GameStop’s Stock publishes Big Swings, Retail ETF follows

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WSJ.com: Markets

The return of great volatility to GameStop Corp.

GME -6.43%

The stocks took investors in a large publicly traded retail fund again.

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State Street’s SPDR S&P Retail ETF saw a surge in gains from GameStop, the fund’s largest holding, which rose more than 4% at one point during Thursday’s trading session, to give it all up by the closing bell. GameStop shares initially doubled on Thursday before investors appeared to reverse their course, bringing the video game retailer’s profit to 19%.

The ETF, which goes after the ticker XRT, fell 3.1%.

This is the latest move for a fund closely tied to the GameStop saga. The ETF was up as much as 42% on Jan. 27, after GameStop stocks rose 135% on that day alone. The next day, XRT fell nearly 10% as GameStop’s rally gave way.

The fund eventually lost $ 506 million in assets, equivalent to three-quarters of its total assets at the time. The redemptions were partly due to large discounts between the ETF’s share price and net asset value, as well as a desire to hold the GameStop stock held by the fund, according to traders.

The data on the rivers on Thursday were not yet available. However, investors have saved money in XRT. In the previous two days, more than $ 100 million flowed into the fund, which, according to FactSet, pushed the net worth back to $ 784 million.

And all the discounts that came in on Thursday were tight. Within the last half hour of trading, however, there were brief premiums of more than 1% between the price of XRT and the net asset value, just as GameStop shares pulled back significantly. This made stocks in the ETF more expensive than its underlying holdings for a short time, a scenario that is usually good for sellers but bad for buyers of the fund.

According to FactSet, XRT closed near its intraday NAV at a premium of 0.1% at the end of the session.

The drama has changed the profile of XRT to some extent. The fund offers investors the chance to bet on a portion of the retail sector and typically offers roughly the same exposure to GameStop as it does to Amazon.com Inc.,

AMZN 1.17%

Macy’s Inc.

M. -3.24%

and cabbage Corp.

KSS 1.49%

However, the GameStop renaissance brought the retailer back to the top of ETF holdings and entered the trading session on Thursday with nearly 6% of its assets. At the height of the GameStop run in January, the video game retailer accounted for up to 20% of the ETF.

Most other retail ETFs and other index tracking funds are weighted by market capitalization, which gives larger companies more weight. As a result, some retail ETFs fell deeper into the red, including the Vanguard Consumer Discretionary ETF (3.6%) and the Consumer Discretionary Select Sector SPDR Fund (3.7%). The S&P 500 yielded 2.4%.

If GameStop’s run continues, stock will continue to heavily impact XRT through the end of March, until State Street plans to undertake the next quarterly realignment and, at least for now, bring all holdings to a largely level playing field.

The recent surge in GameStop and other stocks affects investors in opposing camps: traditional Wall Street firms and small investors who oppose the system. WSJ asked the same series of questions about WallStreetBets’ role in the trading frenzy. Photo illustration: Carlos Waters

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

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