Closing Stock Market SummaryThe S&P 500 advanced 0.9% on Wednesday, driven by Alphabet (GOOG 2960.73, +203.16, +7.4%) following its earnings report and helped by lingering rebound momentum. The Dow Jones Industrial Average (+0.6%) and Nasdaq Composite (+0.5%) followed suit, while the Russell 2000 fell 1.0%.
Shares of Alphabet gained 7% after the company reported better-than-expected Q4 results and announced a 20-for-1 stock split. The latter generated speculation of greater retail interest in the stock and a potential inclusion in the Dow at some point.
The S&P 500 communication services sector, where Alphabet resides, climbed 3.1% to the top of the sector rankings. The other sectors also closed higher, except for consumer discretionary (-0.5%), which included earnings-related weakness in Starbucks (SBUX 97.73, -1.03, -1.1%) and General Motors (GM 53.50, -0.57, -1.1%).
Despite the strong performance in the S&P 500, and the gains in ten of its 11 sectors, there wasn't the same level of bullishness from the prior days. There were more declining issues than advancing issues at both the NYSE and Nasdaq, and PayPal (PYPL 132.57, -43.23, -24.6%) plunged 25% on disappointing earnings results/guidance.
That might have been due to profit-taking pressure on the recognition that the major indices have bounced strongly off their January lows, pushing the Fed's hawkish policy stance to the background of the trading narrative.
In addition, there were some misgivings about the U.S. sending 3,000 troops to NATO countries near Ukraine and the disappointing ADP Employment Change report. ADP estimated a net-loss of 301,000 jobs to private-sector payrolls in January (Briefing.com consensus +220,000), lowering market expectations for the Employment Situation report on Friday.
The market hung in there, though, and after dipping into negative territory in early action, the large-cap indices drifted higher the rest of the session. Advanced Micro Devices (AMD 122.76, +5.98, +5.1%) was another earnings standout.
The Treasury market saw modest demand from buyers amid the geopolitical risks and negative employment data. The 2-yr yield decreased one basis point to 1.15%, and the 10-yr yield decreased two basis points to 1.77%. The U.S. Dollar Index fell 0.4% to 95.99 amid relative strength in the euro, which was a byproduct of ECB rate-hike expectations.
WTI crude futures settled little changed ($88.17/bbl, -0.04, -0.1%). In related news, OPEC+ reaffirmed its decision to increase production by 400,000 barrels per day in March, and the EIA reported an unexpected draw in weekly crude inventories (1.05 million).
Reviewing Wednesday's economic data:
- The ADP Employment Change report estimated a net-loss of 301,000 jobs to private-sector payrolls in January (consensus +220,000). The increase in December was downwardly revised to 776,000 from 807,000.
- The weekly MBA Mortgage Applications Index rose 12.0% following a 7.1% decline in the prior week.
Looking ahead to Thursday, investors will receive the ISM Non-Manufacturing Index for January, the weekly Initial and Continuing Claims report, Factory Orders for December, preliminary Q4 Productivity and Unit Labor Costs, and the final IHS Markit Services PMI for January.
- Dow Jones Industrial Average -2.0% YTD
- S&P 500 -3.7% YTD
- Nasdaq Composite -7.9% YTD
- Russell 2000 -9.6% YTD
After Hours Summary: CCS +10%, RRR +8% rise while FB -23%, SPOT -10% fall on earnings/guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: CCS +9.7%, RRR +8.4%, SKY +8.2%, TMUS +7.9%, MCK +5.6%, DXC +3.0%, MTG +2.2%, AVNW +1.6%
Companies trading higher in after hours in reaction to news: FLEX +11.3% (to sell $500 mln of convertible preferred equity in Nextracker to TPG Rise Climate), SYRS +10.4% (FDA grants orphan drug designation for tamibarotene)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: FB -23.1%, SPOT -9.9%, RRX -7.2%, CTVA -7.1%, LSPD -7.1% (also announced CEO transition), NTGR -7.0%, QRVO -6.0%, LNC -4.5%, AFL -4.2%, OMF -3.9% (also raises dividend by 36% and announces new $1 bln share repurchase program), YELL -3.5%, QCOM -2.4%, CTSH -2.1%, ALGN -1.7%, SITM -1.7%, OHI -1.4%, HOLX -1.1%
Companies trading lower in after hours in reaction to news: DAVE -3.7% (stock offering), CX -1.8% (co and Synhelion announce breakthrough in cement production with solar energy), NDAQ -1.3% (reports January metrics)
Melinda French Gates No Longer Pledges Bulk of Her Wealth to Gates Foundation
Billionaire still promises to give away fortune, cites Pivotal Ventures and Gates Foundation in new Giving Pledge letter
Melinda French Gates is no longer pledging to give the bulk of her wealth to the Bill & Melinda Gates Foundation and instead plans to spread it among philanthropic endeavors, according to people familiar with the matter.
The billionaire made the change official in late 2021 following her divorce from Microsoft Corp. co-founder Bill Gates, the people said, when she published her first individual Giving Pledge letter. In 2010, the couple had committed in a joint Giving Pledge letter to give most of their fortune to the Gates Foundation.
“I recognize the absurdity of so much wealth being concentrated in the hands of one person, and I believe the only responsible thing to do with a fortune this size is give it away—as thoughtfully and impactfully as possible,” Ms. French Gates wrote in her new letter.
The Gates Foundation is one of the world’s largest philanthropies with an endowment topping $50 billion. In July, Mr. Gates and Ms. French Gates said they would commit a further $15 billion to the endowment. It is possible that Ms. French Gates makes additional donations to the foundation even as she gives to other charities, one of the people familiar with the matter said.
A foundation spokeswoman declined to comment beyond prior foundation news releases and the Giving Pledge letters. She said foundation chief executive Mark Suzman had no comment.
The foundation recently added four members to its board of trustees in an effort to boost governance following its co-founders’ divorce. Ms. French Gates and Mr. Gates are the foundation’s co-chairs, though she has agreed to resign in 2023 if either of them decides they can no longer work together. Billionaire Warren Buffett, another major donor, was a trustee until he resigned in June 2021.
In a Gates Foundation video call on Wednesday, Mr. Suzman said Ms. French Gates and Mr. Gates are fully committed to being the long-term co-chairs of the foundation. He said the co-founders regularly lead the foundation’s Covid-19 response meetings and jointly approved recent expanded investments in areas like gender equality and climate adaptation.
Ms. French Gates, Mr. Gates and Mr. Buffett started the Giving Pledge in 2010 to try to kick-start a new era of philanthropy. The campaign encourages the world’s richest individuals and couples to give more than half of their wealth to philanthropy or charitable causes, either during their lifetime or in their wills. Participants typically share their philanthropic intentions in a letter published online.
In late November, Mr. Gates and Ms. French Gates posted new, individual Giving Pledge letters.
In her letter, Ms. French Gates recommitted to giving away the majority of her wealth but didn’t specify that it would go to the Gates Foundation. “I think philanthropy is most effective when it prioritizes flexibility over ideology—and why in my work at the foundation and Pivotal Ventures I’ll continue to seek out new partners, ideas, and perspectives,” she wrote.
Ms. French Gates launched Pivotal Ventures in 2015 to focus on issues affecting women and families in the U.S., including paid-leave policies, and getting more women in technology and to run for public office. Ms. French Gates said in 2019 she would commit $1 billion over a 10-year period through Pivotal to promote gender equality.
Mr. Gates, in his most recent letter, reiterated that most of his wealth will go toward philanthropy, specifying that it will be through the Gates Foundation. “The foundation is my top philanthropic priority, even as my giving in other areas has grown over the years—primarily in mitigation of climate change and tackling Alzheimer’s disease,” he wrote.
Mr. Gates has championed eradication of polio and malaria at the Gates Foundation. He has also invested in clean energy and other technologies to address climate change, as well as Alzheimer’s research through his company Gates Ventures and other investment vehicles.
On Wednesday, Mr. Suzman said that the foundation’s new board will have its first meeting next week. The new members are: Mr. Suzman; businessman and philanthropist Strive Masiyiwa; economist Baroness Nemat “Minouche” Shafik; and philanthropic consultant Thomas J. Tierney.
In response to a question about whether board members will challenge the way the foundation works, Mr. Suzman said it remains a family foundation. “We’ve been clear and they’ve been clear with the incoming board members that we are not looking to change our mission or change our priorities,” he said.
Mr. Suzman said, however, that given the resources the foundation has it can be difficult to get honest feedback so that will be a key role for board members. “Many of our partners are not really incentivized to give us hard feedback or honest dialogue because they’re often looking for partnership or resources,” he said.
Mr. Suzman also said the foundation purposefully selected board members that had worked with Mr. Gates and Ms. French Gates, as well as with the foundation, so trustees were familiar with how the foundation operates.
Growth Hedge Funds Suffer Worst Rout in Years
January troubles add to 2021 losses for many funds
Stock markets’ selloff in January dealt double-digit losses to a range of hedge funds investing in technology and other fast-growing companies, sparking questions about whether a popular and lucrative strategy for these firms is running out of steam.
Whale Rock Capital Management’s hedge fund lost 15.9% for the month in the share class that invests in public and private companies, following a 9% loss last year, according to a person familiar with the firm. Tiger Global Management’s hedge fund, which also lost money last year, lost 14.8% for the month, another person said. Melvin Capital Management and Light Street Capital Management both lost 15% following double-digit losses in 2021, clients said.
Other hedge funds that similarly have bet markets will continue to reward fast-growing companies, including London-based Pelham Capital and Atika Capital Management in New York, also lost double digits in January, investors said.
Some funds investing in biotech, another strategy that has been a bright spot in the hedge-fund industry the past several years, also had losses in January. Joseph Edelman’s biotech hedge fund Perceptive Advisors lost 18%, said people familiar with the firm.
The carnage marks one of the worst starts to a year for fundamental stock pickers in recent memory. It adds to rare losses many growth and technology hedge funds suffered last year, as expectations of higher interest rates hit many of the stocks they favor.
The S&P 500 and technology-heavy Nasdaq Composite lost 5.3% and 9% in January in their worst month since March 2020. Funds got something of a reprieve as those indexes recorded gains starting Friday, with those double-digit declines partially reversing.
Funds’ recent losses mark the biggest test in years for growth investing. Hedge funds that piled into shares of fast-growing public and private companies in recent years have been richly rewarded against a backdrop of easy money and low interest rates.
Many of the stocks they gravitate toward benefit as investors venture further out on the risk spectrum in search of returns—and into assets such as tech companies that promise big earnings gains. Covid-19 supercharged these funds’ returns by juicing demand for many technology businesses.
But the strategy has begun to backfire as the Federal Reserve pulls back on pandemic-era stimulus. Higher rates take a bite out of investors’ perception of the value of potential future earnings, which tends to hit growth stocks like Rivian Automotive Inc. and DocuSign Inc. particularly hard.
The performance updates shared with clients generally offered little context for individual funds’ performance, but managers said that some of the same dynamics in place late last year have only intensified.
Some growth funds fared better than others. Coatue Management and Viking Global Investors lost 4.2% and 4.5% in their flagship funds in January, according to people familiar with the firms. Maplelane Capital, which suffered large losses during the meme-stock rally in January 2021, eked out a 0.40% gain in the month after ending 2021 with a 35% loss.
Some see opportunity amid the wreckage. Tiger in late December told clients they could put more money into its hedge and long-only funds “because the opportunity set seems asymmetric.”
Tiger, whose hedge fund had roughly $25 billion at the start of 2021, wrote, “The companies in our portfolio generally continue to perform well and grow at rapid rates. At the same time, many of their stock prices have declined considerably, resulting in lower valuations today than we have observed in recent history.”
Tesla’s inflated Australian delivery numbers
Things that make you go hmmm.
We’ve not written about Tesla for a while because, being the financial hipsters that we are, it’s all gone a bit mainstream.
But this article from Australian automotive magazine Drive made us go “hmmmm” this morning (with our emphasis):
Tesla Australia has done a U-turn over yesterday’s bold claim 15,000 examples of the Tesla Model 3 were sold last year – a figure that would have scuppered the Toyota Camry’s unbeaten 28-year reign in the mid-size sedan class.
“While the massive year-on-year leap reported was correct, there was an error in the numbers the (Electric Vehicle Council) was provided relating to Tesla deliveries.
“Due to a human error, the Tesla delivery figures for 2020 were erroneously added to the delivery figures for 2021 by Tesla before the figure was provided to the Electric Vehicle Council.
“So instead of 15,054 Tesla Model 3 deliveries in 2021, the figure reported should have been 12,094. Correcting the total Tesla deliveries (all models) reduces the total number of EVs delivered in 2021 from 24,078 to 20,665.”
What’s an extra 25 per cent reported deliveries between friends eh?
Good thing that Tesla’s “founder” and chief executive has a stellar reputation for integrity and diligence that he’s also known to have instilled among his workers.
Otherwise, you might begin to worry whether such errors could be happening across the company.
Paradigm invests in Solana wallet app Phantom at $1.2 billion valuation
In the crypto ecosystem, wallets are perhaps the most critical user touchpoint serving as a gateway to exchanges and smart contracts. This positions the startups building popular wallet apps closest to the firehose of consumer crypto opportunities, while also leaving them to take charge in tackling many of web3’s unsolved problems including steep onboarding challenges and a hostile fraud environment.
Phantom, one of the premier wallet apps for the Solana ecosystem, has seen plenty of momentum as the result of investor and developer attention being paid to the Ethereum competitor which has seen its value explode over the past year — though the relative newcomer is also proving to be a more volatile bet with the token taking a particularly rough hit during the most recent crypto crash.
The San Francisco crypto startup is turning this Solana attention into a fat $109 million funding round led by Paradigm on a $1.2 billion valuation. The monster unicorn round comes six months after the startup closed a $9 million Series A from Andreessen Horowitz. At the time, the startup had 40,000 active users, now they have 2.1 million, with CEO Brandon Millman noting that the company has been consistently onboarding about 100,000 users per week.
Phantom’s next big ambition is to go multi-chain and add support for another blockchain beyond the Solana ecosystem to its wallet. The startup isn’t indicating where exactly it’s aiming to focus resources other than that it’s looking to add support for a blockchain compatible with Ethereum’s EVM stack where most crypto developers have been focusing their attention and where competitors like MetaMask loom large.
Multi-chain compatibility means expanded opportunities, but also means dealing with the headaches of multiple ecosystems, something that could be a challenge for Phantom, which has around 20 employees currently — though the team plans to scale with its new funding.
“As the party that’s closest to the end user, we definitely have a responsibility to protect and educate users. A lot of the work that we’ve spent in the past couple months has been around user safety-related features.” Millman tells TechCrunch.
The company is scaling up its presence on mobile, announcing alongside the funding news that they are rolling out an iOS app widely and will be releasing an Android native app in the coming months. The apps, which accompany Phantom’s site and Chrome extension, are part of efforts designed to bring a new wave of consumers into the crypto space, though plenty in the ecosystem are still questioning whether the web3 space is ready for a wave of less technical players.
“I’d say the entire space is really early from all perspectives and I think no one really knows how all of this is going to shake out,” Millman says. “It’s still very, very much geared towards professional users all across the stack… and it’s typically something that people kind of wave around and say ‘it’s not for consumers yet,’ but we actually want to help be the team that bridges the gap.”