Photo: The Guardian
Photo: The Guardian

GameStop bucks market sell-off with 19% surge as Reddit chatter picks up

Shares of GameStop surged 19% on Thursday, bucking a broader market slump amid a massive sell-off as the chatter on Reddit appeared to gain traction yet again.

Wiping out its earlier losses, GameStop rose to its highest level since the beginning of February, when the frenzy surrounding the video game retailer lost steam following the massive short squeeze that drove prices up in January.

The spike Thursday came later in the session, when several Reddit users on the Wall Street Bets subreddit began posting consecutively, rallying behind the stock.

Among the most popular posts was published on Thursday morning saying "GME IS UNSTOPPABLE," which received more than 10,000 upvotes, the equivalent of "likes" on other social media platforms.

At around the same time, Ryan Cohen, a GameStop board member, tweeted a photo resembling a stuffed toy from a Pets.com advertisement. Some users in the comments interpreted the post as a positive outlook for the video game company.

GameStop closed higher by 6.10%, at $131.76 on Thursday.

Other meme stocks such as AMC Entertainment and Koss however joined the rest of the market, closing lower for the day. The Nasdaq 100 erased gains for the year, plummeting from its February 12 peak.

Dow Jones Today: Powell Speech, 10-Year Treasury Yield

The Dow Jones Industrial Average slid 1.5%, while the S&P 500 traded down 1.7%. The tech-heavy Nasdaq sold off 2.5% in afternoon trade.

Powell said Thursday that he expects economic reopening to cause inflation, but the price increases likely won't be significant enough to make the central bank hike interest rates. Powell's comments came at the Wall Street Journal Jobs Summit.

"We expect that as the economy reopens and hopefully picks up, we will see inflation move up through base effects," Powell commented. "That could create some upward pressure on prices."

Following the comments, the 10-year Treasury yield spiked to session highs at 1.548% before easing. The 10-year Treasury yield briefly topped 1.6% last week.

Among exchange traded funds, the Innovator IBD 50 (FFTY) traded down 4.9% Thursday. Nasdaq 100 tracker Invesco QQQ Trust ETF (QQQ) fell 1.4%. Meanwhile, the SPDR S&P 500 ETF (SPY) moved down 1.1%.

Stock Market Pullback Continues

Looking back at the current uptrend, November was a key month for the stock market. IBD's The Big Picture flagged the new uptrend following the market's bullish follow-through day on Nov. 4. Meanwhile, the start of March has the Dow Jones Industrial Average, Nasdaq and S&P 500 struggling to hold above key support levels.

Wednesday's IBD Big Picture cautioned, "The stock market didn't look too bad Wednesday if your focus was on the Dow Jones Industrial Average. But if your attention was squarely focused on the Nasdaq, the stock market looked downright awful as leading growth stocks sold off again."

Amid the stock market pullback, investors should play more defense than offense. Avoid new breakouts, unless they're exceptional, and make sure to sell any stock that falls more than 7% below your purchase price. Remember, you don't have to wait for the 7%-8% loss signal if the stock is clearly not acting well.

Focus on stocks that show strong relative strength during the current weakness. They could be some of the market's leaders if the indexes are able to continue their rebounds.

Tesla Stock

Tesla stock looked to extend Wednesday's 4.8% fall, diving 7% Thursday midday.

Last week, the electric-auto leader broke down through its key 10-week moving average line, a critical support level.

On Jan. 25, Tesla stock hit a record high at 900.40, after climbing as much as 93% from a 466 buy point in a cup with handle. Shares are about 27% off that all-time high.

Dow Jones Leaders: Apple, Microsoft

Among the top Dow Jones stocks, Apple shares fell over 1% Thursday midday, on pace to extend a losing streak. Apple stock remains below its 10-week line, and is about 16% from its all-time high.

On Feb. 18, Apple stock triggered the 7%-8% loss-cutting sell rule when it fell more than 7% below its 138.89 buy point in a cup with handle.

Meanwhile, IBD Leaderboard stock Microsoft moved down 0.25% Thursday, as it falls further below a recent 232.96 buy point.

According to Leaderboard commentary, "Microsoft is now below the 232.96 buy point and below an earlier entry at 228.22. Shares dipped below the 50-day line as a rebound faces new doubts."

NIO Stock Is Down Today

Photo: The Motley Fool
Photo: The Motley Fool

Shares of Chinese electric-vehicle maker NIO (NYSE:NIO) were trading lower on Thursday amid a broad market sell-off driven by growing concerns about the potential effects of rising interest rates in the United States.

As of 2:00 p.m. EST, NIO's American depositary receipts were down by about 8.5% from Wednesday's closing price, while the S&P 500 index was trading about 2.5% lower.

NIO has already had a tough week, and it's only Thursday. The company's fourth-quarter loss of $0.16 per share, reported on Monday afternoon, was worse than Wall Street had expected given NIO's strong sales numbers.

While the automaker's business generally seems to be on track, that earnings miss raised some questions among investors who were already a bit nervous about its sky-high valuation. NIO's rate of sales growth may also be moderating, another reason for concern.

Those concerns have intensified as the week has gone on, with NIO and other high-flying growth stocks continuing to sell off.

There are two new macroeconomic issues underlying investors' recent bearishness. First, the $1.9 trillion COVID-19 relief package moving through the U.S. Congress has some onlookers worried about inflation, if only because that's a lot of money to pour into the economy more or less all at once.

Second, and relatedly, the yield on the benchmark 10-year U.S. Treasury bond has been rising, and hit its highest level in over a year -- 1.50% -- on Thursday afternoon. While that's still quite low by historical standards, rising interest rates generally lead investors to reduce their exposure to risk.

Taken all together, that's why NIO stock is down Thursday.

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