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Markets try to recover after GameStop frenzy: How the headlines could affect your money

Markets react to Reddit investors, first-time unemployment claims rise. How the news can affect your money.

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Markets dipped during the ongoing GameStop drama, the U.S. gross domestic product rose in the fourth quarter, and the number of Americans who filed first-time unemployment benefits came in slightly worse than expected. Here's how the headlines could affect your money.

Markets recovering as GameStop cools

All three indexes dropped Wednesday as the Reddit-fueled frenzy continued and GameStop stock shot up. The Dow slipped 2.1% for its worst day since October, while the S&P 500 and Nasdaq both fell 2.6%.

On Thursday, as the trend caught the attention of government regulators, various online trading platforms limited investors' ability to trade GameStop and other stocks. Other retail stocks including AMC and Bed Bath & Beyond joined the list of companies getting short-squeezed.

The broader market rebounded Thursday morning.

The economy reports 2020 numbers

The economy closed out 2020 after about 10 months in which the United States was plagued by Covid cases and subsequent lockdowns. The gross domestic product, or the sum of all goods and services produced last year, grew at a 4% pace in the fourth quarter.

Increases in exports and consumer spending buoyed the GDP in the fourth quarter, but declines in federal and government spending stymied overall growth. For the full year, the GDP dropped by 3.5%, its worst showing since the end of World War II. 

Analysts are also predicting a slow start to the first quarter of 2021.

Why the best time to start investing is now, even if the market is hot

Video by Helen Zhao

Jobless claims slightly worse than expected

The number of Americans who filed for unemployment benefits for the first time rose less than analysts predicted, data from the Department of Labor shows. Jobless claims totaled 847,000 for the week ending January 23, versus the previous week's revised figure of 914,000.

Economists had expected claims to reach 875,000. 

Analysts are hoping for a surge in hiring as more Americans receive the coronavirus vaccine and certain businesses are allowed to reopen. 

Keep in mind, too, that unemployment is taxable income, so if you are currently out of work, you can expect to get a 1099 from your state soon.

Words you've heard: short sell

Short selling is when an investor buys shares of a stock that they believe will decline, and immediately sells them back at a lower price in order to make a profit.

Although the daily news can have an impact on your wallet, remember to take a long-term outlook when it comes to decisions on spending, saving, and investing.

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