Day-Trader Favorites Rally Again as Robinhood Eases Trading Ban

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The day-traderfavorites that tumbled Thursday rallied afterhours when brokerage Robinhood Markets Inc. said it would lift trading restrictions on some of the stocks.

GameStop Corp., the face of the retail craze that’s gripped Wall Street and drawn scrutiny from Washington, surged 61% as of 8 p.m. in New York. The heavily shorted video-game retailer plunged 44% in the cash session for its first slump in six days.

Other darlings among members of the WallStreeetBets forum behind the wild rides in left-for-dead stocks also got a boost. Naked Brand Group Ltd. was up 31% after trading mostly unchanged during the day. AMC Entertainment Holdings Inc. rose 43% after plunging 57%. Futures on the S&P 500 fell 0.3%.

The day-trader darlings rallied after Robinhood lifted some tradingrestrictions that prevented legions of investors from buying stocks that had been going straight up for days. The online brokerage said clients would be able to make limited purchases of some of the companies that it blocked, but did not provide further details. Rallies in the likes of GameStop and AMC had delivered massive losses to someprominent hedge funds that held large short positions in them.

“It indicates, perhaps, more extreme price dislocation in these stocks tomorrow, which may cause enhanced volatility in other parts of the market, as well. These stocks have become their own ecosystem to some extent,” said Andrew Ross, managing member of Confluence Global Capital, an event-driven hedge fund.

The rebound was setting up another rough patch for the Wall Street establishment that has been under pressure from the Reddit army. Other retail favorites also rose in late trading with Koss Corp. surging 65% and Express Inc. jumping 31%, neither on any obvious fundamental catalyst. Earlier Thursday, as GameStop and its peers tumbled, bearish wagers beloved by hedge funds notched gains. Wall Street’s most-hated stocks plunged at last. The usual suspects from Inc. to Microsoft Corp. powered large-caps higher.

Asian stocks tracked their U.S. peers higher as moves to limit retail trader speculation led to gains in stocks that hedge funds had been forced to abandon. That could reverse if the retail traders spark another buying frenzy. Users on the WallStreetBets forum on Reddit jumped past 4 million as the phenomenon became a nationalsensation, reaching the doorsteps of both new President Joe Biden’s administration and Federal Reserve Chairman Jerome Powell. The Senate has said it will order a hearing, while other lawmakers ripped the brokerages for denying access.

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