Monthly Archives: September 2020

Stock futures flat as investors brace for final quarter of 2020

U.S. stock futures were flat in overnight trading, as investors braced for the start of the fourth quarter with hopes of fiscal stimulus. 

Dow futures fell 30 points. S&P 500 futures and Nasdaq 100 futures dropped 0.18% and 0.12%, respectively. 

The House of Representatives delayed the vote on a $2.2 trillion rescue package on Wednesday evening after House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin failed to strike a coronavirus aid deal; however, the pair said the conversation would continue. 

The Federal Reserve said Wednesday it is extending the restrictions on big bank dividends and buybacks through the fourth quarter. Banks dipped in extended trading following the central bank’s announcement. 

On Wednesday, the Dow Jones Industrial Average climbed more than 300 points, after being up more than 550 points on hopes the White House and Senate would agree to a second stimulus package.

The S&P 500 also registered a gain, climbing more than 0.8%. The Nasdaq Composite rose 0.75%, helped by gains in Netflix and Microsoft. 

Stocks that hinge on economic recovery — like airlines and cruise lines — lost steam following the negative stimulus headlines. Airlines are on the cusp of laying off tens of thousands of employees without further government support. 

“Given lawmakers failure to make any progress, there is further doubt that any agreement can be reached prior to the election on November thirds,” Aviva Investors’ head of U.S. equities Susan Schmidt told CNBC. “Investors are entering into the final quarter of the year expecting continued volatility and recognizing that not-owning the winners this year has had a detrimental impact on their portfolios.” 

Despite Wednesday’s rally, stocks rounded out September with losses, the first month of decline since March. 

The Dow Jones Industrial Average lost nearly 2.3% in September, a typically weak month for equities. The S&P 500 fell 3.9% this month. The technology heavy Nasdaq Composite dropped 5.2% since September 1, dragged down by weakness is technology stocks. However, all three of the major averages achieved strong gains for the third quarter. 

Investors also digested a combative presidential debate between Donald Trump and Joe Biden on Tuesday evening. 

Starwood’s Barry Sternlicht said Wednesday the stock market would suffer from a Democratic sweep.

“Maybe long term, two, three years out the Democratic sweep would be OK but short term, with the change in capital gains taxes, I think you’d see a pretty significant correction in high flying stocks in November, whenever they announce the winner,” the Starwood Capital Group chairman and CEO said at the Delivering Alpha conference presented by CNBC and Institutional Investor.

Conversely, Social Capital Founder and CEO Chamath Palihapitiya said the stock market will continue to move higher regardless of a Trump or Biden presidency. The outspoken technology investor said that with rates near zero, investors will need to find growth in the equity market. 

Positive coroanvirus vaccine news also bolstered equities on Wednesday. Regeneron’s treatment improves symtoms in non-hospitalized patients and Moderna’s vaccine shows signs of working in older adults, according to a study. Financial Times reported Wednesday that Moderna’s vaccine won’t be ready before the November election.

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Author: Maggie Fitzgerald

Coinbase CEO discourages politics at work, offers generous severance to employees who want to quit

Coinbase CEO Brian Armstrong
Getty Images

Coinbase is offering to pay employees who decide to quit the cryptocurrency company after it discouraged employee activism and discussing of political and social issues at work.

CEO Brian Armstrong told Coinbase staff in an email that the company would offer severance packages for anyone “who doesn’t feel comfortable with this new direction.” The pay packages range from four to six months, depending on how long an employee had been with the company. 

“Life is too short to work at a company that you aren’t excited about,” Armstrong said in the email, which was previously reported by The Block. “Hopefully this package helps create a win-win outcome for those who choose to opt out.”

The message came days after Armstrong published a blog post clarifying the company’s stance of non-engagement on social and political issues.

Specifically, Armstrong said that the company “won’t debate causes or political candidates internally,” and will not engage when the issues are “unrelated to our core mission, because we believe impact only comes with focus.” The cryptocurrency company is “laser focused” on the use of digital currencies, and on profits, Armstrong said. 

The co-founder pointed to “internal strife” at Silicon Valley giants such as Google and Facebook that “engage in a wide variety of social activism, even those unrelated to what the company does.” 

“While I think these efforts are well intentioned, they have the potential to destroy a lot of value at most companies, both by being a distraction, and by creating internal division,” Armstrong said. “I believe most employees don’t want to work in these divisive environments.”

The approach stands apart from many Silicon Valley companies, which have embraced social justice causes in the wake of widespread protests over racial injustice this year.

For instance, Google this week announced an extensive $310 million program to bolster diversity and inclusion at the company as part of a lawsuit settlement with shareholders who alleged the company did not take complaints of sexual harassment and discrimination seriously enough. Facebook’s Mark Zuckerberg, meanwhile, recently tightened restrictions on discussing political and social issues on the company’s internal message boards, but stopped short of discouraging or banning them entirely.

Armstrong himself was outspoken in the wake of George Floyd’s death, and tweeted his support for the Black Lives Matter movement. 

“I’ve decided to speak up. It’s a shame that this even needs to be said in this day and age, but racism, police brutality, and unequal justice are unequivocally wrong, and we need to all work to eliminate them from society,” he said in series of tweets. 

Coinbase’s new policy immediately sparked debate on Twitter. Some, such as investor Paul Graham, applauded the position and predicted “most successful companies will follow Coinbase’s lead.”

Others suggested it would drive away tech talent and customers.

The San Francisco-based company is the largest U.S. cryptocurrency trading platform. It has raised more than $500 million in private funding from Andreessen Horowitz, Union Square Ventures and Tiger Global, among others, at an $8 billion valuation, according to PitchBook.

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Author: Kate Rooney

Near-zero interest rates may be needed for up to 3 years, says Dallas Fed’s Robert Kaplan

Dallas Fed President Robert Kaplan told CNBC on Wednesday that it is likely appropriate to keep interest rates anchored near zero for up to three years to aid the U.S. economic recovery from the coronavirus pandemic. 

“I think we’re going to need to keep the Fed funds rate at zero … for the next probably 2½ to three years years,” Kaplan said on “The Exchange.” ” It could be that long that until we get on track, to have weathered the crisis and are on track to meet our full employment and price stability goals.” 

Earlier this month, the Federal Reserve’s policymaking committee voted to keep short-term rates targeted at 0%-0.25%, where they have been for the last six months, and indicated they would remain there until inflation rises consistently. 

Kaplan was one of two Federal Open Market Committee members to vote against the policy action, but he stressed Wednesday it is due to his desire for the central bank to have more leeway to its monetary approach. 

“My dissent is about making commitments beyond that point. I think beyond that point, I’d rather see us keep some flexibility,” Kaplan said, while noting the Fed’s new policy of average inflation targeting is likely to mean lower interest rates even as unemployment rate falls. 

“I don’t know if that’s going to be appropriate. Historically, it wouldn’t have been,” added Kaplan, who has headed the Federal Reserve Bank of Dallas since 2015. “With the new framework and our inflation targets, I think we’re going to be more accommodative than we have been in the past, but I don’t know if we want to be committing to keeping rates at zero until we meet these targets.”

To be sure, Kaplan emphasized he continues to believe in the accommodative stance the central bank has adopted in response to the pandemic. 

“Obviously, we’re doing extraordinary actions, not just the Fed funds rate but also what we’re doing with the 13(3) programs and asset buying, but we need to because it’s a crisis,” Kaplan said, referring to the emergency lending enabled under the 13(3) powers of the Federal Reserve Act. 

However, Kaplan cautioned there are limits to what the central bank can do for the U.S. economy, contending more stimulus from Congress to make up for lost income is necessary.

After weeks of a stalemate between Democratic negotiators and Trump administration officials, Treasury Secretary Steven Mnuchin told CNBC earlier Wednesday he was “hopeful” there could be a deal. 

“One of the unusual things about this pandemic has been consumer income and consumer spending has stayed resilient, and a big reason why is fiscal support,” Kaplan said. “I think it would create downside risk if we weren’t going to get that fiscal support.” 

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Author: Kevin Stankiewicz

Citigroup’s new stock-trading chief is cutting jobs in effort to revive the flagging business

A Citigroup Inc. trader works on the floor of the New York Stock Exchange
Michael Nagle | Bloomberg | Getty Images

Citigroup’s new global head of equities trading has cut at least three of his most senior U.S. trading personnel as the firm prepares for broader changes at the flagging business, CNBC has learned.

The bank yesterday informed Jim Everett, the bank’s head of North American high-touch trading, Jason Cuttler, who made derivatives recommendations for hedge funds and pensions, and Bill Power, a regional sales head out of Boston, that their positions were being eliminated, according to people with direct knowledge of the cuts.

All three were managing directors, the coveted top title on Wall Street that typically comes with the most responsibilities and biggest bonuses.

The moves are just the first steps that Fater Belbachir, who joined Citigroup from Barclays last month to jump-start the firm’s equities business, is expected to take. While it began this week with the most expensive American talent, cuts are expected to broaden to lower-ranked workers and spread to the bank’s Europe, Middle East and Africa operations, the people said.

Citigroup has the sixth-largest global equities trading business, a ranking that leaves them too small to deliver returns that help the overall company meet its performance targets.

For instance, in the second quarter, the bank saw equities trading revenue drop 3% to $770 million. At the same time, bigger rival JPMorgan Chase produced a 38% revenue boost to $2.38 billion.

“It’s been a problem area for Citigroup, which is why you’ve had so many leadership teams in the last couple of years,” said an industry insider who knows Belbachir. “This is Fater’s style. He’s known to be very cost-focused, very efficiency-focused. He was hired to do the same thing at Barclays.”

Citigroup spokeswoman Danielle Romero-Apsilos said that the reductions are part of the bank’s broader move to trim employees. The company is in the midst of “a limited number of staffing reductions” totaling less than 1% of the firm’s 204,000 workers, she said. The overall size of Citigroup should remain steady when factoring in hires, she added.

“We have made organizational changes  to our equities business over the last several months to capitalize on our investments in talent and technology,” Romero-Apsilos said in an e-mailed statement.

“The decision to eliminate even a single colleague role is very difficult, especially during these challenging times,” she said. “We will do our best to support each person, including offering the ability to apply for open roles in other parts of the firm and providing severance packages.”

Industry insiders expect that Belbachir, a JPMorgan veteran who spent less than a year at Barclays before agreeing to join Citigroup, will help the bank improve its margins in the equities business. He is credited with helping Barclays and JPMorgan make outsized profits by going long on volatility risk.  

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Author: Hugh Son