Raphael Stevens

In this photo illustration the Netflix logo in the App Store seen displayed on a smartphone screen.
Rafael Henrique | SOPA Images | LightRocket | Getty Images

Check out the companies making headlines in after-hours trading:
Netflix — Netflix shares dropped 19% in extended trading after the company’s quarterly report showed slowing subscriber growth. The streaming giant added 8.28 million global paid net subscribers during the fourth quarter, which was ahead of Wall Street’s expectations for 8.19 million, according to estimates from StreetAccount. But the number declined year over year. Netflix beat EPS estimates for the period, earning $1.33 per share compared with the 82 cents analysts surveyed by Refinitiv were expecting. Revenue came in at $7.71 billion, in line with expectations.

CSX — Shares of the rail company declined 2% despite top- and bottom-line beats for the fourth quarter. CSX earned 42 cents per share on $3.43 billion in revenue, ahead of the 41 cents and $3.32 billion in revenue analysts surveyed by Refinitiv were expecting.
Intuitive Surgical — Intuitive Surgical shares dipped 2% despite the company’s latest earnings report, which topped estimates. The medical company earned $1.30 per share, excluding items, on $1.55 billion in revenue. Analysts surveyed by Refinitiv were expecting $1.28 per share on $1.52 billion in revenue.
PPG Industries — Shares of the paint company slid 3% during extended trading. PPG earned $1.26 per share, excluding items, during the fourth quarter on $4.19 billion in revenue. Wall Street was expecting $1.18 per share on $4.04 billion in revenue, according to estimates from StreetAccount.

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People walk in front of the entrance of the five-star Paris Marriott Hotel.
Fred Dufour | AFP | Getty Images

Check out the companies making headlines in midday trading.
Peloton — The at-home fitness company’s shares tumbled 23.93% after the stationary bike maker announced it will temporarily halt production of its bikes and treadmills due to waning demand as it tries to control costs. The news comes as about $40 billion has been shaved off Peloton’s market cap over the past year. 

Marriott International — Shares of the hotel chain 1.6% after the company provided an update on its development process in 2021. Marriott said it added more than 86,000 rooms on a gross basis, growing the system 3.9%, including room deletions of 2.1%. It also said that by the end of the year it had the largest global development pipeline, with roughly 485,000 rooms.
Baker Hughes — The energy tech company’s shares gained 1.6% after it reported strong quarterly earnings. Reported revenue of $5.5 billion beat FactSet estimates of $5.4 billion. Adjusted EBITDA came in at $844 million, compared to estimates of $787.2 million.
Travelers Companies — The insurance stock popped 3.1% on Thursday after Travelers blew past estimates for earnings and revenue for the fourth quarter. The company reported $5.20 in earnings per share on $8 billion in revenue, with net premiums written rising 10% year over year. Analysts surveyed by Refinitiv had projected $3.86 per share on $7.71 billion of revenue.
Regions Financial — The bank’s stock slid 5.2% after the company reported quarterly earnings that were lower than expected by 6 cents per share, as well as revenue that matched analyst estimates.
M&T Bank — Shares of the regional bank fell 5.4% after the company reporter lower-than-expected earnings for the most recent quarter. Interest margins were also lower than expected at 2.58%, compared to estimates of 2.67%.

International Flavors & Fragrances — Shares of the New York-based fragrance company increased 1.1% after CNBC’s David Faber reported that longtime activist investor Carl Icahn took a 4% stake in the company. Separately, International Flavors & Fragrances named Frank Clyburn chief executive officer effective Feb. 14.
Casper Sleep — Shares of the mattress company surged 9.7% after Casper announced that its board had approved a takeover offer from private equity firm Durational Capital Management. The deal values Casper at $6.90 per share.
Mastercard — The card giant saw shares rise almost 1% after it launched a virtual card solution that will allow for instant business-to-business payments. The news follows more new product announcements from Wednesday, including a cobranded credit card with Instacart and an NFT partnership with Coinbase.
Signet Jewelers — Shares fell 9.6% after the jewelry retailer said holiday sales rose 30.4% from year prior. Same-store sales also jumped more than 25%, the company said.
Etsy — The online marketplace saw its shares rise 2.3% after the stock received an upgrade from KeyBanc to overweight from sector weight. The firm’s price target of $200, implies about 22% upside.
 — CNBC’s Jesse Pound, Hannah Miao and Yun Li contributed reporting

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Claims for unemployment benefits increased by 55,000 last week, to 286,000, the Labor Department said Thursday.
A surge in Covid caseloads, fueled by the highly contagious omicron variant, was a likely factor, according to economists.
However, seasonal factors probably played a role, too.

A job seeker receives information from a recruiter during a job fair in Miami, Florida, on Dec. 16, 2021.
Eva Marie Uzcategui/Bloomberg via Getty Images

The number of people filing for unemployment benefits jumped last week to the highest level since October, the Labor Department said Thursday.
That may signal a troubling rebound, after claims hit recent lows unseen in over 50 years. But the one-week bump may not portend an ugly trend for the labor market, according to economists.

Here’s what to know.

Omicron

A recent surge in Covid cases, fueled by the highly contagious omicron variant, likely contributed to the spike in claims last week, economists said. But the extent of that impact is unclear.
Average daily U.S. Covid cases hit a recent peak of almost 798,000 on Jan. 15 — nearly double the tally from the beginning of the year and roughly eight times that of early December, according to Centers for Disease Control and Prevention data.

Meanwhile, initial claims for unemployment benefits (a proxy for applications) hit 286,000 the week ended Jan. 15, according to the Labor Department. That’s an increase of 55,000, or 24%, from the prior week.
A decline in consumer demand amid rising caseloads may have led businesses to furlough workers. Others may have shut their doors temporarily if too many staff members were ill or exposed to the virus.

“People are losing paychecks to omicron,” Diane Swonk, the chief economist at Grant Thornton, said in a tweet. “The losses are large enough to apply for [unemployment insurance], which means layoffs being triggered by workers out ill and people’s fear of contagion.”

About 8.8 million workers said they were out sick with the virus or caring for an ill family member between Dec. 29 and Jan. 10 — a pandemic-era record, according to federal data.
(A quirk in unemployment rules disallows benefits for workers who test positive for Covid; but someone who’s exposed or who loses hours due to a business shutdown may be eligible.)
However, elevated caseloads likely aren’t the only factor at play, according to economists.

Seasonal swings

January is normally a volatile time of year for jobless claims.   
That’s largely due to seasonal labor patterns — layoffs of temporary holiday workers, construction projects affected by winter weather, people delaying a claim for benefits until after the holidays are over.
“It’s pretty normal to see a spike in claims in January,” according to Daniel Zhao, a senior economist at the career site Glassdoor.
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The Labor Department adjusts its weekly unemployment data to account for these seasonal patterns. But pandemic-era distortions to the labor market make it more difficult to control for those factors.
“Seasonality in the best of times can be tricky to interpret, especially during a pandemic when everything is upside down and really wacky,” according to AnnElizabeth Konkel, an economist at job site Indeed.
It’s therefore hard to assess the impact of rising Covid cases on layoffs and furloughs relative to the typical winter reasons.

That said, average unemployment claims have risen modestly, suggesting a slight upward trend. (The four- week average was up by 20,000 last week.)
“We are starting to see something. Maybe it’s just a little blip, and hopefully not a longer multi-week trend,” Konkel said. “My suspicion is this is the economic impact of the surge showing up in data.”

Historical standards

Despite last week’s pop, unemployment claims are still relatively low by historical standards. And layoffs aren’t likely to surge to levels from earlier in the pandemic, economists said.
Initial claims for benefits hovered around 215,000 in mid-January 2019 and 2020; 286,000 claims were filed last week.

“Initial claims are still fairly low, still close to pre-pandemic levels,” Zhao said. “And the labor market was very strong before the pandemic.”
Economists also don’t expect layoffs (and hence jobless claims) to jump to levels seen earlier in the pandemic.
That’s due largely to the current high demand for workers. Job openings are near record levels and a record 4.5 million people quit their jobs in November.
“I don’t think we’ll see a repeat of massive layoffs we saw in early 2020,” Konkel said. “[Businesses] are struggling to get workers in the first place, so they will think long and hard about layoffs.”

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A Rivian R1T electric pickup truck during the company’s IPO outside the Nasdaq MarketSite in New York, on Wednesday, Nov. 10, 2021.
Bing Guan | Bloomberg | Getty Images

IPO investors in a record-breaking issuance rush in 2021 have so far been disappointed by dismal returns, and the outlook for the once-booming market is only getting worse with rising rates and insider selling on the horizon.
Last year, the number of U.S. traditional IPOs climbed to the highest levels since the late 1990s and deal value hit record levels, according to Dealogic. So far performance from these public debuts has been lagging their historical average significantly.

2021 deals have fallen 14% on average in the six-month post-IPO period, compared to a historical average of a 14% gain, according to Bank of America.

Arrows pointing outwards

“High IPO supply, the anticipation of higher Fed Funds rates, a historically extreme proportion of early-stage/non-earning companies, plus perhaps some investor fatigue around learning so many new companies took a toll,” Thomas Thornton, a managing director at Bank of America, said in a note.
Amid expectations for higher interest rates and a return of volatility, the market swiftly rotated away from risky, growth-oriented companies, especially hurting small-cap IPOs and those that have a long roadmap to profitability.
Electric pickup maker Rivian Automotive was one of the biggest IPOs of 2021 with its market cap briefly topping traditional automakers like Ford and General Motors. However, the stock has wiped out all the post-debut pop, trading about 12% below its IPO price.
“I think there’s no doubt that the IPO market will slow down this year,” said Ulrike Hoffmann-Burchardi, portfolio manager at Tudor Investment Corp. “We have seen, especially in software, which is probably 90% of the tech IPO pipeline, now a drastic reset in valuations.”

Tech stocks are seen as sensitive to rising yields because increased debt costs can hinder their growth and can make their future cash flows appear less valuable.
“We have to see rates stabilize,” Hoffmann-Burchardi said. “When the volatility and interest rate move is that large, it’s going to be very hard for valuations to find and recalibrate itself.”
Meanwhile, many IPOs done in the second half of 2021 will experience lockup expiration sometime in the next six months. An IPO lock-up period is typically 180 days where company insiders can’t sell their shares.
— CNBC’s Leslie Picker contributed reporting. More

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With the prospect of higher interest rates looming, 2022 has already been a tough year for the tech sector. The Invesco QQQ ETF has fallen sharply year-to-date but one tech investor is braving the turbulence.  

Ulrike Hoffmann-Burchardi recently launched a new strategy within Tudor Investment Corp. called T++ with a specific focus on technology stocks. She sat down with Delivering Alpha to discuss her current hedging strategy along with where she’s finding alpha in the technology sector.
(The below has been edited for length and clarity. See above for full video.)
Leslie Picker: What’s it like being a tech investor right now, given this whole regime change that’s really gone on in the market?
Ulrike Hoffmann-Burchardi: We have this exciting step of a next generation of digital transformation, one that is fueled by data. We predict that data is going to grow more than 100 times over the next 10 years. And this gives rise to tremendous investing opportunities in data infrastructure, in semiconductors, but also in digital and data-first businesses. So lots to be excited about. And then to the second part of your question, what is going on right now? It’s less to do with the prospects of these new technologies but the fact that we have come up with unprecedented levels of fiscal and monetary stimulus. And that has led to inflationary pressures in our economy that now the Fed seeks to rein in with higher rates. 
And so with that backdrop, everything else being equal, this means low equity valuations. So we are discounting future cash flows with higher discount rates. But I think one thing that’s important to recognize is that this tide of fiscal and monetary stimulus has lifted all boats, not just technology. And it’s interesting to see what is still floating when this tide recedes. And here’s who I still see standing: those companies with stronger secular tailwinds, the best business models, and world class leadership. And I think it’s hard to find another sector that has so much of all of these. So maybe another way to put it is that the Fed can change the discount rate, but not a digital inflection of our economy.

Picker: As you see these valuations come down pretty sharply, at least in the near term, does that concern you? Are you seeing that as more of a buying opportunity?
Hoffmann-Burchardi: If you actually look at these sharp asset price corrections that we have seen, you can look at them and try to invert what these different asset classes price in, in terms of future rate hikes. And so if you look at high-growth software in particular, this now prices in a one percent increase in the 10-year rate, whereas if you look at the Dow Jones, it is still at a zero percent rate hike. So it does look like there’s at least some diversity of risk being priced in. And it sounds like right now, maybe the sharp corrections in high-growth software have, at least in the short term, more to do with positioning and flows than actual fundamentals.
Picker: Paul Tudor Jones of your firm recently said that the things that have performed the best since March 2020, are probably going to perform the worst as we go through this tightening cycle. By and large, that’s been high-growth technology where you spend the most of your time and look into these areas. So do you agree with that? And does that kind of concern you on the long side?
Hoffmann-Burchardi: We have to prepare ourselves for an environment with higher rates. And as you mentioned, those stocks that have cash flows that are further out into the future are more vulnerable than the ones with near-term cash flows. So with that backdrop, you have to adjust your playbook. And I do think in technology and equity investing in particular, there are still opportunities to make profitable investments in individual companies. Even if valuations are coming down, if companies outperform their growth rates, they can offset that multiple compression. And there’s particular companies that are indexed to the amount of data growth. It’s not that data is going to stop growing, just because the Fed stops growing its balance sheet. 
And then secondly, as I just alluded to, there could be tactical opportunities when certain asset classes overreact in the short term. And then lastly, the data also shows that it’s actually sharp increases in rates that are more harmful to equities than higher rates overall. So now that we are pricing in four rate hikes this year, at least the pace of increases in interest rates should start to slow down for the rest of the year. So I would summarize that there’s still two opportunities to deliver Alpha: one is stock selection and then the second one is technically adjusting your hedges when things over or underreact in the short term.
Picker: So given that backdrop that you described, what does that mean about whether technology is currently sitting at its fundamental basis? And does that give you more confidence to be a buyer in this market?
Hoffmann-Burchardi: As fundamental investors with a long term horizon our first premise is to stay invested in the companies that we believe are going to be the winners of this age of data and digital. So it’s all about hedging. And, you know, hedge funds tend to get a bad rap because they’re so short term-focused. But in fact, hedging can allow you to have staying power in your investments for the long term. And so in this environment, if you want to hedge out the duration risk of your cash flows, the easiest way is to offset your long term investments with maybe a basket of stocks that have similar duration of cash flows. 
However, having said that, I think the risk reward of hedging these high-growth names with other high-growth names probably has come down considerably, given that we have seen one of the largest and most furious corrections in high-growth software over the last 20 years. So it’s more about then tactically adjusting your hedges, if you believe that certain assets may have overshot in this environment when others have not appropriately reacted.
Picker: What sectors are you interested in on the longer side and what sectors on the short side?
Hoffmann-Burchardi: On our long term thesis on data and digital, which we’re still very early in this new era of transformation, there are really two sectors that are very interesting. One is data infrastructure, and the other one is semiconductors. And, you know, in a sense, this is very much the picks and shovels strategy of the digital age, very much like in the Gold Rush of the 1840s. And it’s all about software and hardware to translate data into insights. And so for semiconductors, which is a very interesting industry, they’re the digital engine room of our economy, the digital economy, and it has an industry structure that is very benign, actually has gotten better over the years. Actually, the number of publicly traded semiconductor companies has come down over the last 10 years. 
And the barriers to entry in semiconductors have increased across the whole value chain. But even the design of a chip, if you go from 10 nanometers to five nanometers, it has increased by three times. So very benign competitive framework against an end demand that is now accelerating. Even if you look at, for instance, the automotive industry, they are going to see semi content increasing by more than five times over the next 10 years. And then on the data infrastructure side, it’s also very interesting. It’s a very nascent market. Only about 10% of software is currently data infrastructure software. And as companies have to deal with new and large amounts of varied data, they will have to overhaul the data infrastructure. And it’s incredibly sticky. It’s like building a foundation of a house. Very difficult to rip out once installed.
Picker: And how about on the short side? How do you see the best way to hedge what’s going on right now  in the market? 
Hoffmann-Burchardi: I think it’s more hedging the risk of higher interest rates as opposed to hedge out fundamentals. And so it’s just about matching cash flow duration patterns. But again, I think at this point, we’re probably overdone on some of the growth software sell-off. And it’s more about going into hedges that now help you price in maybe an overall slowdown on the index level, much more so than in those particular areas of technology.
Picker: Interesting, so hedging indexes, perhaps just as a way to protect the downside of the longer bets that you’re doing.
Hoffmann-Burchardi: Yeah, at least in the short term. Where we have seen most of the carnage in some pockets of the markets, but others have not really reacted to this higher rate environment. More