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GameStop surges 110% in the premarket as some trading restrictions are lifted

Robinhood said it will resume limited trading of previously restricted securities on Friday.

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Shares of GameStop, AMC and others rebounded aggressively in extended trading on Thursday after Robinhood said it will resume limited trading of previously restricted securities on Friday.

“Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and may make adjustments as needed,” Robinhood said in a statement.

GameStop shares shot up 119% to trade at $424 in premarket trading, after closing down 44% to $193.60 during regular hours Thursday. The stock’s high for the week is $483.

Robinhood said its decision to restrict trading — which angered many users — was in order to comply with capital requirements mandated by the SEC for broker dealers.

“These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today,” the company said.

Amid the trading frenzy the company, which is widely expected to go public this year, has tapped some of its credit lines, according to someone familiar with the matter.

As retail investors piled into the market Robinhood, in addition to other retail brokerages, restricted trading in several names on Thursday. The free-stock trading app said that in some cases, investors would be able to only sell their positions and not open new ones.

In addition to GameStop, the restricted trading sent shares of AMC Entertainment and BlackBerry tumbling 56% and 41%, respectively, on Thursday.

AMC rebounded 70% in premarket trading. Bed Bath & Beyond was 15% higher.

Interactive Brokers took similar steps, and both it and Robinhood raised margin requirements on certain securities. It is not unusual to raise margin requirements, but the move to restrict trading was unusual and more extreme, which angered and confused some users.

Raising margin requirements increases how much money an investor using leverage and derivatives must have in their brokerage account after a stock purchase. TD Ameritrade and Charles Schwab raised margin requirements on Wednesday.

The influence of retail investors — most apparent in GameStop — has captivated the Street in recent days, and speaks to a new class of traders who grew up amid the pandemic.

Individual investors are creating short squeezes by piling into names that hedge funds are betting against, forcing the funds to rush to cover their losses. This typically pushes shares even higher. Retail investors are promoting their activity on the WallStreetBets Reddit board, which has more than 3 million members. Some view it as small, retail investors pushing back against the Wall Street establishment.

Amid the meteoric pops — and then drops — some lawmakers are calling for an investigation. The Democratic leaders of the House Financial Services Committee and the Senate Banking Committee said they would hold hearings.

Rep. Alexandria Ocasio-Cortez, D-N.Y., was among the lawmakers to comment on the trading activity, saying in a tweet that Robinhood’s decision to limit trading was “unacceptable.” Texas Sen. Ted Cruz reposted Ocasio-Cortez’s tweet to his own page, writing, “Fully agree.”

Robinhood, whose mission is to democratize investing for all, has seen its users jump amid the pandemic, and the app now boasts more than 13 million users. Its expansion has come with some growing pains, including several outages on key market days. It’s also increasingly attracted the attention of lawmakers

Meanwhile, Sen. Elizabeth Warren said chaotic trading in the market was due to a lack of oversight from the SEC.

“We need an SEC that has clear rules about market manipulation and then has the backbone to get in and enforce those rules,” she said to CNBC. “To have a healthy stock market, you’ve got to have a cop on the beat.” The SEC did not respond to CNBC’s request for comment.

Here’s the full statement from Robinhood:

“This past year, we’ve seen the financial markets become a voice for the voiceless. We’ve seen a new generation of people come into the markets, sparking conversations about what it means to be an investor. Our customers have shown the world that investing is for everyone—not just institutional investors and hedge funds.

Amid this week’s extraordinary circumstances in the market, we made a tough decision today to temporarily limit buying for certain securities. As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.

Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and may make adjustments as needed.

To be clear, this was a risk-management decision, and was not made on the direction of the market makers we route to. We’re beginning to open up trading for some of these securities in a responsible manner.

We stand in support of our customers and the freedom of retail investors to shape their own financial future. Democratizing finance has been our guiding star since our earliest days. We will continue to build products that give more people—not fewer—access to our financial system. We’ll keep monitoring market conditions as we look to restore full trading for these securities. We will update this Help Center article with the latest changes.

We are deeply grateful to our customers.”

– CNBC’s Maggie Fitzgerald, Leslie Picker, Tucker Higgins and Thomas Franck contributed reporting.

Source: https://www.cnbc.com/2021/01/28/robinhood-will-allow-limited-buying-of-restricted-securities-friday-gamestop-jumps-after-hours.html

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The stock market may be misreading what this weak jobs report means for the Fed

The disappointing April jobs report reinforces the Fed’s easy policies, but some strategists still expect the Fed to move toward ending bond purchases.

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A help wanted sign is posted at a taco stand in Solana Beach, California.

Mike Blake | Reuters

The much weaker than expected April jobs report reinforces the Federal Reserve’s easy policy stance, but some strategists still expect the central bank to signal in the next couple of months that it will slow down its bond buying.

Economists had expected to see 1 million new jobs last month, so the government’s report of just 266,000 was a gut punch to the view that the economy is rebounding in a smooth upward trajectory. The anticipation for a big jobs number also had put the spotlight on the Fed’s easing programs.

Stock futures rose and Treasury yields immediately fell after the report. But the 10-year Treasury yield, after falling to about 1.49% turned around to trade at 1.55%. The 5-year also fell but stayed near its low. Yields move opposite bond prices. In afternoon trading, stocks remained higher with the Dow up about 160 points.

“I’m wondering if bonds are selling off a little as it just reinforces [Fed Chair Jerome] Powell wanting to be patient,” said John Briggs, head of global strategy at NatWest Markets. “But if you’re like me, waiting for the Fed to taper, I think the Fed is going to start talking about it in September. That means the market is going to be talking about it in the summer.”

Economists said the May jobs report will provide more information on the state of hiring, which could have been slowed by bottlenecks showing up in supply chains. For instance, auto workers have been idled due to the shortage of semiconductors needed to build automobiles. There is also an acute shortage of workers in some areas and industries. Economists also see closed schools as an issue, keeping parents from the workforce. To some extent, expanded unemployment benefits may also be a factor.

“If one is thinking about the evident labor shortages being inflationary, that should push the 5-year yield up,” said Michael Schumacher, Wells Fargo rates director. “But the other side is if you consider the chance of the Fed tapering, that’s been pushed back slightly. Not much in my opinion, but people might take that view.”

Schumacher said he still expects the Fed to discuss trimming its purchases of about $120 billion a month in Treasurys and mortgage securities.

Fed Chairman Jerome Powell has knocked the idea that the Fed will begin discussing an unwind any time soon. But some strategists still expect the Fed to be forced into slowing the purchases and ultimately ending them due to the strength of the economic recovery and the specter of inflation.

A step toward ending the bond-buying program would ultimately be a step toward raising interest rates, which the Fed is not expected to do any time soon. Powell has said the Fed would complete the slow wind down of its bond purchases before raising interest rates.

“If you’re an economy bull, you say this is probably an aberration. … The bears can say you’re losing momentum. Either are possible until you get another month,” Briggs said, noting the next report could show a large amount of hiring. “When was the last time you reopened an economy in a pandemic? Where are your seasonal factors for that?”

He said the bond market is also reacting to the potential for more fiscal stimulus, highlighted by the White House after the weak number.

“It’s as simple as this — a drop in rates, let’s buy tech,” said Peter Boockvar, chief investment strategist at Bleakley Advisory Group. “The stock market can’t decide whether it wants to celebrate the drop in yields and maybe a Fed that’s not going to taper so quickly but at the same time, we’re early stage in the recovery but we’re seeing a lot of late stage behavior like supply demand getting hot … this overheating.”

Jan Hatzius, chief economist at Goldman Sachs, said the bond market reversal appears to have come as traders looked at the inconsistencies and decided the number was distorted. “That was my view as well,” he said on CNBC. Hatzius said the weak jobs report does not change his view that the Fed will taper its bond purchases starting next year and then raise interest rates in 2024.

“I’m not sure having one dud report changes the calculation too much,” said Schumacher. “I suspect the forecast range will be astronomical next month.”

The unemployment rate rose in April to 6.1% from 6%. The bulk of hiring was in the leisure and hospitality sector, which added 331,000 jobs as pandemic restrictions on restaurants eased.

Average hourly wages rose by 21 cents to $30.17 in April, and economists note that strong hiring of workers in the hospitality industry typically makes overall wage numbers go down.

“This is a devastating disappointment, more than just seasonal problems. We had declines in everything from professional services to manufacturing and even couriers and transportation,” said Diane Swonk, chief economist at Grant Thornton. “Turning on the lights in the economy is harder than turning them off.”

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Stock futures rose and Treasury yields immediately fell after the report. But the 10-year Treasury yield, after falling to about 1.49% turned around to trade at 1.55%. The 5-year also fell but stayed near its low. Yields move opposite bond prices. In afternoon trading, stocks remained higher with the Dow up about 160 points.

Source: https://www.cnbc.com/2021/05/07/the-stock-market-may-be-misreading-what-this-jobs-report-means-for-the-fed.html

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More earnings, April’s big jobs report and inflation worries could swing markets in the week ahead

April’s jobs report and a barrage of earnings news make for another busy week for markets, as the calendar rolls into May.

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Traders on the floor of the New York Stock Exchange.

Source: NYSE

April’s jobs report and a barrage of earnings news make for another busy week for markets, as the calendar rolls into May.

Stocks notched solid gains in April, as REITs, consumer discretionary names and communications services companies outpaced the broader market, all more than 7% higher. However, April finished on a sour note, with stocks selling off on Friday.

“Since November, there’s been a 30% rally,” said Jimmy Chang, chief investment officer at Rockefeller Global Family Office. He noted that historically the November to April period is the strongest for stocks. “There’s the adage ‘sell in May, go away.’ It may be somewhat appropriate this year since we’ve done so well in the last six months.”

Big jobs report

April’s employment report is schedulted to be released Friday, and the market is expecting a big number.

Economists say payrolls in April could easily reach 1 million, after 916,000 jobs were added in March. Estimates range from about 700,000 to a forecast of 2.1 million from Jefferies economists.

According to Dow Jones, there is a consensus forecast of 978,000 among the economists it surveyed and the unemployment rate is expected to fall to 5.8% from 6%.

Federal Reserve speakers will also be important after Fed Chairman Jerome Powell said in the past week that the central bank is still looking for “substantial further progress” in its goals for the economy.

The chairman emphasized that the Fed is not close to tapering back its bond-buying program, a surprise to some investors. Some bond market pros had expected the Fed to start discussing cutting back purchases at its June meeting and begin to reduce its $120 billion monthly bond buying by the end of the year or early next year.

“Next week is all about the jobs number, because as part of the Fed’s path to ‘substantial progress’ on their two roles, we’ll see how much further along that path they are next Friday” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. The Fed’s mandate is to pursue full employment and a steady pace of Inflation, which it has targeted at 2%.

The Fed has expected a temporary period of high inflation which it anticipates to see subside later in the year though Boockvar and others say inflation could be hotter than the central bank expects. The core personal consumption expenditures price index jumped 0.36% in March, with the year-ago rate rising from 1.4% to 1.8%. It is expected to go even higher in April. Headline inflation in the consumer price index is expected to begin running at 3% or better when it is reported May 12.

Just days after Powell’s comments on tapering, Dallas Fed President Rob Kaplan on Friday said the Fed should begin the discussion on paring back bond purchases because imbalances in financial markets and the economy are improving faster than expected.

The market’s focus on the Fed’s bond program makes the jobs report even more important. If the central bank starts to taper back those asset purchases, it would then signal it would be on the path toward raising interest rates. Most economists do not expect the Fed to raise interest rates before 2023.

“If this jobs number comes in super hot, it’s going to make people up their estimate on when the Fed might taper,” said Michael Schumacher, director of rates at Wells Fargo.

Powell is among Fed speakers in the coming week, but he is not expected to provide any new views when he participates in a National Community Reinvestment Coalition conference Monday afternoon. Kaplan speaks Tuesday and Thursday, and New York Fed President John Williams and Cleveland Fed President Loretta Mester are also among central bank officials speaking in the coming week.

Earnings soar

So far, a record 87% of S&P 500 companies have beat earnings estimates, and earnings look to be growing by more than 46%, according to Refinitiv.

Credit Suisse’s chief U.S. equity strategist, Jonathan Golub, upped his forecast Friday for the S&P 500 based on strong earnings. “We are raising our 2021 S&P 500 price target to 4600 from 4300, representing 9.2% upside from current levels, and 22.5% for the year,” he wrote.

Earnings are expected from a diverse group of companies, from General Motors to ViacomCBS. Pharma will be in the spotlight as Covid vaccine makers Pfizer and Moderna both report. Draftkings and Beyond Meat are also on the schedule.

A host of travel-related companies issue results, including Booking Holdings, Hilton Worldwide, Marriott Vacations and Caesars Entertainment. Consumer brands, like Anheuser Busch Inbev and Estee Lauder also report, as do insurers including AIG, Allstate, and MetLife. (A calendar with some key earnings dates appears below.)

Chang said the market has discounted a lot of the positive news already.

“In spite of the really strong reports from the bellwether companies, you’re seeing some of the names starting to peter out a little bit,” said Chang. “I think it’s a sign that so much good news is discounted. I suspect the market is due for a breather. I think in the next couple of months, we’re likely to see sideways movement. There’s likely to be a pullback which will be healthy.”

The S&P 500 was up 5.2% in April, finishing Friday at 4,181. It is now up 11.2% for the year so far. The Dow rose 2.7% in April, to 33,874, and the Nasdaq gained 5.4% in April, ending Friday at 13,962.

Chang said he expects some of the “boring” blue chips that haven’t participated as much in the rally to do better. Some of those names can be found in pharma, he said.

Heading into the coming week, investors will be watching for words of wisdom from Warren Buffett at Berkshire Hathaway’s annual meeting Saturday.

Week ahead calendar

Monday

Monthly vehicle sales

Earnings: Avis Budget, Loews, Alexion Pharmaceuticals, Rambus, Leggett and Platt, Vornado, American Water, Iamgold, Mosaic, Apollo Global Management, ZoomInfo, Estee Lauder, ON Semiconductor

9:45 a.m. Manufacturing PMI

10:00 a.m. ISM manufacturing

10:00 a.m. Construction spending

2:00 p.m. Senior loan officer survey

2:10 p.m. New York Fed President John Williams

2:20 p.m. Fed Chairman Jerome Powell at National Community Reinvestment Coalition conference

Tuesday

Earnings: Pfizer, CVS Health, ConocoPhillips, Martin Marietta Materials, Activision Blizzard, DuPont, KKR, T-Mobile, Akamai, Pioneer Natural Resources, Lattice Semiconductor, Denny’s, Hyatt Hotels, Host Hotels, PerkinElmer, Prudential Financial, Viavi, Caesars Entertainment, Thomson Reuters, Cummins, Vulcan Materials

8:30 a.m. International trade

10:00 a.m. Factory orders

1:00 p.m. Dallas Fed President Robert Kaplan

1:00 p.m. Minneapolis Fed President Neel Kashkari

Wednesday

Earnings: General Motors, Hilton Worldwide, Booking Holdings, Fox Corp., Uber Technologies, Etsy, PayPal, Allstate, Accolade, Cognizant Technology, MetLife, Marriott Vacations, CF Industries, Marathon Oil, CyberArk Software, Emerson Electric, Amerisourcebergen, BorgWarner, Zynga, Tanger Factory Outlet, Twilio

8:15 a.m. ADP employment

9:30 a.m. Chicago Fed President Charles Evans

9:45 a.m. Services PMI

10:00 a.m. ISM services

11:00 a.m. Boston Fed President Eric Rosengren

12:00 p.m. Cleveland Fed President Loretta Mester

3:00 p.m. Chicago Fed’s Evans

Thursday

Earnings: Regeneron, ViacomCBS, Kellogg, Moderna, Murphy Oil, Beyond Meat, Shake Shack, Square, Roku, Axon, Cushman and Wakefield, Tapestry, Neilsen, AIG, Anheuser-Busch, EOG Resources, Consolidated Edison, DropBox, Expedia, Roku, Peloton Interactive, Datadog, Cardinal Health, Ambac Financial

8:30 a.m. Initial jobless claims

8:30 a.m. Productivity and costs

9:00 a.m. New York Fed’s John Williams

10:00 a.m. Dallas Fed’s Kaplan

1:00 p.m. Cleveland Fed President Loretta Mester

1:00 p.m. Atlanta Fed President Raphael Bostic

Friday

Earnings: Cigna, Siemens, Gannett, AMC Networks, Draftkings, Liberty Broadband, Elanco Animal Health

8:30 a.m. Employment

10:00 a.m. Wholesale trade

3:00 p.m. Consumer credit

Stocks notched solid gains in April, as REITs, consumer discretionary names and communications services companies outpaced the broader market, all more than 7% higher. However, April finished on a sour note, with stocks selling off on Friday.

Source: https://www.cnbc.com/2021/04/30/more-earnings-aprils-big-jobs-report-and-inflation-worries-could-swing-markets-in-the-week-ahead.html

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Apple is in the middle of a supercycle for everything it sells, and the Mac and iPad are on a tear

Apple showed massive growth in Mac and iPad sales in its latest quarterly earnings report on Wednesday.

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Tim Cook, CEO of Apple laughs while Lana Del Rey (with iPad) takes a photo during a launch event at the Brooklyn Academy of Music on October 30, 2018 in New York City.

Stephanie Keith | Getty Images

Apple reported another blowout quarter Wednesday, showing 54% revenue growth and authorizing a mind-melting $90 billion share buyback.

But while we usually spend each quarter talking about the performance of Apple’s iPhone and Services segments, it’s impossible to ignore the insane growth the company reported for Mac computers and iPads.

Apple isn’t just in the middle of a new iPhone supercycle of sales. It’s in the middle of a supercycle for everything.

Just take a look at the Mac and iPad segments’ performance during Apple’s fiscal second quarter:

  • Mac revenue: $9.10 billion, up 70.1% year over year
  • iPad revenue: $7.80 billion, up 78.9% year over year

Those are just wild numbers for two product categories that had been languishing for the last few years. Before 2020, the story behind the Mac was that Apple had put its PC development on the back burner in favor of focusing on its profit engine: the iPhone.

But that started to change last year with the perfect storm for Apple’s Mac and iPad sales growth: the launch of Apple’s own computer chip, the M1, and the spike in demand for devices to help people work from home.

While the pandemic part of the equation is obvious, Apple also said the M1 played a role in the sales boom. On the company’s earnings call Wednesday, CEO Tim Cook credited the M1 chip for fueling the growth, especially after Apple proved the chip can perform just as well as or better than the Intel chips it used to use for computers.

Apple also just added the M1 to its new iPad Pro model, which goes on sale Friday and ships in May. That gives the iPad the same power as the Mac. Apple executives told TechCrunch this week that they hope adding all that power to the iPad will spur a new wave of software development to make the device much more useful for productivity tasks. If that works, the iPad Pro will be a viable alternative for people who want to use a tablet instead of a traditional laptop.

And there are more reasons to be optimistic about the Mac later this year, when Apple will reportedly redesign its Mac laptops and potentially use the next version of its M-series chip in them.

There’s just one caveat to all this optimism around the Mac and iPad: the chip shortage.

Cook and his team admitted on the earnings call Wednesday that there could be supply constraints for some components needed for Apple’s gadgets. But they sounded optimistic they’ll be able to work through the issues.

And don’t forget: Cook made his name in the business world as a supply chain and logistics genius.

Just take a look at the Mac and iPad segments’ performance during Apple’s fiscal second quarter:

Source: https://www.cnbc.com/2021/04/29/apple-aapl-earnings-show-massive-jump-in-ipad-mac-sales.html

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