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Stocks Tumble as Wall Street Gripped by GameStop Trading Frenzy

Stocks finish sharply lower amid the continued retail-trading frenzy on Wall Street, particularly in names such as GameStop and AMC.

Stocks finished sharply lower Friday amid the continued retail-trading frenzy on Wall Street, and the S&P 500 posted its biggest weekly decline since October.

An announcement from Johnson & Johnson  (JNJ) - Get Johnson & Johnson Report that its single-shot coronavirus vaccine was 66% effective in a large late-stage trial did little to stem the losses in equities. The health-care giant's stock fell 3.6%.

The Dow Jones Industrial Average finished down 622 points, or 2.03%, to 29,981, the S&P 500 dropped 1.93% and the Nasdaq was down 2%.

At one point in Friday's trading, the Dow industrials traded off more than 2.4%. 

The Dow has fallen in six of the past seven trading sessions. 

For the week the Dow and the S&P 500 each lost 3.3%, and the Nasdaq declined 3.5%.

All three indexes posted their worst month since October. 

Investors have been roiled by the assault on hedge funds by small traders over online forums, like Reddit. The massive trading has forced the funds to reverse short positions -- bets that prices will fall -- on stocks such as GameStop  (GME) - Get GameStop Corporation Report and AMC Entertainment  (AMC) - Get AMC Entertainment Holdings Inc. Class A Report.

The wicked 10-day stretch in the markets also has stoked volatility, which is approaching the highest levels in six months, and spooked institutional investors who are worried that hedge-fund liquidity issues could spill over into the broader markets. 

GameStop and other heavily shorted names soared after the chief executive of online brokerage Robinhood said restrictions on buying the stocks could be lifted Friday.

The Securities and Exchange Commission said Friday it was reviewing the recent trading volatility that has led to sharp increases in GameStop, AMC Entertainment  (AMC) - Get AMC Entertainment Holdings Inc. Class A Report and BlackBerry  (BB) - Get BlackBerry Limited Report, to name a few.

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The agency vowed to to protect retail investors and said it would review actions taken by brokerages that may “disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.”

Sen. Sherrod Brown (D-Ohio), the incoming chairman of the Senate Banking Committee, said on Thursday that he'd be scheduling a hearing on the stock-market situation. House Speaker Nancy Pelosi (D-California) also said yesterday that Congress would be looking into the matter.

Investors in Europe and Asia also were unnerved by the wild swings in these hot stocks.

“I’m definitely seeing the nerves,” Chris Weston, head of research at Melbourne broker Pepperstone, told Reuters.

“There’s a knock-on effect that happens from targeting hedge funds, and this could have legs. ... People are unsure how this social media movement plays into greater financial markets,” he added.

Johnson & Johnson traded lower Friday after the healthcare giant said its coronavirus vaccine had a 72% efficacy rate in U.S. trials but was less effective against an emerging South African variant. 

J&J said it plans to file with the Food and Drug Administration for emergency-use authorization in the U.S. in early February.

The one-shot vaccine, which doesn't require excessively low temperatures to keep in storage, reached an overall efficacy rate of 66% in the 44,000-person study of patients with moderate to severe forms of covid-19. 

The trial also indicated an 85% rate of protection against patients with more severe forms, and a 57% rate of efficacy against the new strain of the virus recently identified in South Africa. 

The vaccine prevented 100% of hospitalizations and deaths, according to J&J.

Novavax  (NVAX) - Get Novavax Inc. Report soared nearly 65% Friday after the drugmaker said a Phase 3 trial of its covid-19 vaccine candidate showed 89.3% efficacy against the disease, including against the fast-spreading U.K. variant. It was found to be less effective against the South African variant. 

Covid-19 has killed more than 435,089 Americans and 2.2 million people globally.