January 29, 2021

Memes may have just sent Wall Street into its worst spiral in months.

Despite the general disorder of the world right now, the stock market managed to pull out record highs over the past few months. But that all changed this week as concern about coronavirus vaccine rollouts and the rise of an unlikely stock sent markets tumbling, The New York Times reports.

Reddit users collaborated this week to buy massive amounts of stock in GameStop, as well as some other heavily shorted but still beloved brands. The video game retailer's value multiplied by 10 at one point, pretty much dominating all Wall Street talk — and news in general — throughout the second half of the week. GameStop closed out up 400 percent the week, and up 1600 percent this month.

GameStop's success was the rest of Wall Street's loss, as investors fear hedge funds will have to sell off other shares to pay their losses after shorting GameStop. On Friday, the S&P 500 fell 1.9 percent, the Dow Jones Industrial Average meanwhile fell 600 points, or two percent and the Nasdaq Composite fell two percent as well. That put all three major indexes down more than 3 percent this week, leaving the Dow and S&P 500 with their first negative months since October, CNBC notes. The Nasdaq did manage to gain 1.4 percent for the month.

The losses weren't all GameStop's doing, the Times notes. Worldwide shortages of vaccines led investors to sell off airline, cruise line, and shopping mall stocks as they fear the pandemic won't end anytime soon. Kathryn Krawczyk

January 28, 2021

Robinhood should consider changing its name to the Sheriff of Nottingham.

The past two days have turned Wall Street on its head as Reddit users colluded to buy massive amounts of GameStop stock, with the explicit aim of hurting hedge funds that profit off shorting the typically falling stock. A lot of that GameStop trading happened on Robinhood, a free app that allows people to trade small amounts of stocks. But on Thursday, Robinhood decided to betray its name and halt purchases of GameStop stock, as well as stock from other nostalgic companies.

Robinhood said in a Thursday blog post that after "recent volatility," it wasn't allowing the purchase of new stock from GameStop, AMC, BlackBerry, Bed Bath and Beyond, Koss headphones, and Nokia, as well as Naked Brands, which may have gotten caught up in the shutdown after a Wednesday direct offering campaign. Robinhood also raised margin requirements for some securities, meaning users have to front more of their own money to buy the securities, ostensibly benefiting those with more cash. TD Ameritrade and Charles Schwab also increased margin requirements for GameStop stock on Wednesday.

Robinhood has framed the decision as a way to "help our customers navigate this uncertainty" in its blog post. The Verge meanwhile noted one hedge fund suffering amid the GameStop surge was Melvin Capital Management, which another hedge fund, Citadel, has since bailed out. Citadel's founder is Ken Griffin, who also founded Citadel Securities, a firm that partners with Robinhood to execute orders that also works with TD Ameritrade and Charles Schwab. Robinhood co-founder Vlad Tenev later denied making the company's decision "on the direction of any market maker we route to or other market participants."

While Robinhood's everyday users may be blocked from trading these newly booming stocks, they were able to exact revenge against the app with a wave of one-star Google app store reviews. Kathryn Krawczyk

Editor's note: This post was updated to clarify Citadel Securities' relationship with Robinhood.

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