NEW YORK (BLOOMBERG) - Retail traders who lurk in forums like Reddit's WallStreetBets are back to betting against Wall Street pros and the United States Federal Reserve as rallies for meme stocks like Bed Bath & Beyond and AMC Entertainment Holdings show shades of last year's mania.
The home goods retailer nearly tripled at one point during its nine-day winning streak while the movie theatre company capped a 65 per cent rally of its own as speculative pockets of the stock market surge.
The pair have powered a basket of 37 meme stocks tracked by Bloomberg higher by 10 per cent over the past week while the most-hated stocks tracked by a Goldman Sachs basket is up roughly 17 per cent over the same period.
The resurgence of more speculative areas of the market is likely fueled in part by individual traders willingness to jump on riskier trades and bet against hedge funds. A rally in tech shares and other growth stocks at one point on Monday pushed the Nasdaq 100 Index up 20 per cent from a June low amid alarms from some on Wall Street that the Fed is set on fighting inflation regardless of the pain for the stock market.
The "smart guys" are "confused, baffled and fighting short positions from a position of weakness in terms of momentum and firepower," said Mirabaud Securities sales trader Mark Taylor. "The lack of real understanding of why a sudden resurrection of the meme-entum bid could lead to some nefarious speculation about things being manipulated but what would be as much sour grapes speculation as anything real."
Bed Bath & Beyond shares surged 40 per cent on Monday as a record 120.5 million shares changed hands, with the stock being the second-most bought asset on Fidelity's platform.
AMC Entertainment was among the five most purchased stocks on the platform and saw trading volume triple what has been normal over the past month.
Both company tickers, along with GameStop, were the most mentioned on WallStreetBets.
Newly public Magic Empire Global, a little-known Hong Kong-based financial services firm, extended a 2,825 per cent two-day surge since going public, attracting some retail attention.
"These meme stock rallies that are emerging will only last if US stocks broadly continue to head higher," said Oanda senior market strategist Ed Moya. "After AMTD Digital reminded the WallStreetBets crowd of the potential skyrocketing moves, many retail traders are scanning their favourite plays and are looking to get back in."
The rapid rise and subsequent fall for Hong Kong-based AMTD Digital has both puzzled and captivated the markets.
The stock posted an eye-popping surge of more than 32,000 per cent at one point before erasing a chunk of gains.
