Wrapup 3: American Airlines joins GameStop trading frenzy as calls for probe build

N Citron

28/01/2021 14:20

(Adds details on American Airlines; updates stock prices)
    By Sagarika Jaisinghani and Shriya Ramakrishnan
    Jan 28 (Reuters) - An almost 60% surge in shares of American
Airlines led stellar gains for a series of social-media hyped
stocks on Thursday, broadening a battle between small-time
traders and major Wall Street institutions that has shaken U.S.
and European stock markets.
    GameStop  GME.N , the video game chain whose 1,700% rally
has been at the heart of the slugfest in the past week,
retreated after initially adding another 37% in early trading.
 urn:newsml:reuters.com:*:nL1N2K22YX
    On Reddit thread WallStreetBets, where calls to buy stocks
have helped drive the extraordinary moves, some of its more than
4 million members reported trading platform Robinhood was now
preventing investors from buying new shares in GameStop and
other of the companies.
    Robinhood, one of the biggest of the easy access apps that
has spurred the development of a huge online community of
amateur traders, did not immediately respond to requests for
comment.
    Shares in American Airlines soared as much as 60%.
    "It does appear that it (American Airlines) may be getting
caught up in this day trading frenzy," said Randy Frederick,
vice president of trading and derivatives for Charles Schwab in
Austin, Texas.
    The dramatic jumps in the stock price of companies including
GameStop, BlackBerry Ltd  BB.N  and AMC Corp  AMC.N  drew more
calls for regulatory scrutiny and action from commentators.
    "In terms of short interest being monitored, the U.S.
markets are probably the most transparent, but there's always
room for improvement," former SEC chairman Jay Clayton told
CNBC.
    In Australia, previously immune to the trend, heavily
shorted shares including Webjet  WEB.AX  and Tassal Group
 TGR.AX , climbed more than 5% even as Sydney's benchmark ASX
200 index  .AXJO  fell 2%.  .AX 
    Trading in European share markets was subdued, with some of
this week's high-flyers including Evotec  EVTG.DE  and Varta
 VAR1.DE  nearly flat. 

    GAME ON
    The short squeeze - where traders have to abandon
loss-making "short" bets on a stock falling because it has
instead risen - fueled a 2% slide in New York's S&P 500  .SPX 
on Wednesday as investors sold other assets to cover their
losses.
    Short-sellers are sitting on estimated losses of $71 billion
from their positions in U.S. companies so far this year, data
from financial data analytics firm Ortex showed.  urn:newsml:reuters.com:*:nL8N2K3506
    Futures tracking the main New York index were down another
0.3% on Thursday as Reddit discussion threads again hummed with
chatter about a number of stocks.  .N 
    In one discussion, thousands of participants responded "We
love this stock" to a post that called for more buying of
GameStop and cast retail traders as Iron Man against a hedge
fund Thanos in a nod to the superhero movie "Avengers: Endgame".
    The war began last week when famed hedge fund short seller
Andrew Left of Citron Capital bet against GameStop and was met
with a barrage of retail traders betting the other way. He said
on Wednesday he had abandoned the bet.  urn:newsml:reuters.com:*:nFWN2K2160
    Regarded by market professionals as "dumb money", the pack
of traders, some of them former bankers working for themselves,
has become an increasingly powerful force worth 20% of equity
orders last year, data from Swiss bank UBS showed.
    The only-way-is-up nature of stock markets over the past
decade, fueled by a constant flow of newly created money from
major central banks, has also made it less risky to bet on
shares rising.
    The U.S. Federal Reserve kept those taps firmly open at its
latest meeting on Wednesday.  urn:newsml:reuters.com:*:nL1N2K22XP
    This week's turmoil caught the attention of the White House,
with President Joe Biden's economic team - including Treasury
Secretary Janet Yellen on her first full day on the job on
Wednesday - "monitoring the situation."
    Massachusetts state regulator William Galvin called on NYSE
to suspend trading in GameStop for 30 days to allow a
cooling-off period.  urn:newsml:reuters.com:*:nL1N2K23NB
    "The prospect of intervention here is clearly high, but this
will just galvanize the (WallStreetBets) community as it just
brings home the feeling of inequality in financial markets,"
said Chris Weston, head of research at broker Pepperstone in
Melbourne.
    "It's fine to prop up zombie companies through Fed actions
but if retail follows a path that greatly distorts asset prices
by targeting short sellers, then this gets shut down."

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EXPLAINER-Why regulators may scrutinize GameStop's Reddit-driven
retail stock surge     urn:newsml:reuters.com:*:nL4N2K246P
TIMELINE-GameStop's 1,600% surge in retail investor vs hedge
fund battle     urn:newsml:reuters.com:*:nL8N2K2494
BREAKINGVIEWS-Short squeezers could end up strangling themselves
    urn:newsml:reuters.com:*:nL8N2K22TV
The big short: GameStop effect puts global bets worth billions
at risk     urn:newsml:reuters.com:*:nL1N2K217R
GameStop surge leaves U.S.-based mutual funds and ETFs behind   
 urn:newsml:reuters.com:*:nL1N2K230Y
Europe's top shorted stocks soar on GameStop contagion   
 urn:newsml:reuters.com:*:nL8N2K22G4
U.S. state regulator says GameStop trading could be
'systemically wrong' - Barron's     urn:newsml:reuters.com:*:nL4N2K20QJ
Bearish GameStop options contracts fly off the shelf after stock
surge     urn:newsml:reuters.com:*:nL1N2K22YX
Hedge fund Melvin Capital has closed GameStop position
-spokesman     urn:newsml:reuters.com:*:nFWN2K20LX
BlackRock may have raked in $2.4 bln on GameStop's retail-driven
stock frenzy     urn:newsml:reuters.com:*:nL4N2K23QG
QUOTES-No let up in short squeeze, retail frenzy forces funds to
cover     urn:newsml:reuters.com:*:nL1N2K21PS
GRAPHIC: GameStock surge timeline    https://tmsnrt.rs/2KSQYX3
GRAPHIC: The short squeeze    https://tmsnrt.rs/3t1OlU8
EXPLAINER-How retail traders squeezed Wall Street for bets
against GameStop     urn:newsml:reuters.com:*:nL1N2K221Y
Retail trading frenzy, reflation trade drive smallcap stocks
higher    https://tmsnrt.rs/2Ylef7l
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Sagarika Jaisinghani, Shriya Ramakrishnan, Medha
Singh, Ismail Shakil and Sruthi Shankar in Bengaluru, Saqib
Iqbal Ahmed and April Joyner in New York; and Thyagaraju
Adinarayan in London 
Writing by Patrick Graham; Editing by Saumyadeb Chakrabarty)
 ((Sagarika.Jaisinghani@thomsonreuters.com; within U.S. +1 646
223 8780; outside U.S. +91 80 6182 2256;))