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Dow jumps 470 points, posts best day since November as the GameStop trading mania unwinds

U.S. stocks jumped on Tuesday, building on a strong rally in the previous session as concerns about a speculative retail trading frenzy continued to ease.

The Dow Jones Industrial Average climbed about 475.57 points, or 1.6%, to 30,687.48 for its best daily performance since November.

The S&P 500 gained 1.4% to 3,826.31, pushing its two-day rally to 3%.

The tech-heavy Nasdaq Composite popped 1.6% to 13,612.78, bringing its week-to-date gains to more than 4%.

The back-to-back advance in the broader market coincided with a sharp reversal in GameStop, the video game stock that captivated Wall Street with its massive short squeeze coordinated by a band of retail investors on social media. GameStop, fresh off a 400% rise last week, fell another 60% Tuesday. The stock has lost more than 70% of its value since Friday.

Investors took it as a sign that the speculative mania from retail traders is unwinding, which is healthy for the overall market and investor confidence. The stock market suffered its worst week since October last week as many grew worried that the wild trading activity in those heavily shorted names could be contagious and spill over to other areas of the markets.

Still, some believe that this Reddit-fueled trading mania showed that the collective power of retail investors warrants extra attention.

Meanwhile, investors will be following stimulus negotiations in Washington, after congressional Republicans made a counteroffer to President Joe Biden’s $1.9 trillion stimulus plan on Sunday.

Biden met with those lawmakers on Monday as congressional Democrats moved toward passing a reconciliation bill without bipartisan support. White House Press Secretary Jen Psaki described the meeting as “substantive and productive.”

Investors also awaited big earnings reports Tuesday, with tech giants Amazon and Alphabet set to release quarterly numbers after the market close.

Reference: CNBC