NEW YORK, Feb 2 — Silver dropped more than 4 per cent today and GameStop Corp sank 33 per cent in early European deals, raising questions about how long a social media-fuelled trading frenzy in stocks and other assets would last.
The populist trading rally, organised in online forums such as Reddit’s WallStreetBets, has helped attract a flood of retail cash into stocks such as GameStop, burned hedge funds that had bet against the stocks and roiled broader markets.
Here are five things to watch today:
Silver margins
The rally in silver halted overnight with prices slipping back below US$30 (RM121) after CME Group raised Comex 5000 Silver Futures maintenance margins by 17.9 per cent. Frankfurt-listed shares of GameStop, the trigger for the slugfest between amateur investors and Wall Street hedge funds last week, also plunged 37 per cent at the open following a 19 per cent slide on Monday.
Broker capital
Robinhood, the easy access brokerage app which has fuelled the trades, raised another US$2.4 billion in funding on top of the US$1 billion it raised last week after its finances were strained by the retail trading frenzy, but will that be enough?
Short of shorts
The number of GameStop shares that were shorted fell by more than half last week as short sellers scrambled to cover their bets due to soaring valuations of stocks they had bet would fall. Still, GameStop short interest stood at US$8.82 billion as of Friday, making it the sixth-biggest short by value, according to S3.
Reddit forums
WallStreetBets saw a surge in posts on Monday arguing that the bets on silver were undercutting their focus on GameStop and other popular stocks. Swings in the forum’s almost 8 million participants may decide where the pack move next.
Broader markets bounce
The S&P 500, hit by the fallout of the battle last week, registered its biggest daily percentage gain since November yesterday. Still, the US stock market which some analysts argue already looks overvalued after a stimulus-powered rally last year, was at risk of falling further if the short squeeze persists. — Reuters
