Treasury Secretary Janet Yellen is scheduled to meet with heads of financial market regulators, including the Federal Reserve and the Securities and Exchange Commission, this week to discuss the market volatility created by retail traders in “meme stocks” like GameStop, according to a Treasury official.
The meeting will take place as early as Thursday, the official said. Representatives of the Commodity Futures Trading Commission and the Federal Reserve Bank of New York are also expected to be included. The meeting was previously reported by Reuters.
The meeting is a sign of increased scrutiny in Washington over the trade frenzy in the past 10 days. The shares of GameStop, a video game retailer, saw a notable increase last week, but have since fallen from their dizzying heights, testing the willingness of investors who joined the fervor as a challenge to Wall Street investors. Since Friday, GameStop’s stock price has plunged from $ 325 to $ 90.
The shares were up about 11 percent at the start of Wednesday’s trading session. AMC Entertainment, another company whose shares were taken by online traders, rose about 7 percent, out of a 41 percent drop the day before.
The pullback on Tuesday eased concerns that the large hedge funds that were losing with the GameStop increase would have to sell shares in other larger companies to make up for the losses.
Many companies announced widespread disruptions in donations through political action committees after the Capitol riot on January 6. These breaks were mostly temporary, so intense internal debates are now taking place across corporate America about what to do as a self-imposed deadline approach.
Companies are breaking up into three main fields:
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Impose targeted bans. After reviewing their policies, some companies said they would suspend donations only to 147 Republican members of Congress who opposed the certification of election results. This is what Walmart and Google did.
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Stop all political donations. Broker Charles Schwab decided to close his PAC, concluding that “a clear and non-political position is in the best interest of our customers, employees, shareholders and the communities in which we operate”.
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Take a break and restart. Many companies that have stopped all donations have yet to announce what will happen next, and one possibility is that they will simply go back to what they were doing before. “If they are doing this hoping the problem will go away, I don’t think it’s very smart,” said Doug Pinkham, chairman of the Public Affairs Council.
Companies that have not yet said what they will do after an initial pause in all donations include Microsoft, which set a February 15 deadline to decide; American Airlines, which is taking a three-month break; BP, which is paused for six months; and Hilton, who said he was suspending all donations “indefinitely”.
Corporate consultants, lobbyists and executives say that employees are often the most pressure on board members when considering their options. Democratic officials are criticizing companies for “both sides” and in particular threatening to limit access to lawmakers for companies that have suspended all donations. But Democratic control of Congress is tight, and Republicans can still defend its relevance.
Several companies are discussing changes in governance and greater transparency around the actions of their corporate PACs. But consider this: Microsoft paused its PAC for a few months in 2019 in response to employee pressure, eventually making changes such as adding an employee advisory board and monthly reports on donations. Now it is rethinking its approach (again) after the electoral challenges and the takeover of the Capitol.
“You spend your evenings going to these dinners, and the reason you go is because the PAC writes a check,” said Brad Smith, president of Microsoft, in recent comments on political donations, referring to the work of the affairs team governmental organizations. But from that effort, he added, a relationship with lawmakers “evolves, emerges and solidifies”.
The pandemic was disastrous for the economy in general. But for companies that sell much-needed entertainment to bored consumers stuck at home, it’s been a gold mine.
See Sony in Japan. On Wednesday, the company reported that its profit jumped nearly 20% to $ 3.4 billion during the three-month period ended in December, compared to the same period last year.
Profit was largely driven by the company’s entertainment and gaming divisions. Demand for its newest gaming system, the PlayStation 5, has helped boost sales of games and other digital content, the company said in an announcement of its quarterly financial results.
Over the past decade, Sony, once known as the world leader in providing cutting-edge electronics, has increasingly relied on its PlayStation console to power its results.
The launch of the long-awaited fifth iteration of the game system in mid-November was a great success, with eager fans sometimes struggling to get their hands on one of the devices. The company sold 4.5 million units by the end of December, Sony said.
Sony’s profit does not come from the machines themselves, but from the content they provide. Quarterly revenue from software and network fees increased 40 percent to $ 8.4 billion, the company said, driven by a 30 percent increase in total game time on its network service compared to the same period in 2019.
The segment accounted for about a third of the company’s profit in the first nine months of this fiscal year.
Sony has also seen significant profit growth in its music and film segments, the company said.
The windfall, which included surprising growth in sales from its consumer elections, prompted Sony to increase its financial forecast by about a third to $ 8.5 billion for fiscal 2020, which in Japan runs until March.
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Google’s parent company Alphabet said on Tuesday that fourth quarter sales increased 23% over the previous year, to $ 56.9 billion, a record for a quarter, and net income rose 43%, to $ 15.2 billion. Alphabet has benefited from a continued recovery in its core business, ads in search results. Search advertising revenue increased 17% to $ 31.9 billion in the fourth quarter, Alphabet said.
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Amazon released a record $ 125.6 billion in sales in the fourth quarter on Tuesday, while profit more than doubled to $ 7.2 billion from the previous year. It was the first time that the company exceeded $ 100 billion in sales in a single quarter. In a call with investment analysts, Brian Olsavsky, head of finance at Amazon, said that Amazon will continue to spend more on cloud computing infrastructure and groceries, and will expand its logistics operations – especially its growing last-mile delivery network, which depends on half a million driver contracts to deliver packages.
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In the worst year for the company in four decades, Exxon said it lost $ 22.4 billion in 2020, compared to a profit of $ 14.3 billion in 2019. A large part of the company’s losses came from $ 19.3 billion in write-offs in the last three months of the year as the company reduced the value of US natural gas fields acquired when gas prices were much higher before fracking flooded the market a decade ago.
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BP on Tuesday reported its first loss in at least a decade, having a loss of $ 5.7 billion for the year compared to a profit of $ 10 billion in 2019. The company said it made a profit of $ 115 million in the fourth quarter of 2020, representing an annual reduction of around 95%. BP attributed the decline to a number of factors, including low demand for its refined products due to the economic slowdown caused by the pandemic, as well as low oil and natural gas prices.
United States
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Shares on Wall Street rose for the third day, after gains on most European and Asian indices, after reports of stronger earnings from the technology sector.
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Alphabet, the parent company of Google and Amazon, recorded record sales in the last quarter. Japan’s Sony said its profit rose 20 percent as its entertainment and gaming divisions helped to ease the boredom of consumers trapped at home.
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The S&P 500 rose 0.3 percent in early trading, while the Nasdaq high-tech compound gained 0.7 percent. Alphabet rose 7 percent and Amazon, which had also said its founder Jeff Bezos would step down as chief executive this summer, gained about 0.6 percent.
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The S&P 500 gained more than 3 percent this week, rebounding from a similar-sized drop last week. Those gains came in part because GameStop’s shares and other earnings shares fueled by social media retreated, dispelling concerns that the large hedge funds that were losing on the rise would have to sell shares in other larger companies to offset losses.
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On Wednesday, GameStop rebounded slightly from its recent decline, rising about 11 percent in early trading. The shares had fallen 72% in the previous two days.
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Treasury yields increased as Democratic lawmakers took steps to approve President Biden’s $ 1.9 trillion economic bailout plan without Republican support. Democrats also continue to negotiate with Republicans about a possible stimulus project, but said they would continue without Republican support, if necessary.
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Crude oil prices also continued to rise, reflecting optimism about the economy and after reports that inventories fell last week. West Texas Intermediate, a benchmark in the United States, rose from $ 55 a barrel, reaching its highest point in more than a year.
Europe
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Italy’s stock market performed best in Europe, with the FTSE MIB index rising 2.6 percent on Wednesday after Mario Draghi was chosen to be the next prime minister and form a new government. Draghi, a former president of the European Central Bank, was instrumental in lifting the region out of a debt crisis just under a decade ago.
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The Stoxx Europe 600 gained 0.6 percent, while the FTSE 100 in Britain was slightly lower.
Asia
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The Nikkei 225 in Japan rose 1%, while the Hang Seng Index in Hong Kong rose 0.2%. Sony’s stock rose 1.6 percent after its earnings report.
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Alibaba said on Tuesday that it was conducting internal reviews of its businesses in response to an antitrust investigation by the Chinese government. Alibaba saw a 37% increase in sales in the last quarter, with $ 12.2 billion in profit and $ 33.9 billion in revenue.