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Why These 4 Meme Stocks Were Falling Today

What happened

Meme stocks tend to defy logic when it comes to reacting to broad market trends, but the 500-point drop at the open for the Dow Jones Industrial Average was apparently too much for AMC Entertainment Holdings (NYSE: AMC), Genius Brands International (NASDAQ: GNUS), Skillz (NYSE: SKLZ), and Sundial Growers (NASDAQ: SNDL), which were down 5.2% on average heading into midday trading Monday.

So what

The market downdraft sucked down large swaths of the market on fears of a cooling economy, especially in China, as its largest property developer, Evergrande Group, careened toward default due to its indebtedness.

Image source: Getty Images.

The meme stocks above, however, were largely in a steady downward trend already, so the broad market sell-off did nothing to help their stocks. The mid-single-digit declines they were posting signal investors are wary of what will happen if a market collapse occurs.

Now what

It's not just U.S. markets that reeled in the wake of the news over Evergrande. The STOXX Europe 600 index was down 2% on the news, London's FTSE 100 slipped 1%, and Hong Kong's Hang Seng Index ended down 3.3%.

China's own stock market is closed due to a national holiday and won't reopen until Wednesday, which could be long enough for the market to sort out the property developer's news, but because the Chinese economy is slowing more than originally believed the rout may just continue regardless.

The meme stocks were weak already, with investors expressing significant caution about how their businesses will fare in a recovering market. A new global recession could hit them hard.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Skillz Inc. The Motley Fool has a disclosure policy.


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