U.S. equities mounted a comeback from their worst loss since October as moves to limit retail traders’ speculation in some companies opened the door for hedge funds to load up on stocks they had been ditching.

The S&P 500 Index rose 1 per cent after trading platforms restricted activity in stocks whipsawed by internet chatter, from GameStop Corp. to AMC Entertainment Holdings Inc. and American Airlines Group Inc. Hedge funds that had shorted the stocks were burned in recent days, forcing them to reduce holdings in shares they loved in order to cut risk.

That dynamic reversed Thursday, and a Goldman Sachs basket of stocks favored by hedge funds jumped the most since early November, halting a five-day slide. An index of the most-shorted shares tumbled more than 7 per cent, the most since June. GameStop whipsawed, rising as much as 39 per cent in early trading before plunging as much as 68 per cent. It closed down 44 per cent. AMC sank 57 per cent, American was up 9.3 per cent and Tootsie Roll Industries lost 9.5 per cent.

The trading restrictions sparked outrage on the WallStreetBets forum where day traders have convened to drive the manic rallies that burned hedge funds across Wall Street. Washington took notice of what some have called inequitable rules, with Democratic and Republican lawmakers criticizing restrictions imposed on retail investors.

All 11 industry groups in the S&P 500 traded higher, with sentiment also boosted by solid corporate earnings from the likes of Mastercard Inc. and Comcast Corp. and a surprise drop in jobless claims.

Stocks have seen volatile trading after a prolonged rally that spurred talk of possible asset bubbles and predictions of a pullback given a raging pandemic and patchy rollout of vaccines. The turmoil created by internet chat rooms has stoked fears of broader consequences for Wall Street, particularly hedge funds, but that fear seemed to fade on Thursday.

“Earnings are great and guidance is better and we’re picking up the pace of getting vaccines out and eventually we’ll have fiscal stimulus coming out of Washington,” said Arthur Hogan, chief market strategist at National Securities Corp. “The market is trying to digest a lot of things at the same time.”

The Stoxx Europe 600 Index edged higher. Earnings beats from STMicroelectronics NV and Diageo Plc were accompanied by a miss from Swatch Group AG and a revenue drop at EasyJet Plc.

The benchmark 10-year Treasury yield rose after touching the lowest level since Jan. 5. Bitcoin climbed past US$32,000. Stocks in Hong Kong and Australia saw the bulk of Asian losses.

These are the main moves in markets:

Stocks

The S&P 500 Index jumped 1 per cent as of 4 p.m. New York time.
The Stoxx Europe 600 Index rose 0.1 per cent.
The MSCI Asia Pacific Index fell 1.8 per cent.
The MSCI Emerging Market Index fell 1.4 per cent.

Currencies

The Bloomberg Dollar Spot Index slipped 0.2 per cent.
The euro rose 0.2 per cent to US$1.2129.
The British pound rose 0.4 per cent to US$1.3736.
The Japanese yen weakened 0.1 per cent to 104.23 per dollar.

Bonds

The yield on 10-year Treasuries rose four basis points to 1.05 per cent.
Germany’s 10-year yield rose one basis point to -0.54 per cent.
Britain’s 10-year yield rose two basis points to 0.285 per cent.

Commodities

West Texas Intermediate crude fell 1 per cent to US$52.31 a barrel.
Gold fell 0.1 per cent to US$1,842.54 an ounce.