A basket of meme stocks tracked by Bloomberg rose 3.7 per cent, extending a six-day rally of its own. Among the group’s top performers were GameStop and Express. Newly-public Magic Empire Global, a little-known Hong Kong-based financial services firm, extended to 2,825 per cent two-day arises since going public, attracting some retail attention.
“These meme stock rallies that are emerging will only last if US stocks broadly continue to head higher,” said Ed Moya, senior market strategist at Oanda. “After AMTD Digital reminded the WallStreetBets crowd of the potential skyrocketing moves, many retail traders are scanning their favorite plays and are looking to get back in.”
The rapid rise and subsequent fall for AMTD Digital both puzzled and captivated the markets. The stock posted an eye-popping arises from more than 32,000 per cent at one point before erasing a chunk of gains.
Heavily-shorted stocks like Wayfair, Rent the Runway, and those that went public via blank-cheque merger including 23andMe Holding Co saw double-digit rallies at one point as investors braced for volatility.
Short covering from institutional investors may have boosted the recent surge, according to some on Wall Street. More than half of Bed Bath & Beyond shares available for trading are currently sold short, according to data from analytics firm S3 Partners, while AMC Entertainment, GameStop and Wayfair short interest each sit around 20 per cent.
An index tracking hedge funds’ high-conviction bets rose 1.8 per cent last week, trailing those favored by retail investors by 2.7 percentage points, the most since March, data compiled by Goldman Sachs show. While still early into August, the firm’s basket of retail favorites is on track for the best month since January 2021 relative to firms favored by hedge funds. The retail basket carries names including Delta Airlines, which just clocked the longest streak of weekly gains since 2020.
“Retail traders have to move quickly, because one headline can change the entire trajectory of the stock market,” said Quincy Krosby, chief global strategist at LPL Financial. “Retail traders are daring the Fed and they’re daring some professional investors, and they’re doing well so far. It’s dicey because it can go in the other direction really fast.”