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Stock Markets5 hours ago (Jan 29, 2021 09:41AM ET)

© Reuters © Reuters

By Geoffrey Smith -- U.S. stocks opened markedly lower on Friday as battle resumed between an army of bullish retail traders determined to squeeze a selection of short positions held by Wall Street hedge funds.

GameStop (NYSE:), the retailer of video games and related hardware that has been the chief battleground between the two sides, surged 83% to $354.35 as Robinhood eased trading restrictions on that and other names. The brokerage synonymous with the new generation of retail traders had drawn ire from its users in restricting their ability to buy the stock on Thursday, an action that allowed shorts to cover their position under less pressure. 

AMC Entertainment (NYSE:), another stock subject to an intense short squeeze, rose 54%.

By 9:40 AM ET (1440 GMT), the was down 373 points, or 1.2%, at 30,230 points. The was down 1.2% and the was down 1.0%. All three indices are on course for their worst weekly loss since October, in part due to hedge funds' need to liquidate in order to meet margin calls on short positions elsewhere.

The bulls were unfazed by a statement from the Securities and Exchanges Commission saying that it "is closely monitoring and evaluating the extreme price volatility of certain stocks’ trading prices over the past several days."

"Extreme stock price volatility has the potential to expose investors to rapid and severe losses and undermine market confidence," it added. 

An illustration of how distorted price formation has become is that GameStop's price, which hit an intraday high of $411 at the open, was more than twice the 'bull case' scenario target price outlined in a research note published only two weeks ago by Research, which turned bullish on the stock as long ago as 2019. 

Other squeezed stocks also rose sharply, with Koss (NASDAQ:) rising 50%, Express (NYSE:) rising 33% and Naked Brands (NASDAQ:) rising 24%. BlackBerry  (NYSE:) stock and Bed Bath & Beyond (NASDAQ:) stock both gained 10%.

Sentiment wasn't helped by figures showing that in the U.S. fell for a second straight month in December. The 0.2% drop was smaller than expected but November's data was revised to show a larger decline of 0.7%.

Elsewhere, it was a big day for biotech, Johnson & Johnson (NYSE:) stock fell 4.1% after announcing its single-dose vaccine candidate had only 66% efficacy in preventing the Covid-19 disease. Novavax (NASDAQ:) stock rose 50% after a trial of its experimental Covid-19 drug in the U.K. showed 89% efficacy. The news is particularly important because the U.K. is home to a strain of Covid-19 that spreads more quickly and may be significantly more deadly than the original strain.

AstraZeneca (NASDAQ:) ADRs fell 0.4%, paring losses after it received partial authorization from the European Union's drug regulators for its Covid-19 vaccine. Germany had said on Thursday it won't administer the Astra jab to over-65s, due to insufficient data in its trial results.

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