Gary Gensler, the newly installed chairman of the Securities and Exchange Commission, is hinting at new potential regulation following the GameStop saga.
In prepared remarks to be delivered at a hearing on Thursday, Gensler said the SEC is “vigorously reviewing” the GameStop situation for potential violations and he has directed staff to consider whether “expanded enforcement mechanisms are necessary.”
In particular, Gensler called out the “gamification” of mobile trading apps, an obvious reference to Robinhood. The SEC chief said regulators must make sure investors are being appropriately protected and rules match current technologies.
Gensler also questioned whether there are “inherent conflicts of interest” behind payment for order flow, the controversial practice that paved the way for zero-commission trading. He noted neither the United Kingdom nor Canada allow brokers to route retail orders in exchange for payment.
The SEC chief noted the rising market share of Citadel Securities and warned that market concentration can lead to “fragility” and other problems.
Gensler also said the SEC will consider new disclosure rules around the derivatives that masked the staggering size of the positions amassed by Archegos Capital Management, a little-known hedge fund that imploded in March.
US stocks ended mixed on Wednesday, with the Nasdaq Composite dragged 0.3% lower, predominately driven by losses in real estate, utilities and healthcare stocks.
The Dow finished up 0.3%, or 97 points, while the S&P 500 closed 0.1% higher.
The market calmed down after comments from Treasury Secretary Janet Yellen over potentially higher interest rates sent it lower yesterday, but it leveled out after she walked the comments back later in the day. Solid economic data for private payrolls and the services sector also lent support Wednesday.
Jessica Alba’s The Honest Company, maker of baby and personal beauty care products, finally went public Wednesday. And shareholders, especially Alba, are making out well so far.
Shares of The Honest Company (HNST) soared more than 40% from their initial public offering price of $16. Trading at $23 a share late Wednesday, Alba’s nearly 5.65 million shares of the company — a more than 6.1% stake — were worth about $130 million.
The company is now worth about $2 billion.
Alba, the 39-year-old actress who is The Honest Company’s founder, chair of the board and chief creative officer, also received a salary, bonus and other compensation that totaled more than $2.2 million in 2020.
It’s vindication for Alba and other executives and investors at The Honest Company. Over the past few years, the firm had been plagued by questions about how safe its products were and whether they truly were as organic as the company claimed.
Rumors flew a few years ago that The Honest Company was preparing for an IPO or sale to a larger consumer products company. Neither happened.
Still, the company continued to grow. Sales rose nearly 28% last year to about $300 million thanks to strong demand for diapers and wipes. The Honest Company still isn’t profitable, but losses are narrowing.
So it looks like waiting for the right time to go public has worked out just fine for Alba and The Honest Company. And that’s no lie.
Is the market unable to handle the idea of higher rates? Apparently not.
Yesterday’s selloff came on the heels of Treasury Secretary Janet Yellen’s comments that interest rates may have to rise to keep the economy from overheating.
The stock market doesn’t like that idea one bit, because it would make it more expensive for companies to borrow money. That’s why investors are watching inflation and other economic indicators like crazy, trying to predict when the Federal Reserve might change its policy.
“What we saw yesterday in reaction to [Yellen’s] comments was just a reflection of that fear,” said Laura Kane, head of Americas Thematic Investing at UBS Global Wealth Management.
Even though prices are rising as the economy ramps up and supply chain bottle necks add pressure, “our base case is that we’ll see bouts of inflation that will work themselves out in the end of the year,” Kane told Alison Kosik on the CNN Business digital live show Markets Now.
That puts Kane on the same page as Fed Chairman Jerome Powell, who has stressed again and again that the central bank is not yet ready to talk about raising rates or tapering its asset purchases.
People are ready to go back to the movies.
“It’s not a guesstimate, we have data to show that,” said Richard Gelfond, CEO of IMAX.
In Asia, that data is showing that people are flocking back to theaters. In China, 30% more movie goers went to see films over Chinese New Year, that nation’s busiest cinema period, Gelfond said on CNN Business’s digital life show Markets Now.
“People have been so boxed in, they want to do something different,” he said. And IMAX is that experience, he said.
To be sure, the movie industry was in survival mode during the pandemic, Gelfond said. Projects were put on hold or movies were released directly to streaming platforms. Now the industry has to decide how to evolve into the post-pandemic future.
“We do big global blockbusters, and the evidence is in that they will be theater experiences,” he said.
SPACs – Special Purpose Acquisition Companies, or blank check companies – are not an investment fad, they’re here to stay, said Joe Moglia, former chairman and CEO of TD Ameritrade (AMTD), on the CNN Business digital live show Markets Now.
But investors should still be vigilant about what kind of SPAC mergers are on deck and if the companies are really good quality. That’s why SPAC IPOs might not be right for retail investors, Moglia said. Instead, the average person investing the stock market might want to wait until a public SPAC is merging with a company.
“When a SPAC comes to market, the SPAC itself is an empty vehicle,” he said. So forget its IPO, he added. “Pay attention to the merger company when it’s announced and make your decision then on whether to invest or not.”
The Dow has moved past its earlier hiccup and is back in the green at midday.
In fact, all three major indexes are higher at lunchtime.
The Dow is up 0.5%, or 156 points, and the S&P 500 is also 0.5% higher. The Nasdaq Composite is up 0.6%.
Peloton (PTON) shares fell about 10% following a massive recall of its treadmills.
About 125,000 treadmills are included in the recall. The Consumer Product Safety Commission said one child died and 70 other people have been injured in connection to Peloton’s Tread and Tread+ machines.
Peloton reversed its previous stance of not issuing a recall when the CPSC issued an “urgent warning” last month.
It’s mid-morning and the Dow has given up its moderate gains. The index is now flat.
The S&P 500 and Nasdaq Composite remain in the green though they have also come down from the highs. They’re up 0.3% and 0.5%, respectively.
Investors got spooked by comments from Treasury Secretary and former Federal Reserve boss Janet Yellen who said interest rates may have to go up to stop the economy from overheating. But Yellen walked back her comments and stressed that the Fed is an independent institution.
Inflation is rising and the US labor market is healing, which could set the stage for a policy change from the Fed down the line.
“With inflation on the rise, the current debate is how long this trend will persist,” said Marko Kolanovic and Bram Kaplan, strategists at JPMorgan (JPM).
“The question that matters the most is if asset managers will make a significant change in allocations to express an increased probability of a more persistent inflation. We think that this shift in allocation will happen (regardless of how temporary inflation is),” he said in a note to clients.
The White House has made good on its promise to reverse a Trump-era labor policy that made it easier for companies to classify workers as independent contractors, rather than employees who are eligible for benefits.
Gig businesses like Uber (UBER) made use of this rule.
“By withdrawing the Independent Contractor Rule, we will help preserve essential worker rights and stop the erosion of worker protections that would have occurred had the rule gone into effect,” said U.S. Secretary of Labor Marty Walsh in a statement.
The withdrawal of the rule will be effective as of tomorrow, May 6.
If you have a swimming pool in your backyard or like to visit your community’s public pool, then you’ve probably heard that a chlorine shortage could make it more difficult (and more expensive) to keep pools clean this summer.
But the head of Hayward Holdings (HAYW), a pool equipment company that went public in March, isn’t panicking.
Hayward CEO Kevin Holleran told CNN Business Wednesday that his firm, which sells supplies directly to wholesale distributor Pool Corp. (POOL) and retailer Leslie’s (LESL), recognized last year that there would be a supply disruption due to a fire at a chlorine plant in Louisiana.
As a result, Holleran said Hayward quickly shifted gears to increase production of salt chlorine, which pool owners can simply sprinkle into pools instead of using the more standard tablets that circulate chlorine through the filtration system.
“We were aware of the loss of that factory last year and sprung into action,” Holleran said. “We made sure to aggressively ramp up salt chlorine production at a plant in Rhode Island.”
That should be good news for pool owners — and Hayward investors. The company reported earnings Wednesday, its first quarterly results since going public. Sales nearly doubled and the company is forecasting a 40% to 45% increase for the full year. The stock surged nearly 25% on the news and is now up more than 40% since the March IPO.
The vaccine rollout and the reopening of the economy is boosting America’s services sector.
The Institute for Supply Management’s purchasing managers’ index for the services sector came in at 62.7. Any number above 50 denotes an expansion.
Even so, the April PMI was weaker than expected, and a slight pullback from March.
So what happened?
The ISM survey respondents said the pent-up demand is continuing to level off, which keeps business strong. But at the same time “production-capacity constraints, material shortages, weather and challenges in logistics and human resources continue to affect deliveries, which has resulted in a reduction of inventories,” said Anthony Nieves, chair of the Institute for Supply Management services business survey committee.
Meanwhile, the services PMI from IHS Markit showed a strong April, at 64.7:
“Supporting the upturn in output was the fastest increase in new business on record,” according to the release. The data series began in 2009.
As far as weekend gamblers are concerned, the pandemic is over.
Caesar’s Entertainment, the nation’s largest casino operator under the Caesars, Harrah’s, Horseshoe and Eldorado brands, told investors after the bell Tuesday that its Las Vegas properties are fully booked on weekends “for the foreseeable future.”
It also said in the first quarter, total occupancy was 63% with weekends at 85% and midweek at 52%. And March was the strongest month of the quarter.
Still Caesar’s reported a larger-than-expected first-quarter loss, and analysts are forecasting it will continue to lose money throughout the rest of this year. The company’s problems are not all pandemic related – it lost money in the fourth quarter of 2019, before the Covid-19 outbreak.
But the pandemic clearly was the major cause of the problems since early 2020 and the belief by Americans that it is safe to travel and vacation again is helping to drive the business rebound.
“What we’ve seen as vaccines have rolled out and numbers have come down, is we’ve seen a surge in business,” said CEO Tom Reeg.
Still the outlook on bookings was enough to prompt four different analysts raise their target price for the stock. And shares of Caesar’s were up 8% in early trading Wednesday.
US stock indexes kicked the day off in the green, reversing some of Tuesday’s losses.
On Tuesday, Treasury Secretary and former Federal Reserve Chairwoman Janet Yellen said interest rates may have to rise to prevent the economy from overheating, which freaked out investors. But Yellen walked her comments back, stressing that the Fed is independent and that she wasn’t making a prediction of recommendation. Investors breathed a sigh of relief.
In economic data, the ADP employment report showed strong job growth in April with 742,000 jobs added back, even though it undershot economists’ predictions.
Dogecoin is going … “to the moon,” I guess.
The cryptocurrency that started as a joke and now has its supporters laughing all the way to the bank is up another 25% today. That puts a single token at 67 cents, according to Coindesk data.
Sure, that’s still peanuts, but Dogecoin has rallied more than 13,800% so far this year.
The recent bout of the Doge rally has even broken investment platform Robinhood’s crypto trading service. Whoops.
Tesla (TSLA) head Elon Musk, who has in the past talked about the cryptocurrency — thus boosting its price — is hosting “Saturday Night Live” this weekend. Doge fans expect him to make new comments about the digital currency that could push the price higher.
Another 742,000 private payroll jobs were added back to the economy in April, according to the ADP Employment Report.
Even though that was an impressive jump from the revised 565,000 jobs added in March, it still fell short of economists’ expectations. Consensus forecasts had called for 800,000 jobs in April.
The job gains were split rather evenly across small, mid-sized and large companies but were overwhelmingly skewed to the services sector. The leisure and hospitality industry alone added 237,000 jobs, the most of any single industry.
As usual, the ADP report precedes Friday’s official government jobs report for which economists expect 978,000 jobs added. The two reports aren’t correlated and based on different surveys. Still, the ADP report is considered to set the tone for the employment stats at the end of the week: The recovery keeps roaring on, even if it does so at a slightly slower pace.
As the pandemic crushed the US economy last spring, sawmills shut down lumber production to brace for a housing slump. The slump never arrived and now there isn’t enough lumber to feed the red-hot housing market.
The shortage is delaying construction of badly needed new homes, complicating renovations of existing ones and causing sticker shock for buyers in what was already a scorching market.
Random-length lumber futures hit a record high of $1,615 on Tuesday, a staggering sevenfold gain from the low in early April 2020. That’s a big deal because lumber is the most substantial supply that home builders buy.
US stock futures were higher Wednesday after Treasury Secretary Janet Yellen walked back earlier comments that the Fed may have to raise rates as the economy heats up.
Stocks fell Tuesday after Yellen said interest rates will have to head north to prevent the economy from overheating. As a former Fed Chair, investors viewed Yellen’s comments as inside info.
But later in the day, Yellen said the Fed is independent, and she was not trying to influence Chair Jerome Powell’s decision-making. She said she was neither making a prediction or a recommendation. That seemed to calm investors’ nerves.
Here’s where things stand as of 6:15 am ET:
Krispy Kreme is preparing to go public — again.
The doughnut company said on Tuesday that it has confidentially filed paperwork related to a public offering of its stock with the Securities and Exchange Commission.
The number of shares that will be offered and their price range has not been determined, the company said, adding that the IPO is expected to happen after the SEC completes its review.
Hunter S. Thompson once wrote, “There is nothing in the world more helpless and irresponsible and depraved than a man in the depths of an ether binge.” He was referring to the intoxicating drug, not the cryptocurrency.
But ethereum investors may have reasons for fear and loathing, too.
The world’s second-most valuable cryptocurrency has soared even more than bitcoin (XBT) in 2021 thanks to non-fungible token mania and increased adoption of ethereum — ether, for short.
