent in the third quarter, as the economy bounced back from a severe downturn early in the year, when the pandemic brought German factories to a standstill.

Over all, the German economy shrank 5 percent for all of 2020, the statistical office said.

In a separate note to clients, ING said, “It’s the worst performance since the financial crisis in 2009 but still much better than some had feared at the start of the Covid-19 crisis.”

Economists predict that the German economy will shrink again in the first quarter of 2020 because of the slow rollout of vaccines and extended lockdowns.

Downtown San Francisco. Besides providing funds for back rent, the California legislation extends eviction protections set to expire in January. Credit…Lucas Foglia for The New York Times

The California Legislature voted Thursday to bring a measure of security to renters hit hard by the coronavirus pandemic. The bill allocates billions of dollars of federal pandemic relief to help tenants pay their back rent.

“The state’s housing crisis wasn’t created by Covid, and this bill alone certainly doesn’t solve it,” Gov. Gavin Newsom said in a statement. “While we’ve got to recommit to housing affordability more broadly, this bill protects against the worst economic impacts of the pandemic in a balanced and equitable way.”

The vote came as other states as well as the federal government have moved to provide relief to tenants. President Biden, in one of his administration’s first acts, added two months to a federal eviction moratorium that was due to expire at the end of January. Meantime, state legislatures and city councils are beginning to deploy $25 billion in rental assistance from a $900 billion federal stimulus package passed late last year.

The California deal, approved overwhelmingly, extends state eviction protections that were to expire this month. They will now stay in effect through June. The bill also allocates up to $2.6 billion in federal money to clear some tenants’ debts.

Under the legislation, the state will pay 80 percent of back rent owned by tenants who fell behind because of the pandemic and who make no more than 80 percent of their area’s median income — but only if the landlord agrees to forgive the remaining 20 percent.

Tenants whose landlords won’t accept the deal can apply for state assistance that would cover 25 percent of their unpaid rent and utility bills back to April 2020. Tenants are also able to apply for assistance on up to 25 percent of their rent between April and June of this year.

Local businesses have been eviscerated by the pandemic.Credit…Adria Malcolm for The New York Times

The economic upheaval caused by the pandemic is changing communities across the country. Hundreds of thousands of businesses have closed, leading to lost livelihoods and empty storefronts. Many of these businesses were neighborhood pillars, beloved locales that we returned to over and over again. In your neighborhood, perhaps the bar where you met friends after work, the restaurant where your family celebrated birthdays or the bookstore where you loved to browse is now gone.

The New York Times would like to hear from you about a local business that has shut down. Why was it special to you, and what do you miss about it? How is its absence altering the fabric of your community?

We may contact you with a few follow-up questions. And if you can, please share a photo of the business as well.

American Airlines said it was working to rebook customers after a regional subsidiary grounded much of its fleet for inspections.

The wholly owned subsidiary, PSA Airlines, took most of its 130 planes out of service to complete what American described in a statement as a “necessary, standard inspection” of nuts and bolts on the nose gear of the affected aircraft. PSA flies two types of planes, both manufactured by Bombardier.

PSA had canceled more than 200 flights as of early Thursday night, according to FlightAware, a flight-tracking website. The Federal Aviation Administration confirmed the grounding in a statement, saying that the airline “voluntarily disclosed the matter” to the agency.

“We are working with PSA and the F.A.A. to immediately address the issue,” American said in the statement. “We are working with our customers to arrange new accommodations on other flights, and we are working to return the impacted aircraft to service.”

American has nearly 900 planes in its fleet, not including those operated by subsidiaries like PSA, which is based in Dayton, Ohio. Many of those planes have been sidelined as the coronavirus pandemic stifles demand for flights. On Wednesday, just over 530,000 people were screened at federal airport security checkpoints, roughly 30 percent of the traffic on the same day last year, according to the Transportation Security Administration.

News of the PSA groundings came on a busy day for American, which reported its full-year financial results Thursday. The airline’s stock also soared early in the day as the carrier found itself in the middle of a war of wills involving amateur and professional traders.

Facebook is working on newsletter tools for journalists and writers, according to three people familiar with the company’s plans, a move toward offering more services to independent writers as the social network jumps into the fast-growing newsletter space.

The product, which is still in its earliest stages, could be similar to those of other newsletter companies, according to the people, who spoke on the condition of anonymity because they were not authorized to do so publicly. That could include features to help writers build their followers on Facebook and curate their email lists, the people said, as well as paid subscription tools to help journalists make money from their newsletters.

The effort would be part of the Facebook Journalism Project, which is managed in New York, the people said. Mark Zuckerberg, Facebook’s chief executive, is supportive of the initiative, said the people, and has encouraged a team of dozens of engineers to pursue it.

Newsletters are booming, as publishers and start-ups seek new ways to attract and support independent writers. Substack, a start-up founded in 2017, has attracted a growing audience with software that allows writers to publish and distribute both free and paid emailed newsletters to their followers. In return, the company receives a nominal cut of the writer’s subscription sales. Earlier this week, Twitter announced it had purchased Revue, another newsletter software service.

“We want to do more to support the independent journalists and experts who are building businesses and audiences online,” said Campbell Brown, vice president for global news partnerships at Facebook. “We’re exploring ways to help them benefit from the news products we’ve built, like Facebook News and subscriptions, while also building new tools to complement what journalists already find useful.”

The newsletter project is part of Facebook’s plan to provide more legitimate news sources. The company has spent the past few years building up the News Tab, a specific destination inside of the Facebook app that displays stories from publishers like The Washington Post, Bloomberg, The Wall Street Journal and The New York Times. It has also pledged to donate more than $100 million to publishers, an effort to rejuvenate the ailing local news industry.

Facebook executives believe that while they have improved relations with major publishers, the company had not yet developed a way to court individual writers to publishing their work on Facebook. Mr. Zuckerberg noticed the growing trend of independent journalists monetizing their work through newsletter services, and urged the team to make the project a priority.

It is unclear when the product will see the light of day, though executives hope to release it by this summer.

Kevin Roose contributed reporting.

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