GameStop skyrockets as retail investors force short squeeze

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What goes up, must come down, and today gravity seems to be taking its toll on consumer-related stocks caught up in the short-squeeze frenzy. GameStop stock is the biggest mover this morning, down 49%. AMC Entertainment Holdings is tumbling 38.2% Express is 32% lower. 

In recent weeks, a number of retail stocks with high consumer interest have seen huge swings. GameStop is of course the poster child for this: With bears betting so heavily against the video game retailer, an influx of money from small investors forced many short to give up and cover their positions, fuelling a cycle of major gains. To bet against a company, bears borrow stocks, intending to buy it back later at a lower price. Short squeezes occur when a stock's prices rises, promoting bears to throw in the towel and by the stock immediately to limit their losses. That can force other sort to do the same, and the stock rapidly rises. That's how GameStop stock rocketed to $483 recently from just over $17 at the start of 2021. 

One issue is that the recent short squeeze—which have sent other stocks, including AMC, Bed Bath & Beyond, Macy’s, and Stitch Fix, flying—doesn’t reflect any underlying change in fundamentals that would point to a sustainably better future for the companies at the heart of the frenzy. The moves were sparked by small investors pouring money into the shares, not any particularly good news on the part of the companies, such as a robust earnings report, which can set off squeezes.