continued to fall out of favor for investors as fears of a faster rise in interest rates puncture the prospects of speculative trading.
After surging 600% last year amid a retail trading frenzy, GameStop fell 11% on Monday, extending a 28% slide from the start of 2022. Similarly, AMC has lost a third of its value so far this year following a more than 1,100% jump in 2021. The value of the heavily shorted stocks zoomed when an army of small-time investors coordinated on online message boards such as Reddit's r/wallstreetbets, boosting their stock price and hurting bearish hedge funds."As rates rise, the present value of future cash flows diminishes and it takes some of the speculation out of the market," said Thomas Hayes, managing member at Great Hill Capital in New York.
U.S. stocks are coming off their worst week since the start of the pandemic in March 2020 as a rise in the cost of borrowing would mark the end of the easy money policy that had fueled a stock market rally. "There was a period there where there was all this free stimulus money and low rates and margin availability..that's coming to an end," Hayes said.
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