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Fed Chief Powell, other officials owned securities central bank bought during Covid pandemic

Federal Reserve Chairman Jerome Powell owned municipal bonds of the same type bought by the Fed during the coronavirus pandemic.

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Amid an outcry about Federal Reserve officials owning and trading individual securities, an in-depth look by CNBC at officials’ financial disclosures found three who last year held assets of the same type the Fed itself was buying, including Chairman Jerome Powell.

None of these holdings or transactions appeared to violate the Fed’s code of conduct. But they raise further questions about the Fed’s conflict of interest policies and the oversight of central bank officials.

  • Powell held between $1.25 million and $2.5 million of municipal bonds in family trusts over which he is said to have no control. They were just a small portion of his total reported assets. While the bonds were purchased before 2019, they were held while the Fed last year bought $21.3 billion in munis, including one from the state of Illinois purchased by his family trust in 2016.
  • Boston Fed President Eric Rosengren held between $151,000 and $800,000 worth of real estate investment trusts that owned mortgage-backed securities. He made as many as 37 separate trades in the four REITS while the Fed purchased almost $700 billion in MBS.
  • Richmond Fed President Thomas Barkin held $1.35 million to $3 million in individual corporate bonds purchased before 2020. They include bonds of Pepsi, Home Depot and Eli Lilly. The Fed last year opened a corporate bond-buying facility and purchased $46.5 billion of corporate bonds.

Among those questions: Should the Fed have banned officials from holding, buying and selling the same assets the Fed itself was buying last year when it dramatically widened the types of assets it would purchase in response to the pandemic?

The Fed’s own code of conduct says officials “should be careful to avoid any dealings or other conduct that might convey even an appearance of conflict between their personal interests, the interests of the system, and the public interest.”

In response to CNBC questions asked in the process of our research, a Fed spokesperson released a statement Thursday saying Powell ordered a review last week of the Fed’s ethics rules surrounding “permissible financial holdings and activities by senior Fed officials.”

A Fed spokesperson told CNBC that Powell had no say over the central bank’s individual municipal bond purchases and no say over the investments in his family’s trusts. A Fed ethics officer determined that the holdings did not violate government rules.

Barkin declined to comment.

Rosengren has announced he would sell his individual positions and stop trading while he is president. Dallas Fed President Robert Kaplan, who actively traded millions of dollars of individual stocks, also said he would no longer trade and would sell his individual positions. But he said his trade did not violate Fed ethics rules.

A spokesman for Rosengren told CNBC that he “made sure his personal saving and investment transactions complied with what was permissible under Fed ethics rules.”

But Dennis Kelleher, CEO of the nonprofit Better Markets, said if some of these Fed actions are not against the rules, the rules need to change.

“To think that such trading is acceptable because it is supposedly allowed by Fed’s current policies only highlights that the Fed’s policies are woefully deficient,” Kelleher told CNBC.

While trading by Rosengren and Kaplan was not conducted during the so-called blackout period, when Fed officials are not allowed to talk publicly about monetary policy or trade, Kelleher said during a crisis like last year, “the whole year should be considered a blackout period” because Fed officials are constantly talking and crafting policy in response to fast-moving events.

Source: https://www.cnbc.com/2021/09/17/fed-officials-owned-securities-it-was-buying-during-pandemic-raising-more-questions-about-conflicts.html

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Vaccine makers move quickly against new omicron Covid variant, testing already under way

Pfizer and BioNTech said they expect more data from lab tests in two weeks at the latest.

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A vial of Pfizer-BioNTech Covid-19 vaccine.

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The world’s major manufacturers of Covid-19 vaccines said Friday that they are working to quickly investigate and adapt their shots to a new and highly mutated strain of the virus.

The World Health Organization on Friday said the new strain, named omicron, is a “variant of concern” that may pose a higher risk of reinfection than past mutations of the virus.

Pfizer and BioNTech said they are investigating omicron, first labeled B.1.1.529, and can adapt their vaccine quickly if needed.

“We understand the concern of experts and have immediately initiated investigations on variant B.1.1.529,” the companies said.

Pfizer and BioNTech said they expect more data from lab tests in two weeks at the latest.

“These data will provide more information about whether B.1.1.529 could be an escape variant that may require an adjustment of our vaccine if the variant spreads globally,” the companies said.

Pfizer and BioNTech said they can adapt their mRNA vaccine within six weeks and start shipping batches within 100 days if an escape variant is identified.

Johnson & Johnson on Friday said they were already testing their vaccine against omicron.

“We are closely monitoring newly emerging COVID-19 virus strains with variations in the SARS-CoV-2 spike protein and are already testing the effectiveness of our vaccine against the new and rapidly spreading variant first detected in southern Africa,” J&J said.

AstraZeneca said it is also investigating the variant. Its vaccine platform developed with Oxford University enables a quick response to new mutations as they emerge, the company said.

“AstraZeneca is also already conducting research in locations where the variant has been identified, namely in Botswana and Eswatini,” the company said.

Moderna, in a statement Friday, said the combination of mutations in the variant “represents a significant potential risk to accelerate the waning of natural and vaccine-induced immunity.”

“A booster dose of an authorized vaccine represents the only currently available strategy for boosting waning immunity,” the company said.

Moderna said it will test three booster candidates against omicron, including at a higher dosage level. The company will also develop a booster dose specific to the variant.

“From the beginning, we have said that as we seek to defeat the pandemic, it is imperative that we are proactive as the virus evolves,” said Moderna CEO Stephane Bancel in a statement. “The mutations in the Omicron variant are concerning and for several days, we have been moving as fast as possible to execute our strategy to address this variant.”

The variant, which emerged in South Africa, has about 50 mutations, more than 30 of which are on the spike protein that allows the virus to bind to human cells. The spread of the new variant is still in its early stages, and it’s not yet clear how severe an infection would be to a vaccinated person.

Several European and Asian nations have suspended flights from southern Africa in response to the variant. The United Kingdom suspended flights on Thursday from six countries in the region, and the European Commission – the European Union’s executive body – told all 27 member states to halt travel from southern Africa.

White House chief medical advisor Dr. Anthony Fauci on Friday said the U.S. is working with South African scientists to obtain the molecular makeup of the variant so lab tests can be conducted. Those tests would help determine whether or not the variant can evade antibody protection provided by the vaccines.

Fauci said that data would help determine whether or not the U.S. should implement similar travel restrictions. The Biden administration confirmed later on Friday that the U.S. would restrict entry for non-citizens coming from eight southern African nations.

The strength of Covid vaccines against infection has declined over time, although they’re still highly effective at preventing hospitalization and death. A study published in the journal Science this month found that the Pfizer vaccine’s efficacy at preventing infection declined from 86% to 43% from February to October. Moderna’s vaccine dropped from 89% to 58%, and J&J’s vaccine fell from 86% to 13% efficacy against infection in the same study.

The U.S. Centers for Disease Control and Prevention authorized booster shots of Pfizer-BioNTech’s and Moderna’s vaccines for all adults last Friday. The Pfizer booster dose was 95% effective at preventing symptomatic infection in people who had no evidence of prior infection in a clinical trial of 10,000 participants ages 16 and older, according to the company. Moderna is still conducting a clinical trial on the efficacy of its booster dose.

The World Health Organization on Friday said the new strain, named omicron, is a “variant of concern” that may pose a higher risk of reinfection than past mutations of the virus.

Source: https://www.cnbc.com/2021/11/26/pfizer-biontech-investigating-new-covid-variant-jj-testing-vaccine-against-it.html

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Macy’s shares surge on upbeat earnings, decision to hire AlixPartners to review business

Macy’s reported third-quarter earnings and sales that topped analysts’ expectations, leading the department store chain to raise its full-year forecast.

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Macy’s on Thursday reported fiscal third-quarter earnings and sales that topped analysts’ expectations, leading the department store chain to raise its full-year forecast ahead of the holidays.

Separately, the company teased the launch of a digital marketplace that’s set to debut in the second half of 2022, and said it had hired consulting firm AlixPartners to review its business structure.

Macy’s shares closed the day up 21.1%. At one point, the stock hit a three-year high of $37.95.

The announcements come as activist Jana Partners has taken a stake in the business and is pressuring Macy’s to spin off its e-commerce operations from its stores, hoping to fetch a greater valuation. Saks Fifth Avenue pursued a similar split earlier this year. Its e-commerce unit is now reportedly preparing for an initial public offering at a higher valuation than it saw after its spin off from Saks’ stores.

“We also recognize the significant value the market is assigning to pure e-commerce businesses,” Macy’s Chief Executive Jeff Gennette said on an earnings call. “And as we look at the landscape today, we are undertaking additional analysis that could help inform our long-term strategy to further unlock value for Macy’s.”

Earnings top estimates

Under Gennette, Macy’s has been trying to woo younger consumers who may have shifted away from shopping at traditional department stores. He said Macy’s added 4.4 million new customers in the quarter and benefited from an “improved economic environment.”

Gennette also tried to ease concerns about ongoing supply chain issues and said Macy’s doesn’t expect to be hurt by bare shelves during the critical holiday shopping season.

“We expect the supply chain issues are going to continue into 2022,” he said. “Some categories are much better, some [challenges] persist. But I think overall we’ve got a great handle on how we’re mitigating that.”

Here’s how Macy’s did in the three-month period ended Oct. 30 compared with what analysts were anticipating, based on a survey by Refinitiv:

  • Earnings per share: $1.23 adjusted vs. 31 cents expected
  • Revenue: $5.4 billion vs. $5.2 billion expected

Macy’s reported net income of $239 million, or 76 cents per share, compared with a loss of $91 million, or 29 cents a share, a year earlier. Excluding one-time items, the company earned $1.23 per share, far better than the 31 cents that analysts had predicted.

Sales grew to $5.4 billion from $3.99 billion a year earlier. That came in ahead of estimates for $5.2 billion.

Macy’s reported comparable sales growth, on an owned plus licensed basis, of 35.6% in the quarter. Analysts had been looking for growth of 29.3%, according to Refinitiv estimates.

Digital sales up 19%

Digital sales grew 19% year over year and were up 49% on a two-year basis. The company said its online business made up 33% of total sales, up 10% from 2019 levels. And 41% of Macy’s new customers came through digital in the third quarter.

At Bloomingdale’s, comparable sales on an owned plus licensed basis rose 38.5% year over year. The company said shoppers with more money to spend bought up luxury handbags, fine jewelry, men’s shoes and apparel.

“It is super heated right now,” Gennette said in a phone interview about the luxury market. “Customers are ready to put more of their disposable income against brands for the future.”

He said the company also expects to see a rebound in spending among international tourists, as they travel back to the U.S., which should further help its luxury business. The return of foreign shoppers to Macy’s stores will likely be straddled both between 2022 and 2023, he said.

Gennette said the company has successfully brought back old customers and found new shoppers during the coronavirus pandemic. A tie-up with Toys R Us has helped Macy’s toy sales more than double from 2019 levels, he said. And the company is seeing some crossover from competitors that have closed, according to Gennette.

Macy’s now sees 2021 revenue ranging between $24.12 billion and $24.28 billion, compared with a prior range of $23.55 billion to $23.95 billion.

It expects full-year adjusted earnings per share to hit $4.57 to $4.76, up from a prior forecast of $3.41 to $3.75.

Analysts had been looking for adjusted earnings per share of $3.89 on revenue of $23.78 billion.

Department store operator Kohl’s also on Thursday raised its outlook for the year, sending its shares up 10.6% on the day.

Adding a digital marketplace

Meanwhile, Macy’s planned digital marketplace will allow third-party merchants to sell their items on Macy’s and Bloomindales’ websites. The company said it’s working with tech provider Mirakl to power the platform. According to Gennette, this has been in the works for at least a year.

Macy’s Chief Digital and Customer Officer Matt Baer said the marketplace will help the retailer expand its product assortment at a lower cost. The company has been targeting $10 billion in online revenue by 2023, but this marketplace should add more incremental sales on top of that, Baer said.

Bed Bath & Beyond earlier this month announced it plans to debut a similar marketplace for third parties to sell items on its site. It’s a push to mimic the marketplaces that companies like Amazon, Walmart and Target already have. But it’s unclear if these retailers will be as successful.

According to GlobalData managing director Neil Saunders, the launch of an online marketplace could end up only amplifying the calls for Macy’s to spin off its e-commerce business.

“A possible danger of the marketplace is that it will decrease the overlap between stores and online,” Saunders said.

Jana’s founder and managing partner, Barry Rosenstein, said in an emailed statement that the activist group applauds Macy’s latest results.

“We appreciate Macy’s strong execution in the quarter and commend the board for promptly engaging advisors to undertake a review of ways to unlock the value of its strong e-commerce business,” he said.

Jana’s interest in Macy’s stock has given the retailer’s shares a boost. As of Thursday’s close, its stock has rallied more than 232% year to date, putting its market value at $11.6 billion.

Find the full press release from Macy’s here.

The announcements come as activist Jana Partners has taken a stake in the business and is pressuring Macy’s to spin off its e-commerce operations from its stores, hoping to fetch a greater valuation. Saks Fifth Avenue pursued a similar split earlier this year. Its e-commerce unit is now reportedly preparing for an initial public offering at a higher valuation than it saw after its spin off from Saks’ stores.

Source: https://www.cnbc.com/2021/11/18/macys-m-q3-2021-earnings.html

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Kohl’s shares jump after retailer reports 16% sales increase as shoppers buy clothes and makeup

The department store chain also raised its forecast for the year.

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Customers leave a Kohl’s store on November 12, 2015 in San Rafael, California.

Justin Sullivan | Getty Images News | Getty Images

Kohl’s on Thursday said sales rose 16% in the fiscal third quarter, as shoppers turned to its stores and website for clothes and makeup.

The department store raised its forecast for the year, following its better-than-expected performance.

Shares closed Thursday at $62.48, up 10.6%. With the day’s gains, Kohl’s stock is up 53% this year, bringing its market value to $9.4 billion.

Kohl’s is one of the retailers that was hit hard by the pandemic, as Americans spent time at home and had few reasons to refresh their wardrobe or buy new shoes. As consumers get out and about again, it is trying to draw them in with a wider assortment of clothing, including activewear, and a new partnership with Sephora. It has opened about 200 Sephora shops inside of Kohl’s stores and plans to add more.

CEO Michelle Gass said the moves the retailer is making are paying off.

“All of the pieces of our strategy are coming together and we remain incredibly confident in the future of our business,” she said in a news release.

Here’s what the company reported compared with Refinitiv consensus estimates:

  • Earnings per share: $1.65 vs. 64 cents expected
  • Revenue: $4.6 billion vs. $4.27 billion expected

In the third quarter ended Oct. 30, net income rose to $243 million, or $1.65 per share, from a net loss of $12 million, or 8 cents per share, a year earlier. The results topped the 64 cents per share expected by analysts surveyed by Refinitiv.

Revenue climbed to $4.6 billion from $3.98 billion a year ago, outpacing estimates of $4.27 billion.

Same-store sales, which track sales online and at Kohl’s stores open for at least 12 months, grew 14.7% in the third quarter, topping the 12.5% gain that analysts expected, according to StreetAccount.

Digital sales grew 6% in the third quarter and 33% on two-year basis, Gass said on an earnings call. E-commerce drove 29% of total sales in the quarter.

Gass said the company saw strong sales in men’s, women’s and children’s apparel and footwear during the three-month period. She said active apparel was a bright spot as shoppers bought athleisure and workout clothes from Nike, Under Armour, Adidas and Champion and responded to the retailer’s inclusive sizing.

Sephora shops draw new customers

The addition of Sephora shops is attracting younger and more diverse customers and leading to higher sales, she said. At the Kohl’s stores where Sephora shops have opened so far, it is seeing a mid single-digit lift to same-store sales compared with ones that do not yet have it, she said.

More than 25% of Sephora shoppers are new to Kohl’s, she said. It is still early days for the partnership, since the shops are just in a fraction of Kohl’s stores.

“When we’re up over 600 [Sephora shops] next year, you can only imagine the millions and millions of customers that we’re going to be introducing, so it’s already meaningful and that will only grow,” she said.

As the company renovates to add these shops, it is refreshing the look and feel of its stores. She said it is teaming up with other popular brands, too, and will launch a exclusive collection with Draper James, the fashion company founded by actress Reese Witherspoon.

Low inventory

However, Gass said Kohl’s is still weighed down by supply chain challenges and higher costs — a dynamic that she expects to continue. She said levels of inventory remain lower than planned as the company copes with production and transit delays.

She said the retailer’s inventory was down 25% on a two-year basis at the end of the third quarter. That has benefited the company’s margins and driven turnover of merchandise, as less winds up on the clearance rack.

Gass said in a separate phone interview that the company has invested in technology on its website to offer shoppers alternative choices if they find items out of stock, or not in the size that they’re looking for.

Some consumers have kicked off their holiday shopping early this year, in part to avoid running into empty shelves. But Gass said the pre-Black Friday rush hasn’t resulted in a dramatic pull-forward of fourth-quarter sales.

“I do think there’s probably some early buying, but I think it’s human nature, customers will buy throughout the season,” she said.

The retailer said it now expects to earn between $7.10 and $7.30 per share for the year, excluding charges. Previously, Kohl’s predicted earnings of $5.80 to $6.10 per share.

Along with pandemic-related challenges, Kohl’s had a recent clash with activist investors who raised doubts about the company’s direction and tried to take control of its board. The group of investors —Macellum Advisors, Ancora Holdings, Legion Partners Asset Management and 4010 Capital — came to an agreement with the retailer in April and added a few investor-backed independent directors to its board.

Kohl’s said it bought back $506 million of shares in the third quarter and now plans to repurchase a total of $1.3 billion of shares in 2021.

—CNBC’s Lauren Thomas contributed to this report.

Read the company’s press release here.

Kohl’s is one of the retailers that was hit hard by the pandemic, as Americans spent time at home and had few reasons to refresh their wardrobe or buy new shoes. As consumers get out and about again, it is trying to draw them in with a wider assortment of clothing, including activewear, and a new partnership with Sephora. It has opened about 200 Sephora shops inside of Kohl’s stores and plans to add more.

Source: https://www.cnbc.com/2021/11/18/kohls-kss-q3-2021-earnings-.html

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