Robinhood, the brokerage of choice for legions of online day traders, is in talks with securities regulators and other authorities over a host of matters, including last month’s surge in shares of GameStop and other so-called meme stocks.
The firm, in a regulatory filing on Friday, said it has received requests for information from federal prosecutors, the Securities and Exchange Commission, various states attorneys general and other financial regulators over its decision to restrict trading last month in stocks including GameStop.
The filing also said the Financial Industry Regulatory Authority, known as Finra, and the S.E.C. are investigating the firm’s options trading platform and how it displays information about options trading and cash positions to its customers. Robinhood has faced criticism over how its app displays information since the death last year of Alexander Kearns, a 20-year-old who killed himself because he thought he had incurred more than $700,000 in losses. Mr. Kearns’s family has filed a wrongful-death lawsuit against the brokerage.
Robinhood, a privately traded company with financial backing from several Silicon Valley firms, also disclosed other investigations, including an inquiry by Finra into a March 2020 outage that stopped some customers from accessing the firm’s trading platform on the web and its mobile app at a time of major market volatility as a result of the coronavirus.
Robinhood has become popular over the past several years with retail investors and fast-fingered day traders because of it does not charge commissions on trades, but last year it settled a case with the S.E.C. over its disclosures to customers about how it earned money.
The firm said it is facing at least four potential class-action lawsuits over it disclosures about the fees it receives from other firms.
That source of revenue — called payment for order flow — drew the attention of angry users after Robinhood curbed trading last month in GameStop and other stocks that got caught up in a retail-trading frenzy that briefly sent the video-game retailers shares soaring.
In the regulatory filing, Robinhood disclosed that it is facing at least “46 putative class actions and three individual actions” over the trading restrictions.
The S&P 500 fell half a percent on Friday to end an unsteady day, bringing its losses for the week to 2.5 percent.
The Nasdaq composite index rose 0.6 percent and the Dow Jones industrial average fell 1.5 percent. All three indexes experienced steep losses on Thursday.
The yield on 10-year Treasury notes dropped to 1.4 percent. On Thursday, the yield on those government bonds rose above 1.5 percent, setting off a slide in U.S. stocks that rippled across the globe.
Investors have recently been rattled as government bond yields have risen sharply reflecting expectations for a quick pickup in growth this year. In February, yields on 10-year Treasury notes rose by the most since late 2016, as inflation expectations have climbed to multiyear highs and traders worried that inflation would force the Federal Reserve to pull back on its easy-money policies sooner than expected.
The rising yields have dampened enthusiasm for risky investments, like stocks, with once high-flying shares of technology companies leading the retreat on Wall Street. Since it reached a record on Feb. 12, the S&P 500 is down more than 3 percent.
Stock indexes in Asia and Europe were also sharply lower. Performance in Asia — the Hang Seng Index in Hong Kong lost 3.6 percent and the Nikkei 225 in Tokyo fell 4 percent — was its worst since March, by one measure, though it followed months of significant gains as investors bet on the prospect of global economic recovery from the pandemic. The Stoxx Europe 600 lost 1.6 percent, and London’s FTSE 100 fell 2.5 percent.
There has been a debate about how much central banks will be able to tolerate higher levels of inflation before they begin easing their efforts to support economies hit by the pandemic. Policymakers have tried to reassure investors that they will look past a short-term rise in inflation and are only focused on whether there will be a sustained increase in prices.
But traders have been testing this message, pushing bond yields higher.
“Central banks are watching,” Holger Schmieding, an economist at Berenberg Bank wrote in a note. “But financial markets are not their prime concern.” Yet, if market moves led to the kind of tightening of financing costs or excess volatility that could derail the economic recovery, “they would try to do something about it,” he added.
JPMorgan Chase and Bank of America said on Friday that they would give employees paid time off to get the Covid-19 vaccine.
The announcements follow similar moves by companies to encourage employees to get the vaccine. Dollar General is giving its 157,000 workers a payment equivalent to four hours of work if they get a vaccine. JBS, the meatpacking giant, is offering a $100 bonus. The grocery delivery service Instacart said it would provide a $25 stipend.
Staff at JPMorgan Chase who qualify for the vaccine will be able to take eight hours off for their shot appointments, and Bank of America employees will be eligible for two half days, up to four hours each.
On Friday, the Biden administration said it would partner with business lobbying groups, including the U.S. Chamber of Commerce, National Association of Manufacturers, and the Business Roundtable, to encourage companies to support workers in getting the vaccine by offering paid time off or benefits.
“Every employer has a role that they can play in helping support vaccinations,” Neil Bradley, the chief policy officer for the U.S. Chamber of Commerce, said in an interview. “There is a light at the end of the tunnel. We have to get to that light as quickly as possible, and employers can be a huge asset in getting us there.”
President Biden has compared the fight against the coronavirus to wartime mobilization, but with the exception of pharmaceutical companies, the private sector has done relatively little in the effort. It has not made a major push to persuade Americans to remain socially distant, wear masks or get vaccinated as soon as possible.
Biden administration officials and business leaders announced a plan on Friday to change that.
The aim is twofold: to expand the private sector’s contributions beyond the manufacture of vaccines, tests and treatment, and to encourage businesses to give employees time off and the necessary support to get vaccinated, said Andy Slavitt, a White House pandemic adviser.
The plan, which was announced as the federal government warned impatient governors against relaxing pandemic control measures, includes some of the country’s largest corporate lobbying groups — like the Chamber of Commerce, the Business Roundtable, the National Association of Manufacturers and groups representing Asian, Black and Latino executives — as well as some big-name companies.
Pro sports leagues are helping set aside more than 100 stadiums and arenas to become mass vaccination sites, Mr. Slavitt said. A few weeks ago, Mr. Biden announced in a C.B.S. interview that the N.F.L. commissioner had offered him the use of stadiums.
Ford and The Gap will donate more than 100 million masks for free distribution. Uber, Lyft, PayPal and Walgreens will provide free rides for people to get to vaccination sites. Best Buy, Dollar General and Target will give their workers paid time off to get a shot. And the White House will urge many more companies to do likewise.
Many of the steps are fairly straightforward. That they have not happened already is a reflection of the Trump administration’s disorganized pandemic response. Trump officials oversaw a highly successful program to develop vaccines, but otherwise often failed to take basic measures that other countries did take.
“We’ve been overwhelmed with outreach from companies saying, ‘We want to help, we want to help, we want to help,’” said Mr. Slavitt. “What a missed opportunity the first year of this virus was.”
Mr. Slavitt said the initiatives would be coordinated by the companies themselves and the administration did not have a formal role.
The Bank of England’s chief economist warned on Friday that inflation could overshoot the central bank’s target and cause policymakers to act more aggressively, adding his voice to a debate that has roiled financial markets in recent days.
Andy Haldane described inflation as a sleeping tiger that had been “stirred from its slumber” by the large amounts of monetary and fiscal support used to protect the economy from the pandemic, according to a speech published on the bank’s site.
Central bankers and economists on both sides of the Atlantic are debating the path of inflation and whether easy-money policies will need to be halted sooner than expected to contain it. In some circles, there are concerns that more fiscal stimulus, including President Biden’s $1.9 trillion economic relief package, will cause prices to rise as the vaccine rollout supports an economic recovery. Others, such as Jerome H. Powell, chair of the Federal Reserve, say there will be only a short-term increase in inflation but that over a longer period, disinflationary pressures might to prevail.
Still, markets have been unnerved by an increase in inflation expectations. Ten-year U.S. Treasury bond yields have jumped more than 40 basis points this month, the most since 2016. In Britain, the yield on 10-year government bonds has climbed nearly 50 basis point this month to the highest level in more than a year.
“My judgment is that we might see a sharper and more sustained rise in U.K. inflation than expected, potentially overshooting its target for a more sustained period,” Mr. Haldane said. The Bank of England has a target annual inflation rate of 2 percent. It was at 0.7 percent in January, but the central forecasts it rising to the target by the middle of the year.
“There is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,” he said. He added that it was right for people to caution against tightening policy prematurely but that the bigger risk was complacency by central banks.
Mr. Haldane has been one of the most bullish central bank policymakers. A few weeks ago, he wrote that in the British economy, there was an “enormous amounts of pent-up financial energy waiting to be released, like a coiled spring.”
More than two months after Congress authorized a $15 billion relief fund for the live events industry, venue operators like music clubs and theaters are still waiting for details about how and when to apply. A bipartisan group of lawmakers now wants answers about the long delay.
In a letter on Thursday to the Small Businesses Administration, three members of the House Small Business Committee pressed for urgent action.
“Each day that goes by without assistance puts the economic future of so many businesses in question,” they wrote. The letter was signed by Representatives Roger Williams, Republican of Texas, Blaine Luetkemeyer, Republican of Missouri, and Nydia Velázquez, Democrat of New York.
The Small Business Administration has released some information about its plans for the Shuttered Venue Operators Grant program but has not yet published an application form or said when the program will begin. A representative said the agency “has received the letter and will respond accordingly.”
Mr. Williams said in an interview that he had come away disappointed after a call with agency officials last week.
“They had no urgency,” he said. “If the S.B.A. can’t do this, we’ve got to find an agency that can.”
The issue is becoming critical because of a looming deadline in another relief effort: the Paycheck Protection Program is scheduled to end on March 31.
Business owners are barred from seeking aid this year from both programs. The shuttered venue program would provide much more money for most businesses, but a tiered application period — the hardest-hit get priority — means many won’t be able to apply until weeks after the program opens. By that time, the Paycheck Protection Program could be closed. (Lawmakers and business owners are also concerned that the shuttered venue program’s funding will be used up so fast that many applicants will be left empty-handed.)
At her Senate confirmation hearing this month, Isabel Guzman, President Biden’s nominee to lead the Small Business Administration, said it would be one of her “Day 1 priorities” to get the grant program running “as quickly as possible.” She is one of dozens of nominees still awaiting a confirmation vote.
A tumultuous week in financial markets left onlookers questioning whether the Federal Reserve had showed too little concern as longer-term interest rates crept higher — and spurred speculation that the central bank’s leadership may need to speak out against the rise.
Yields on all but very short-term government debt have moved sharply higher in recent weeks, driven in part by expectations that economic growth will snap back after the pandemic. Fed officials had been sanguine as rates have moved up, pointing to the increase as a sign of growing economic confidence and playing down the risk of a sudden increase in borrowing costs.
Still, a sudden jump in rates on Thursday rippled through financial markets, and analysts at Evercore ISI said the Fed’s message might change as a result. The jump in yields could make borrowing by the government, consumers and businesses more expensive, slowing progress toward the Fed’s economic goals.
“The Fed leadership holds some responsibility for this, as the absence of any indication of concern or — more appropriately in our view — central bankerly carefulness” in recent days “has been read in markets as a green light to ramp real yields higher,” Krishna Guha and Ernie Tedeschi wrote in a reaction note, capturing a narrative fast developing among financial analysts.
Yields on the 10-year Treasury note surged as high as 1.6 percent on Thursday before falling to 1.4 percent on Friday. That rate was below 1 percent for much of 2020 and had been steadily increasing this year in part as investors expect that a flood of new government spending and the rollout of the coronavirus vaccine would lead to fast economic growth later this year.
Despite several public appearances in recent days, central bank officials including the Fed chair, Jerome H. Powell, and John C. Williams, the New York Fed chief, have not voiced concerns over the shift in yields. Raphael Bostic, the Atlanta Fed president, said Thursday afternoon that he did not yet see the increases as cause for concern.
The change in yields has come partly because of growth and inflation expectations and partly because investors have shut down trades and sold bonds amid the gyrations, said Gennadiy Goldberg, a rates strategist at TD Securities. But the Fed’s professed comfort is adding fuel to the flames.
“There is a lot of trepidation,” Mr. Goldberg said, and while the Fed wouldn’t need to do much to soothe markets, “At the very least, they have to stop saying that the rise in rates doesn’t matter.”
Mr. Goldberg and other analysts expect that Fed officials may signal that they are keeping an eye on the situation — which would imply that they are prepared to act if things get out of hand. The Fed could shift the size or style of its bond buying to help hold down longer-term yields, among other policy fixes.
“A change of tone at least seems warranted in our view and possibly more,” Mr. Guha and Mr. Tedeschi wrote on Thursday, a conviction they repeated in a note on Friday.
AT&T is selling part of its TV business, which consists of the DirecTV, AT&T TV and U-verse brands, to the private equity firm TPG in a spinoff deal as it looks to shed assets to deal with a burdensome debt load and focus on its mobile telephone and streaming businesses.
The deal, which will give TPG a minority stake, values the TV business at $16.25 billion — about a third of the $48.5 billion AT&T paid just for DirecTV in 2015.
AT&T carries $157 billion of debt, as of December, the result of megadeals including its purchases of DirecTV and Time Warner, which it paid $85.4 billion for in 2018. The entertainment industry has been disrupted by Netflix and an array of competitors fighting for viewers’ attention, complicating plans for DirecTV, which lost more than 3.2 million subscribers in 2020, and for HBO, considered the crown jewel of Time Warner’s business.
Investors have worried that AT&T will not be able to become profitable enough to manage the debt load. The company made about $53.8 billion in pretax profit last year, meaning it carries a little more than $3 of total debt for every dollar of pretax profit. Traditionally, AT&T prefers that ratio to be closer to 2.5 to 1.
Under the terms of the deal with TPG, AT&T will own 70 percent of the new stand-alone company, which will go by DirecTV, and TPG will own 30 percent. The board of the new entity will include two representatives from each company and the chief executive of AT&T’s video unit, Bill Morrow.
The companies hope to fix challenges facing DirecTV — namely a subscriber base that has been bleeding customers faster than most pay-TV services. Annual sales at the DirecTV group fell 11 percent last year to $28.6 billion, and operating profit decreased 16.2 percent to $1.7 billion. The company is also counting on growth of AT&T TV, the company’s new service that streams TV over the internet to a set-top box.
“We certainly didn’t expect this outcome when we closed the DirecTV transaction in 2015, but it’s the right decision to move the business forward,” said John Stankey, AT&T’s chief executive, who as an executive at WarnerMedia led both the DirecTV and Time Warner deals.
TPG has ample experience with corporate partnerships, including taking a joint stake in Intel’s McAfee computer security unit and teaming up with Humana in its deal for the hospice provider Kindred. It has owned parts of Spotify, Creative Artists Agency, the cable provider Astound Broadband, and Entertainment Partners, which provides software to the entertainment and video industry.
AT&T has not ruled out more divestitures.
The Securities and Exchange Commission announced this week that it would “enhance its focus on climate-related disclosure in public company filings” and eventually update guidelines issued in 2010.
The timing of the announcement comes just days before the Senate confirmation hearings for Gary Gensler, President Biden’s pick to lead the commission, puts the issue “front and center,” the securities law partner Joseph Hall of Davis Polk told the DealBook newsletter.
The regulator “is setting the stage, sending a signal that we are no longer in an administration where ‘climate change’ is a forbidden term,” Mr. Hall said. “It’s a warning flare to let people know new disclosure rules are coming down the pike.” He predicted that “senators will be all over this” issue during next week’s hearings, and “battle lines will be drawn.”
Democrats will probably push Mr. Gensler on adopting specific disclosure requirements, tied to metrics, which are more burdensome for companies but make cross-industry comparisons easier, Mr. Hall said. Republicans will probably lobby for a principles-based system that gives companies extra leeway but critics say is too vague. The S.E.C. is likely to try to strike a balance, Mr. Hall believes, but whatever happens, any move on climate-related disclosures will be “hugely consequential.”
“It’s a significant statement and one companies can see as an opportunity,” said Wes Bricker a vice chair of PricewaterhouseCoopers and a former chief accountant at the S.E.C.
Mr. Bricker said he thought that many companies had already moved beyond requirements under the old framework, responding to the market’s increasing demands for transparency on their environmental impact. For companies that are not there yet, the S.E.C.’s announcement is a reminder of the direction things are heading.
Surveying the climate-related disclosure scene across companies and grappling with an understanding of what matters to investors now is “very constructive,” Mr. Bricker said.
It may be some time before any changes are mandated, but he said that there was likely to be an immediate effect anyway. He believes that the S.E.C.’s message will begin to subtly nudge any company that is on the fence about a disclosure toward more transparency.
Volkswagen, Europe’s largest carmaker, reported a steep drop in profit and sales for 2020 caused by the pandemic as well as the continuing cost of its diesel emissions scandal. Net profit fell 37 percent from the previous year to 8.8 billion euros, or $10.7 billion. That was after Volkswagen subtracted 9.7 billion euros from operating profit to cover expenses stemming from revelations in 2015 that the company deceived regulators about emissions from its diesel vehicles. Volkswagen said it expected sales in 2021 to be significantly higher than in 2020.
In its first earnings report as a public company, DoorDash showed how it has benefited from the pandemic even as it hinted that difficulties might lie ahead. The delivery company on Thursday posted revenue of $970 million for the fourth quarter, up 226 percent from a year earlier, as total orders jumped 233 percent. Yet it also reported a loss of $312 million, compared with a loss of $134 million a year earlier.
Airbnb posted declining revenue and a whopping $3.9 billion loss on Thursday in its first earnings report as a publicly traded company. The company brought in $859 million in revenue in the last three months of the year, down 22 percent from a year earlier. Its loss was driven by $2.8 billion in costs associated with stock-based compensation related to its I.P.O., as well as an $827 million accounting adjustment for an emergency loan it took out last year to weather the pandemic.
The New York Times
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