Bed Bath & Beyond falls 40% as markets fall

Bed Bath & Beyond plunged more than 40% Friday as investors put a hard stop on the meme stock’s meteoric rise, highlighting the volatility and immense risk that has defined a new era of social-media fueled investing.

But Wall Street punished both meme stocks and blue chips: Investor sentiment soured on Friday, dragging down all the major indexes and positioning the S&P 500 to break its four-week winning streak, ending a summer rally fueled by fresh rounds of positive economic data that had quieted some fears of a recession.

The Dow Jones industrial average fell more than 280 points or 0.8% in afternoon trading. The broader S&P 500 lost 54 points or 1.3%, and the tech-heavy Nasdaq tumbled 265 points or more than 2%.

Investors are still grappling with the uncertain direction of the nation’s economy, with federal data offering conflicting insights.

Earlier this month, analysts were stunned by a blowout jobs report, revealing a hot labor market that strengthened more than expected with employers added 528,000 jobs.

But government data released days before also showed the economy contacted for the second consecutive quarter.

How aggressive the Federal Reserve will move to combat inflation and the pace of price increases, which eased in July, are among the other factors weighing on Wall Street.

Stocks have pushed upward in recent weeks, with investors buoyed by the optimistic jobs data and a growing sense that central bankers can successfully tame inflation without forcing an economic slowdown that could lead to mass layoffs and a recession.

While Wall Street powerhouses like Apple, Microsoft and Amazon have enjoyed double-digit gains over the past several weeks, recovering some of their losses for the year.

Bed Bath & Beyond has soared more than 350%.

The home goods retailer is riding a wave of excitement from small investors after billionaire investor Ryan Cohen took a large stake in the company despite its dismal financial results.

But the stock faltered after the GameStop chairman signaled he would dump his shares.

They tumbled 19.6% on Thursday, closing at $18.55, and were trading near $10.60 ahead of Friday’s open.

That’s still more than twice where it stood earlier this summer, before the meme stock rally.

Still, the stock has now lost more than half of its value since its recent peak, when it climbed well above $20 per share.

The volatility and immense trading interest echoes the 2021 investing frenzy when many novice investors, lured by the hype and potential for enormous gains, ended up losing big.

Just last month, the troubled housewares chain was trading near $5.But investors poured in, buying into an optimistic view of the company or simply banking on a cycle of further speculation and higher prices, echoing the staggering rush into stocks such as GameStop, AMC and BlackBerry that took Wall Street by surprise last year.

Cohen, who co-founded the online pet supply company Chewy, became a pivotal figure in GameStop’s rise after taking a major stake in it in 2020 through RC Ventures.

The chain had been written off by many expert traders and analysts as a relic of an earlier era, when a massive retail footprint was essential and when consumer interest was defined by overnight lines for Black Friday and blockbuster game releases.

Cohen offered investors a future-oriented vision for the gaming retailer, focused on digital sales, esports, streaming and mobile gaming.

His view caught on, sparking interest on Web forums where a collective optimism set in, and where many saw an opportunity for massive gains by betting against the institutional wisdom of Wall Street.

Bed Bath & Beyond, another struggling retailer, drew the interest of the crowd, alongside a basket of other names that would become meme stocks.