AMC Stock Surges 100 Percent, Trading Halts -

Major U.S. stock indexes fluctuated between small gains and losses Wednesday as concerns around the consequences of a strong economic recovery, marked by inflation, continued to buffet the market -

The S&P 500 bounced around the flatline in afternoon trading, giving up a small gain from earlier in the session. The Dow Jones Industrial Average and Nasdaq Composite also waffled. The blue-chip index was recently up 12 points, or less than 0.1%, while the Nasdaq slipped 0.2%.

Communication, consumer discretionary and material stocks all dragged the market lower as investors gravitated again toward the reopening trade and energy sector.

The market's more seismic moves were concentrated around a handful of stocks popular with individual investors, including AMC Entertainment and BlackBerry. Both of those stocks are on a tear again after surging earlier this year.

The major indexes, which are hovering close to all-time highs on the back of unprecedented fiscal and monetary support, are struggling for traction this month as investors look for ways to justify the high valuations already commanded by many stocks. On Tuesday, manufacturing data pointed to an expansion in factory activity driven by demand for goods, but also highlighted growing supply bottlenecks.

"Investors are much more anxious as we enter the midpoint of the year," said Michael Arone, chief investment strategist for State Street Global Advisors. He pointed to the increasingly common signs that inflation has taken hold as being one of investors' bigger issues right now, followed by questions of whether profits and growth have already peaked and determining where the U.S. is in the current economic cycle.

"Investors who like to align themselves with the economic cycle are finding this all problematic," he said.

AMC Entertainment stock's recent dramatic rise hasn't helped lift movie theater peers IMAX and Cinemark Holdings. An analyst at Goldman Sachs doesn't think the latter two will close the gap.

Goldman Sachs analyst Michael Ng cut his ratings on IMAX (ticker: IMAX) and Cinemark (CNK) to Sell from Neutral in a note on Wednesday. Ng cut his price target for IMAX to $18.60 from $19.60. He lowered his Cinemark target to $19 from $21.

IMAX stock fell 2.6% on Wednesday, to $21.68, while Cinemark stock was down 0.2%, to $24.36. On the flip side, AMC stock (AMC) jumped 85% Wednesday, to $60.08.

Though AMC shares have risen 353% in the past month, shares of IMAX and Cinemark are up only 1.5% and 5.2%, respectively. Meme stocks GameStop (GME) and BlackBerry (BB) are up 59% and 53%, respectively during that period.

Even so, Ng, who does not cover AMC, believes valuations for both IMAX and Cinemark already price in a sharp domestic box office recovery in 2021 and 2022. He notes that there are heightened risks to such a recovery.

"Second, although we expect IMAX's global box office to outperform the industry given its focus on tentpole films that are less of a risk of going direct to consumer and gain share of the box office, we expect greater volatility in IMAX's pace of installations -- particularly relative to 2019 levels -- given greater uncertainty in the global box office," he wrote.

Ng points to a secular decline in moviegoing that could be accelerated by the pandemic, and notes that Americans spent more on home entertainment options since the pandemic began and adoption of streaming services accelerated, especially among older customers.

"While the upcoming film slates are certainly robust, we question whether thecrowded slates will lead to cannibalization and consumer fatigue," Ng added.

In other words, don't count on the same retail enthusiasm that's helped drive AMC share.


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