CNN – Robinhood got off to a rocky start when it debuted on Wall Street a year ago, but hopes for the buzzy trading app were high as armchair investors crowded into the market in the hope to make a quick fortune.
The stock market was booming, and the number of monthly active users more than doubled year-over-year to over 21 million. The number of people trading crypto surged as dogecoin, the digital coin that started out as a joke, exploded into the stratosphere. The retail army was showing strength and Robinhood was about to cash in.
Fast forward 12 months, and the picture is very different. Robinhood is cutting hundreds of jobs as fears of inflation and recession drive down stock and crypto prices on Earth. The number of monthly active users in June fell to 14 million as “customers navigated a volatile market environment.”
“For our customers, many of whom are younger, it looks like they are facing a recession for the first time in their adult lives,” CEO Vlad Tenev said on a call with analysts on Wednesday. “Clients are seeing this high inflation along with high interest rates, bear markets [in] stocks and a crypto winter.”
“All of this translates into less money to spend and therefore less to save and invest,” he continued.
Robinhood shares rose nearly 12% on Wednesday after announcing cost-cutting measures and reporting a net loss of $295 million, lower than in the first quarter. Shares are still down more than 40% since the start of the year.
That said: Retail investors remain a powerful force that Wall Street is watching closely — as evidenced this week by the dramatic rise in shares of little-known company AMDD Digital.
Shares of the Hong Kong-based company have risen 14,000% since their public market debut less than a month ago. They were 126% higher on Tuesday alone, before falling sharply on Wednesday.
This sparked speculation that marketers coordinating on social media were involved in baptizing yet another meme stock.
“Where did AMTD Digital come from,” wrote a user on the WallStreetBets Reddit forum. “What did I miss?”
AMTD Digital said this week that to its knowledge nothing “material” has changed since its public offering that would have caused the “significant volatility”.
Important caveat: it is not yet clear what triggered the huge rally. But the surge is a reminder of how outsized moves for individual stocks have become the norm in the era of Reddit traders, putting the wider investing community on high alert for sudden distortions.
Once a stock goes supernova, investors of all stripes now spring into action.
AMTD’s parent company was the first transaction on Fidelity’s platform on Tuesday. On Thursday, billionaire Li Ka-shing’s CK Group announced it had entered talks to sell its less than 4% stake in parent company AMDD Digital – a sign it doesn’t want to stick with the bag when the bubble bursts.
Bank of England announces biggest rate hike in decades
UK central bankers have announced the biggest interest rate hike in 27 years as spiraling inflation continues to cripple the finances of millions of households.
It just happened: The Bank of England raised the cost of borrowing by half a percentage point to 1.75% – the sixth time the central bank has raised rates since December, my colleague reports from CNN Business, Anna Cooban.
In June, annual consumer prices rose 9.4%, a four-decade high. The Bank of England has forecast inflation to top 13% this autumn, when energy bills are expected to rise, and will “remain at very high levels for much of 2023”.
The Resolution Foundation, a think tank, said on Wednesday it expects energy costs to drive consumer price inflation past 15% next year.
Wage increases are not following. The real wages of British workers suffered their biggest drop in more than two decades between March and May, according to official data released last month.
Britons tightened their belts in response, spending less in supermarkets and ditching their streaming subscriptions.
On the radar: The fear is that as central banks raise borrowing costs in an attempt to tame inflation, people will start to limit their spending more aggressively. This could trigger a series of recessions.
The BOE said on Thursday it expects the UK to go into recession in the last three months of this year.
The Federal Reserve is also raising rates faster than ever. The latecomer European Central Bank ended its long run of negative rates last month.
The Bank of England’s job is made even harder by Britain’s exit from the European Union, which has made the world’s fifth-largest economy less competitive.
Coal is still a big source of income for this company
The oil majors are not the only ones to benefit from the exorbitant cost of energy. Mining giant Glencore is also making record profits as coal prices surge.
The latest: The company said on Thursday its profits more than doubled to $18.9 billion in the first half of the year, driven by record coal prices amid strong demand for the coal product. because of Russia’s war in Ukraine.
Efforts to avoid coal have been sidelined as countries try to ensure they have enough power to get through the winter, especially in Europe. Germany, for example, has restarted coal-fired power plants in an effort to conserve natural gas supplies.
“The real star this time around has been coal,” CEO Gary Nagle said on a call with analysts. “You will recall that a year ago, in the first half of last year, coal revenues were under $1 billion, but with the energy crisis and global baseload energy needs stable, prices coal soared.”
Remember: coal is the single largest source of energy-related carbon emissions, according to the International Energy Agency. Global consumption is expected to rise in 2022 to 8 billion metric tons, matching a record set in 2013, the Paris-based agency said.
Glencore shares soared more than 3% in London on Thursday. Its stock is up 23% year-to-date, while the FTSE 100 index has gained just over 1%.
Alibaba, ConocoPhillips, Kellogg, Lordstown Motors, Nikola, Papa John’s and WeWork report earnings before US markets open. AMC Entertainment, Beyond Meat, DoorDash, Live Nation, Lyft, Redfin, Zillow and CNN parent Warner Bros. Discovery follow after the close.
Also today: US initial jobless claims for last week’s release at 8:30 a.m. ET.
Coming tomorrow: Economists expect to hear that the US economy added 250,000 jobs in July. This is a considerable number, although less than the 372,000 jobs created in June.
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