Finance

Cryptocurrencies are considered securities regardless of the context in which they are sold, a federal judge said.
The opinion came from the same Manhattan federal court that handed down a controversial ruling involving a crypto asset called Ripple that said the opposite.
Private companies, lawmakers, and regulators have tussled over whether cryptocurrencies are considered securities.

Hon Chang-joon, business partner of Do Kwon, the cryptocurrency entrepreneur who created the failed Terra (UST) stablecoin, is taken to court in Podgorica, Montenegro, March 24, 2023. 
Stevo Vasiljevic | Reuters

Cryptocurrencies are considered securities regardless of how they are sold, a Manhattan federal judge said in an opinion, allowing the Securities and Exchange Commission to pursue securities charges against Terraform Labs and its founder Do Kwon.
The opinion, issued by U.S. District Judge Jed Rakoff on Monday, contradicts an earlier ruling from the same district court that said Ripple, another cryptocurrency, may not be categorized as a security in all circumstances. It will not impact the prior opinion.

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The judge’s decision, part of litigation between the SEC and Kwon, will likely inform any appeals made between the federal financial regulator and private sector crypto firms under government scrutiny, including Ripple.
Kwon and Terraform Labs are accused of committing a massive fraud upon investors through the unregistered offer and sale of multiple cryptoassets, including Luna and a stablecoin called TerraUSD.
“The Court declines to draw a distinction between these coins based on their manner of sale, such that coins sold directly to institutional investors are considered securities and those sold through secondary market transactions to retail investors are not,” Rakoff said of the prior ruling in the case. “In doing so, the Court rejects the approach recently adopted by another judge of this district in a similar case.”
Shares of crypto exchange Coinbase are down about 3% in pre-market trading.
The SEC has pursued numerous other crypto firms over the alleged unregistered offer and sale of securities, including Coinbase, Gemini and Genesis.
CNBC’s Lora Kolodny contributed to this report. More

People walk by a Gap retail store on August 24, 2022 in Beijing, China.
VCG | Getty Images

Check out the companies making headlines before the bell on Tuesday.
SoFi Technologies — The financial technology stock dropped 3.7% after KBW analyst Michael Perito downgraded the stock from underperform from market perform. Perito hiked his price target for shares by $2 to $7.50, however, which still implies shares can fall 34.5% from Monday’s closing price. 

Estee Lauder — The beauty stock shed 1.1% following a Barclays downgrade to neutral from buy. The firm said difficulties in China could weigh on the business in the near-term.
Gap — The retail stock climbed nearly 4% after Barclays upgraded Gap to overweight from equal weight. Analyst Adrienne Yih assigned a $13 price target to the company, which suggests shares could rally 26.2% from Monday’s close. The firm also upgraded retailers American Eagle, Bath & Body Works and Tapestry to overweight. Each of those are up more than 2% in early morning trading.
Incyte — Shares rose 2% after Incyte beat analysts’ expectations in its latest results. The pharmaceutical company reported second-quarter revenue of $954.6 million, exceeding the FactSet consensus estimate of $909.7 million. Per-share adjusted earnings came in at $0.99, higher than the forecasted $0.72 per share. CEO Herve Hoppenot cited double-digit growth in Jakafi (ruxolitinib), a treatment for blood cancer.
Uber — Shares of the ride-hailing giant rose more than 2% in premarket trading after the company reported second-quarter results that missed analysts’ expectations for revenue but offered rosy guidance for the third quarter. CEO Dara Khosrowshahi said the company achieved two major milestones during the quarter: its first quarter of free cash flow over $1 billion and its first GAAP operating profit. 
Caterpillar — Shares of the manufacturing company gained 1.4% after reporting better-than-expected earnings and revenue. Caterpillar warned of potential decline in sales and margins for the third quarter, however.

Merck — Shares of the pharmaceutical giant rose nearly 2% premarket after the company reported second-quarter revenue that topped expectations, driven by sales of its blockbuster cancer drug Keytruda and HPV vaccine Gardasil. Merck also posted a narrower than expected loss for the quarter.
Pfizer — The stock shed more than 1% in early morning trading after Pfizer reported second-quarter adjusted revenue that beat expectations but posted revenue that fell short of Wall Street’s estimates. The company’s revenue miss was caused by a decline in Covid product sales.
ZoomInfo Technologies — Shares sank by nearly 20% in premarket trading after the data company reported a weak outlook for third-quarter revenue. ZoomInfo, which posted results after Monday’s close, said it anticipates $309 million to $312 million in revenue, falling short of analysts’ expectations of $326 million as gauged by Refinitiv. ZoomInfo’s revenue in the latest quarter also missed expectations, coming in at $309 million, while analysts estimated $311 million.
Toyota Motor — The automaker added about 2% after reporting operating income of 1.12 million yen ($7.84 billion) for the fiscal first quarter, 94% higher than a year prior. That topped the 9.878 trillion yen expected from analysts polled by Refinitiv.
Arista Networks — Shares advanced 13.6% in premarket trading after the company reported after the bell Monday that its quarterly earnings topped analysts’ expectations. Arista posted adjusted earnings of $1.58 per share, versus consensus analyst estimates of $1.44 per share, according to Refinitiv. Revenue also came in higher than expected at $1.46 billion, compared to analyst expectations of $1.38 billion.
— CNBC’s Tanaya Macheel, Alex Harring, Yun Li, Sarah Min, and Michelle Fox Theobald contributed reporting. More

Signage outside the State Street Corp. Global Advisors Global Advisors building in Boston, Massachusetts, U.S., on Tuesday, Jan. 18, 2022.
Scott Eisen | Bloomberg | Getty Images

Asset management giant State Street is reducing the fees investors pay for a group of core ETFs, the company announced Tuesday.
The changes impact roughly half of the SPDR Portfolio ETF suite, including funds focused on U.S. stocks, foreign stocks and fixed income. Combined, the 10 funds hold about $77 billion in assets, according to FactSet. The changes take effect Aug. 1.

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The biggest fund seeing an expense cut is the SPDR Portfolio S&P 500 ETF (SPLG), with roughly $20 billion in assets under management.

SPDR ETF expense cuts

Fund Ticker
Category
Previous total expense ratio
New TER

SPLG
S&P 500
0.03%
0.02%

SPMD
S&P 400 mid cap
0.05%
0.03%

SPSM
S&P 600 small cap
0.05%
0.03%

SPDW
Developed world ex-US
0.04%
0.03%

SPEU
Europe
0.09%
0.07%

SPEM
Emerging markets
0.11%
0.07%

SPTS
Short term Treasury
0.06%
0.03%

SPTI
Intermediate term Treasury
0.06%
0.03%

SPTL
Long term Treasury
0.06%
0.03%

SPHY
High yield Bond
0.10%
0.05%

Source: State Street Global Advisors

“We look at the fees on a pretty consistent basis, and one of the things that we know is that as funds achieve scale it gives us extra room to be able to make [total expense ratio] reductions. And this has been a very successful lineup for us,” said Sue Thompson, head of SPDR Americas distribution at State Street Global Advisors.
The portfolio suite of ETF is aimed at smaller investors focused on long-term ownership, Thompson said. The funds have lower per-share prices than similar funds, such as the SPDR S&P 500 Trust (SPY), which can make it easier for investors to build out a full portfolio when buying full shares of the funds.
The SPY, which is used as a trading vehicle by many institutional investors, has an expense ratio of 0.0945% and trades around $450 per share. The SPLG will now have an expense ratio of just 0.02% and a per share price of close to $50.
Fund costs have been trending lower in recent decades for all asset managers, as the ETF industry grows in size and pulls assets from higher cost mutual funds. Some firms even offer products with a sticker price of zero for the expense ratio, such as the BNY Mellon Large Cap Core Equity ETF (BKLC).

Thompson said she does not see the SPDR fund expenses ever getting to zero “because of the real costs that are involved in running these funds,” but said the firm does plan to continue to share the savings from the scale of its products with customers.
“When you look at where expense ratios were 15 years ago across the board to today, this has been a massive win for investors. It has been a massive win for smaller investors,” Thompson said. More

HSBC’s net profit more than doubled to $18.1 billion in the six months ended June, a sharp spike compared to the $9 billion in the same period a year before.
The bank’s profit before tax rose 147% year-on-year to $21.7 billion, up from $8.78 billion in the first half of 2022.
In light of the strong results, HSBC’s board approved a second interim dividend of $0.10 per share, and announced a further share buyback of up to $2 billion, which “we expect to commence shortly and complete within three months.”

HSBC’s net profit more than doubled to $18.1 billion in the six months ended June, a sharp spike compared to the $9 billion in the same period a year before.
The bank’s profit before tax rose 147% year-on-year to $21.7 billion, up from $8.78 billion in the first half of 2022.

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This figure included a $2.1 billion reversal of an impairment relating to the planned sale of its retail banking operations in France, as well as a provisional gain of $1.5 billion on the acquisition of Silicon Valley Bank UK.
In light of the strong results, HSBC’s board approved a second interim dividend of $0.10 per share, and announced a further share buyback of up to $2 billion, which “we expect to commence shortly and complete within three months.”

An HSBC Holdings bank branch in Hong Kong on May 24, 2022. A Hong Kong-based trade platform launched by HSBC Holdings three years ago with much fanfare has shut down after failing to build a commercially viable business.
Bertha Wang | Bloomberg | Getty Images

Asked when the bank’s dividend might return to pre-pandemic levels, CEO Noel Quinn told CNBC’s “Capital Connection” that “if all goes to plan this year, we should be above our pre-pandemic dividend level.”
HSBC paid out a total dividend of $0.51 in 2018, and $0.30 in 2019.
For 2022, the bank has already declared two interim dividends of $0.10 each, bringing the total amount of dividends paid to $0.20. Quinn said that “our final interim dividend at the end of the year, will be the balance to get us to a 50% payout ratio.”

In March, the U.K. arm of HSBC — Europe’s largest bank by assets — bought SVB U.K. for £1 ($1.21), in a deal that excludes the assets and liabilities of SVB U.K.’s parent company.
Revenue increased by 50% year-on-year to $36.9 billion in the first half, which HSBC said was driven by higher net interest income across all its global businesses due to interest rate rises.

My job is to diversify the revenue. And I believe we’re starting to show evidence of that and we will continue to invest for diversification of revenue.

Noel Quinn
CEO of HSBC Holdings

Net interest income for the first half stood at $18.3 billion, 36% higher year-on-year, while net interest margin came in 46 basis points higher at 1.70%.
The strong performance was due to strong revenue growth across all business lines and all product areas, the CEO said. “Certainly, there’s an element of interest rates in there. But there’s also good growth in our fee income and trading income.”

Solid second quarter

For the second quarter alone, HSBC beat analysts’ expectations to report an 89% jump in pre-tax profit in the second quarter.
Pre-tax profit for the quarter ended in June was $8.77 billion, beating expectations of $7.96 billion.
Net profit was $6.64 billion, beating the $6.35 billion expected in analysts’ estimates compiled by the bank, jumping 27% compared to the same period a year before.
Total revenue for the second quarter came in at $16.71 billion, 38% higher than the $12.1 billion seen in the same period a year ago.
HSBC’s Hong Kong-listed shares rose 1.23% after the announcement.

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Here are other highlights of the bank’s financial report card:

Net interest income came in at $9.3 billion in the second quarter, compared to $6.9 billion in the same period a year ago.
Net interest margin, a measure of lending profitability, rose 43 basis points year on year to 1.72% in the second quarter of 2023.

Moving forward, HSBC has also raised a key performance target, forecasting a near term return on tangible equity of 12%, compared to its previous target of 9.9%.
In fact, Quinn said that in the next two years, HSBC is expecting a “mid-teens” return on tangible equity, adding that “this is a broad-based delivery of profit and return.”
He sees future growth for HSBC coming from corporate banking, as well as international wealth and international retail banking for the affluent.
“We’re investing in areas that will drive growth beyond the interest rate regime there exists today. My job is to diversify the revenue. And I believe we’re starting to show evidence of that and we will continue to invest for diversification of revenue.”
Correction: This story has been updated to reflect that net interest margin rose 43 basis points in the second quarter of 2023. An earlier version misstated the year. More

Pedestrians walk past Yum! Brands Shanghai, China
Bloomberg | Getty

Check out the companies making headlines in extended trading.
Yum China — The restaurant franchiser’s shares fell 3.4% following its mixed second-quarter results. The company announced 47 cents in adjusted earnings per share on $2.65 billion in revenue. Analysts polled by Refinitiv had expected 46 cents earnings per share on $2.68 billion in revenue. Management noted that same-store sales across its restaurants still remained below pre-pandemic levels. 

ZoomInfo Technologies – Shares shed 17% in extended trading after the company posted a weak outlook for third-quarter revenue. The data company anticipates $309 million to $312 million in revenue, while analysts called for $326 million, according to Refinitiv. ZoomInfo’s revenue in the latest quarter also missed expectations, coming in at $309 million, while analysts estimated $311 million.
Western Digital — The data storage company’s stock gained 2% after a better-than-expected fiscal fourth quarter earnings report. Western Digital posted a loss of $1.98 per share on $2.67 billion in revenue. Analysts had estimated a loss of $2.01 per share on $2.53 billion in revenue, according to Refinitiv. 
Arista Networks — Shares rose more than 11% after the company’s quarterly earnings topped analysts’ expectations. Arista reported adjusted earnings of $1.58 per share, versus consensus analyst estimates of $1.44 per share, according to Refinitiv. Revenue also came in higher than expected at $1.46 billion, compared to analyst expectations of $1.38 billion. 
Lattice Semiconductor — The stock declined 2.6% after management noted that the company “is not immune to macroeconomic challenges” impacting the chip sector. Lattice reported second-quarter earnings of 52 cents per share, adjusted, on revenue of $190.1 million, while analysts polled by FactSet called for 51 cents in earnings per share on revenue of $188.2 million.
Rambus — The stock tumbled more than 8% after the release of its second-quarter earnings. Rambus posted $120 million in revenue, versus analysts’ forecast for $133 million, according to Refinitiv. Licensing billings and product revenue also declined year over year. 

Monolithic Power Systems — Shares lost 3.8% Monday in extended trading. The lower end of the semiconductor company’s revenue guidance for the third quarter came in below analysts’ estimates. Monolithic forecasts revenue of $464 million to $484 million for the third quarter, while analysts called for $473.4 million, per FactSet.
SBA Communications — Shares of the real estate investment trust added more than 4%. The wireless infrastructure company reported second-quarter revenue of $678.5 million, while analysts called for $676.9 million. SBA also announced a newly signed master lease agreement with AT&T. More

The Fed’s closely watched Senior Loan Officer Opinion Survey, released Monday, showed that while credit conditions got stricter, demand declined as well.
On the issue of consumer lending, banks “reported having tightened standards for credit card loans and other consumer loans,” the survey said.

The U.S. Federal Reserve Building in Washington, D.C.
Win Mcnamee | Reuters

Lending conditions at U.S. banks are tight and likely to get tighter, according to a Federal Reserve survey released Monday.
The Fed’s closely watched Senior Loan Officer Opinion Survey showed that while credit conditions got more strict, demand declined as well.

Those results are important as economists who expect a recession believe that the most likely source will be from the banking system, which has had to respond to a series of 11 interest rate hikes as well as a momentary crisis in March when three midsize institutions failed.
“Regarding banks’ outlook for the second half of 2023, banks reported expecting to further tighten standards on all loan categories,” the Fed said in a survey summary. “Banks most frequently cited a less favorable or more uncertain economic outlook and expected deterioration in collateral values and the credit quality of loans as reasons for expecting to tighten lending standards further over the remainder of 2023.”
On the issue of consumer lending, banks “reported having tightened standards for credit card loans and other consumer loans, while a moderate net share reported having done so for auto loans.”
Banks also said they are raising the minimum level for credit scores when giving personal loans and are lowering credit limits in the $1.9 trillion consumer-loan space.
In the critical $2.76 trillion commercial and industrial lending segment, the survey noted that a “major” share of banks said they have seen lower demand for loans amid tightening standards across all business sizes.

Commercial real estate also saw a large share of banks saying they have put more restrictions on standards along with weaker demand.
Fed officials say they are aware of conditions in the banking sector, though they continue to raise interest rates to try to bring down inflation.
At his-post meeting news conference last week, Fed Chair Jerome Powell said he expected the loan survey to be “consistent with what you would expect.”
“You’ve got lending conditions tight and getting a little tighter, you’ve got weak demand, and you know, it gives a picture of a pretty tight credit conditions in the economy,” Powell said.
The Fed hiked its key interest rate another quarter percentage point at the meeting, taking it to a target range of 5.25%-5.5%, the highest in more than 22 years. More

Pedestrians walk by the SoFi Technologies headquarters on February 22, 2022 in San Francisco, California.
Justin Sullivan | Getty Images

Check out the companies making headlines in midday trading.
SoFi Technologies – Shares of the fintech company popped 19.9% after it reported second-quarter results and lifted its full-year guidance. SoFi Technologies posted a narrower-than-expected loss of 6 cents a share on a GAAP basis. Analysts surveyed by FactSet had expected a 7-cent loss per share.

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ON Semiconductor — The chipmaker’s shares jumped 2.5% after it posted an earnings and revenue beat for the second quarter. The company reported $1.33 earnings per share, excluding items, on $2.09 billion in revenue. Analysts polled by FactSet had estimated $1.21 earnings per share and $2.02 billion in revenue.
Disney — Disney climbed 3.2% after the Financial Times reported that the entertainment giant brought back back former executives Kevin Mayer and Tom Staggs, both of whom were once considered potential successors to Bob Iger.
New Relic — Shares jumped 13.4% after a private equity consortium announced it would take the software company private. The all-cash deal values the company at nearly $6.5 billion and offers $87 per share.
Spero Therapeutics — Shares ascended 14.8% after the company announced it reached an agreement with the Food and Drug Administration to have a special protocol assessment in its phase 3 trial for a urinary tract infection drug.
Sweetgreen — The salad chain’s shares jumped 6.9% Monday after an upgrade from Piper Sandler. The firm raised its rating on the stock to overweight from neutral, saying that the tide may be turning for the company.

XPeng — The Chinese electric vehicle maker tumbled 10.6% following a downgrade from UBS to neutral from buy. UBS said the company’s near-term gains may now all be priced in after shares more than doubled in price this year.
Hasbro — The toymaker rose 4.1% on the heels of Bank of America’s upgrade to buy from neutral. Bank of America said Hasbro could beat earnings expectations when it reports on Thursday, due in part to the success of its cards set tied to “Lord of the Rings.”
GoodRx – The digital health-care platform’s shares surged about 36.9% after Cowen upgraded them to outperform, saying the company’s pharmacy benefit management partnerships – like Express Scripts and CVS Caremark – help generate a new revenue stream but also solidify the company’s position in the health-care ecosystem. Cowen raised its price target to reflect about 78% potential upside.
Adobe — The software stock jumped 3.3% after Morgan Stanley upgraded the shares to overweight from equal weight. The Wall Street firm said while Adobe may have been “late to the party,” the company still stands to gain from artificial intelligence integration across its line of products. Morgan Stanley’s $660 price target represents nearly 25% upside.
Chevron — The oil giant advanced 3% after Goldman Sachs upgraded the stock to buy from neutral. The firm said it sees a cash flow inflection for the company.
New York Community Bancorp — Shares of the regional bank traded 1.5% higher after Deutsche Bank upgraded the stock to buy from hold, citing good execution.
CSX — The railroad stock shed 1.4% after RBC downgraded shares to sector perform from outperform despite noting fluid operations and positive performance in recent quarters.
Wayfair — Shares popped 6.5% after Piper Sandler upgraded Wayfair to overweight from neutral and raised its price target. The Wall Street firm said Wayfair is improving sales and taking back market share as the home furnishings industry stabilizes.
Salesforce — The cloud company saw its shares dip 0.3% after Morgan Stanley downgraded the stock to equal weight from overweight. The Wall Street firm said Salesforce’s near-term catalysts, including margin expansion and price increases, are now in the “rear-view mirror.” The stock has gone up 68% this year.
— CNBC’s Hakyung Kim, Yun Li, Sarah Min, Tanaya Macheel and Samantha Subin contributed reporting More

A private equity consortium will take software provider New Relic private at $87 a share, the company announced Monday.
The all-cash deal values New Relic at $6.5 billion and will see the company return to private ownership nearly nine years after it first debuted on the New York Stock Exchange.

Lew Cirne, CEO, New Relic
Scott Mlyn | CNBC

A consortium led by Francisco Partners and private equity group TPG will take software provider New Relic private in an all-cash, $87-a-share offer that values the company at nearly $6.5 billion, New Relic announced Monday.
New Relic shares rose 13% in morning trading, to nearly $84. The offer represents a 26% premium to New Relic’s 30-day volume-weighted average closing price, the company said. New Relic builds software to help websites and applications track performance.

The deal is expected to close by early 2024, the company said. It will return New Relic to private ownership nearly nine years after it first debuted on the New York Stock Exchange in 2014.
“We are pleased to partner with Francisco Partners and TPG, who are committed to continuing to build upon New Relic’s strong foundation and achieve its full potential,” New Relic founder and Executive Chairman Lew Cirne said in a release.
Reuters reported in May that Francisco Partners and TPG had ended deal talks after failing to secure enough debt financing to meet New Relic’s desired valuation. The resurrected transaction was announced concurrently with New Relic’s earnings report.
Since that report, the private equity groups were able to obtain financing and meet New Relic’s valuation requirements. Major shareholders, including Cirne and activist hedge fund Jana Partners, have signed off on the deal.
Under the terms of the agreement, New Relic will have a 45-day “go-shop” period, during which it can entertain offers from other qualified bidders.

TPG is an alternative asset manager with investments around the world, including Airbnb, Box and Zscaler.
Francisco Partners is a technology-focused private equity firm with past investments in Barracuda Networks, On Semiconductor and K2. In recent years, the firm has taken other cloud and IT companies private, including in a $1.7 billion deal for Sumo Logic and a 2018 deal for payment technology company Verifone.
Correction: Sumo Logic was taken private in a $1.7 billion deal. A previous version misstated the valuation of the deal. More