In today's market insights, we delve into Citibank's oil price predictions, the evolving competition between Huawei and Apple, the Saudi Arabia-Tesla partnership, and the upcoming rate decisions from the world's major central banks.
War for GameStop between Reddit and Wall Street
If you didn’t know about GameStop before all this fuss over it, we’ll tell you. GameStop is an ordinary American high street shop that sells games, consoles, and other electronic devices. Obviously, the Covid-19 pandemic hit hard such kinds of shops and GameStop was no exception. And who would go buying games in a street shop when everything is sold online?
As you can see, GameStop was having a tough time. Therefore, a lot of hedge funds made bets on GameStop to lose its value and started selling the stock. And GameStop would have really fallen, but, all of a sudden, people in Reddit began discussing this topic, made it trending, and started massively buying GameStop shares.
As a result, the demand raised its stock price enormously, and all the investors, who bet on its dropping, lost billions of dollars. This activity has created a so-called "short squeeze". The short sellers betting against GameStop were forced to buy more GameStop stock to cover their losses. That in turn drove the price even higher, which then again forces more short sellers to cover their losses, which pushes the price up even more.
What was the real purpose?
Some people started buying GameStop just for fun. Others wanted to test what the internet community is capable of. There is even an opinion that it was kind of revenge against the big financial companies accused of the market crash in 2008. Even Elon Musk entered the game with a tweet, which sent GameStop further upwards.
The total cost of all the bets against GameStop reached $5 billion, according to Investopedia. "We're seeing a phenomenon that I have never seen," Jim Cramer, a Wall Street commentator.
GameStop stock jumped more than 822%, from $17.25 at the beginning of the year to a high of $159.18 on Monday. On Thursday, it jumped to $483.00, before halving again. Today it’s trading near $380.00.
All this GameStop chaos made a huge impact on the large-cap indexes. The S&P 500 and Dow Jones both dropped significantly on Wednesday, down 2.6% and 2.1% respectively. Some analysts consider that the index selloff happened because of the investors who took their money out of these indexes to cover short bets made on stocks like GameStop.
Let us finish on a positive note. This situation gave rise to a lot of memes that you can see below.
Good Wednesday, dear traders! Let’s look at the main news ahead of the main event that will shake the markets: the release of US CPI at 15:30 GMT+3!
The US stock market slid heavily on Wednesday after Fitch downgraded the US credit rating from AAA to AA+. The Dow Jones Industrial Average index fell 0.54%, while Nasdaq dropped by 1.74%.
The Japanese yen fell to its lowest level against the US dollar in 33 years. Read the full report to learn the next target for USDJPY!
The US stock market fell in the third quarter. What's going on and why economists think that the last quarter will be better? Let's discuss it all here.
BlackRock CEO forecasts the Fed may have to raise rates further. The US dollar index (DXY) gains 130 points today. Read the full report to get more fresh news and technical analysis!