Finance

Banks are facing mounting uncertainty as the commercial real estate (CRE) sector continues to struggle. But, tailwinds in our financial names should help safeguard their bottom lines. Club names Wells Fargo (WFC) and Morgan Stanley (MS) have bright spots in their operations that can offset potential weakness from CRE exposure. We’re optimistic about green shoots in Morgan Stanley’s dealmaking and the continued maturing of its wealth management business , along with progress in Wells Fargo’s multiyear recovery plans to expand its balance sheet and put past misdeeds behind it . Commercial real estate landscape Higher interest rates, tightening credit conditions and elevated office vacancies are weighing down the estimated $21 trillion commercial real estate sector . Many banks have exposure to CRE through loans. Fluctuations in property values and market conditions can impact their loan portfolios and asset quality. Economic downturns can lead to higher default rates and loan losses, affecting a bank’s profitability and overall financial health as well. Banks provide financing to investors and developers in the sector, making them vulnerable to weaker market cycles too. A lagging commercial real estate market can strain a bank’s capital reserves while a stronger market can boost incomes from lending and fees. Tomasz Piskorski, a property market expert and professor at Columbia Business School, said the key overhang on the banking sector is the central bank’s monetary tightening, and trouble in CRE is the “icing on the cake.” The Federal Reserve has hiked borrowing costs 11 times since March 2022 — from near-zero on the fed funds overnight bank lending rate to the target range of 5.25% to 5.5% — all in a bid to combat sticky inflation. The midpoint of the current range is the highest level in more than 22 years. “U.S. banks are now in a very difficult position and the main factor driving this difficult position is high interest rates,” Piskorski told CNBC in an interview. “This is one of the main problems affecting commercial real estate because a lot of these buildings were written at a lower rate and now they have to refinance to higher rates.” While there’s reason for concern in the broader commercial real estate market, we see the most pronounced challenges unfolding in offices. Work-from-home trends and tech layoffs have led to increased vacancies, decreased demand, and drastic reductions in property values. Office vacancy rates reached 18.6% in the first quarter of 2023. That’s 5.5% higher than when the Covid pandemic began to hit the U.S. during the first quarter of 2020. Back in July, Jim Cramer said the doom and gloom around CRE is a real threat but exaggerated, describing it at the time as a “well-overdone crisis” Morgan Stanley’s exposure MS YTD mountain Morgan Stanley (MS) year-to-date performance In reporting its second-quarter financial results, Morgan Stanley said that “increases in provisions for credit losses were primarily driven by credit deteriorations in the commercial real estate sector as well as modest growth across the portfolio.” The bank’s provision for credit losses rose to $161 million in Q2 from $101 million in the second quarter of 2022. Tailwinds spurred by a resurgence in Morgan Stanley’s investment banking (IB) services, however, could offset CRE market weakness going forward. There have been signals of more mergers and acquisitions (M & A) and initial public offerings (IPOs), which could boost this dormant, and crucial, part of the bank’s business. Semiconductor designer Arm Holdings (ARM) had a blockbuster listing earlier this month, the largest IPO since electric vehicle maker Rivian Automotive (RIVN) in 2021. Grocery delivery service Instacart (CART) and marketing automation Klaviyo (KVYO) made Klaviyo mad their debuts shortly after Arm. IB has lagged in recent quarters amid macro uncertainty and recession concerns. The global M & A value declined by 44% in the first five months of 2023, per data analytics firm GlobalData , with firms pulling back on dealmaking in order to preserve capital in the face of an economic downturn. During the Barclays conference earlier this month, management at Morgan Stanley said that capital markets are set to improve next year. This could boost IB broadly because companies will feel less conservative about how they allocate funds. “I would say we are more confident now than any time this year about an improved outlook for 2024,” the team said. “I think it’s clear to us now that the first half of the second quarter was probably the low point in sentiment around capital markets and M & A.” Still, there’s a lot of uncertainty around the U.S. economy as it’s unclear when the Fed will stop hiking interest rates. Academics like Piskorski, however, contend that pressure on traditional investment banking will likely continue. “We’re in a very different environment than two years ago. I would expect much fewer IPOs,” he said. “Cost of capital is much higher. Investor appetite to invest in companies, especially companies that are not profitable, is very different.” Wells Fargo’s exposure WFC YTD mountain Wells Fargo (WFC) year-to-date performance Offices represent around 22% of Wells Fargo’s outstanding commercial property loans and 3% of its entire loan book. It has one of the largest portfolios when it comes to CRE in the country, with more than $154 billion in loans outstanding and $33 billion of that consists of office loans. According to its latest quarterly earnings release, Wells Fargo boosted allowances for losses connected to its commercial property loans, driven mostly by the firm’s exposure to offices, flagging a $949 million increase in their credit loss allowance. However, management said that significant losses have not been observed so far. For context, banks typically boost reserves for credit losses as a preventative measure to curb losses from borrowers who could default on their loans. This, in theory, gives Wells Fargo the extra capital to absorb credit losses during a market downturn or periods of extreme volatility. For context, JPMorgan Chase (JPM) also bulked up its reserves in anticipation of rising office property loan losses. Wells Fargo stands to benefit from its multiyear recovery plan once U.S. regulators decide to lift its asset cap, which would increase its balance sheets, along with its valuation that’s providing a cushion to any downward earnings estimates. Still, it remains unclear when regulators may lift these rules. “The losses are still quite small,” Chief Financial Officer Michael Santomassimo said in July. “We do expect that there will be more weakness in the market, and it’s going to take a while to play out.” CEO Charlie Scharf said the bank sustained “higher losses in commercial real estate, primarily in the office portfolio.” He added, “While we haven’t seen significant losses in our office portfolio-to-date, we are reserving for the weakness that we expect to play out in that market over time.” Still, revenue from Wells Fargo’s commercial real estate business rose to $1.33 billion in the second quarter, up 26% from 2022 and 2% higher from the last quarter. The banking giant attributed the gains to “higher interest rates and higher loan balances.” Wells Fargo may not stand to gain as much as Morgan Stanley from an uptick in investment banking, but the comments made by management during the Barclays conference indicate ongoing signs of recovery for the bank. “A lack of bad news turned out to be good news,” Jeff Marks, CNBC Investing Club’s Director of Portfolio Analysis, said during a Morning Meeting earlier this month. Wells Fargo execs emphasized the bank’s solid forward guidance while signaling an improved efficiency ratio as the Wall Street giant continues to cut costs via various restructuring plans like layoffs. Santomassimo said the macro picture is “much better than people would have expected at this point” as well. (Jim Cramer’s Charitable Trust is long WFC, MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Collin Madden, founding partner of GEM Real Estate Partners, walks through empty office space in a building they own that is up for sale in the South Lake Union neighborhood in Seattle, Washington, May 14, 2021.
Karen Ducey | Reuters

Banks are facing mounting uncertainty as the commercial real estate (CRE) sector continues to struggle. But, tailwinds in our financial names should help safeguard their bottom lines. More

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, September 26, 2023.
Brendan McDermid | Reuters

A majority of Wall Street investors haven’t taken solace in stocks’ 2023 gains, thinking the market could retreat further as risk of a recession creeps up, according to the new CNBC Delivering Alpha investor survey. 
We polled about 300 chief investment officers, equity strategists, portfolio managers and CNBC contributors who manage money about where they stood on the markets for the rest of 2023 and beyond. The survey was conducted this week.

Arrows pointing outwards

More than 60% of respondents believe the stock market’s gain this year has just been a bear market bounce, seeing more trouble ahead. A total of 39% of investors believe we are already in a new bull market.
The S&P 500 has fallen more than 5% this month alone, cutting its 2023 gains to 11%. Stocks struggled as the Federal Reserve signaled higher interest rates for longer, sending bond yields higher. The market also contended with a rally in crude oil as well as a 10-week winning streak for the dollar. 

Arrows pointing outwards

Asked about the probability of a recession, 41% of survey respondents said they expect one in the middle of 2024, and 23% said a downturn will arrive later than 12 months from now. Only 14% said they don’t expect a recession.
“I think the market is telling us we should expect another hike or two, and the consensus is building higher for longer,” Ares Management CEO Michael Arougheti said in an interview with CNBC’s Leslie Picker.
The Fed kept interest rates unchanged this month but forecast it will hike one more time this year. DoubleLine Capital CEO Jeffrey Gundlach said odds for more rate hikes are higher now in light of the recent jump in oil prices, which could put upward pressure on inflation. JPMorgan Chase CEO Jamie Dimon also warned that interest rates could go up quite a bit further. More

Minneapolis Fed President Neel Kashkari told CNBC on Wednesday that he’s unsure whether the central bank has raised interest rates enough to tame inflation.
He cited various concerns suggesting that “we might not be as restrictive as we otherwise would think.”

Minneapolis Federal Reserve President Neel Kashkari said Wednesday he’s unsure whether the central bank has raised interest rates enough to tame inflation.
Speaking one day after he penned an essay suggesting that rates may have to go “meaningfully higher” from here in order to bring down prices, Kashkari told CNBC that the neutral rate of interest, or one that is neither holding back the economy nor stimulating it, may have moved higher.

“I don’t know,” he said on “Squawk Box” when asked whether the current target range for the federal funds rate of 5.25%-5.5% is “sufficiently restrictive” to bring inflation back to the Fed’s 2% goal. “It’s possible given the dynamics of the reopening of the economy, that the neutral rate may have moved up.”
Some of his concerns stem from the fact that sectors of the economy that normally are affected by rate hikes seem to be ignoring them.
“So one thing that makes me cautious that we might not be as restrictive as we think, is that consumer spending has remained robust, GDP growth continues to outperform,” Kashkari said. “The two sectors of the economy that are traditionally most sensitive to interest rate hikes, autos and housing, have both added some signs of bottoming and in some cases are starting to show some recovery that makes me cautious that we might not be as restrictive as we otherwise would think.”
Those comments come one week after the rate-setting Federal Open Market Committee, of which Kashkari is a voting member this year, opted not to raise interest rates but still signaled another quarter-point hike before the end of the year while cutting its outlook to two reductions next year, half the last projection in June.
Wall Street has been fearful that the continuing tightening of monetary policy could send the economy into recession.

But Kashkari insisted that is not the Fed’s goal.
“If we have to keep rates higher for longer, it’s because the economic fundamentals are even stronger than I appreciate and the [economic] flywheel is spinning,” he said. “It isn’t obvious to me that that means that a recession is more likely, it just might mean that we need a higher rate path to get inflation back down to 2%.”
However, he said “we just don’t know right now” whether the Fed has done enough, adding that “we all want to avoid a hard landing” for the economy. More

SEC Chair Gary Gensler participates in a meeting of the Financial Stability Oversight Council at the U.S. Treasury in Washington, D.C., July 28, 2023.
Kevin Dietsch | etty Images

Securities and Exchange Commission Chair Gary Gensler is testifying before the House Financial Services Committee today. It will be very much like his testimony two weeks ago to the Senate Banking Committee: a forum for Republicans to attack Gensler for being overzealous and overreaching in his rulemaking proposals. 
Republicans are increasingly apoplectic about the more than 40 rules Gensler has been proposing, especially now that he has begun adopting them. 

That’s not new. Republicans have been critical of Gensler from the get-go. 
What’s different, nearly three years into the Biden administration, is that the financial services industry (hedge funds, mutual funds, market makers, trading firms, exchanges) are increasingly abandoning attempts to negotiate with Gensler and adopting a more confrontational stance. 
Some are suing him. 
“The industry (brokers and exchanges alike) are left with the only remaining tool at their disposal – a tool of last resort — litigation against the Commission,” Kirsten Wegner, CEO of the Modern Markets Initiative, wrote in a recent editorial in Trader’s Magazine. 
The complaints from the industry have been mounting for over a year: too many rules. No time for industry input. No roundtable discussions. No sharing of data used to make the policy decisions. 

The tone of the industry commentary toward Gensler has become increasingly hostile and bitter: “”Comment letters’ are a facade because it is all but impossible for the market to digest, process and respond to thousands of pages of draft regulation in only a few months’ time, and regardless, their points are often dismissed without meaningful study or explanation,” Wegner wrote.
Litigation starts 
Last month, Grayscale Bitcoin Trust, which is seeking to convert to a bitcoin ETF, successfully sued the SEC on the grounds that it had already approved a “similar” product in bitcoin futures and its actions were arbitrary and capricious. The SEC is weighing an appeal. 
Now that Gensler has adopted several of the rules that had been in the proposal stage, the industry has begun to take a more litigious stance. 
For example, six financial trade associations this month sued the SEC over its new Private Funds Adviser Rule, which requires registered private fund advisers to undergo an annual financial statement audit. The trade associations claim the SEC exceeded its statutory authority and acted arbitrarily and capriciously.
Gensler also appears to be in open warfare with Virtu Financial, one of the world’s largest market makers.  The SEC recently sued Virtu, claiming it failed to provide measures to protect sensitive customer data, and for making materially false and misleading statements regarding information barriers to prevent the misuse of that information. 
These types of cases would normally result in a quiet settlement, but that doesn’t appear likely. 
Virtu claims that this suit was an “escalation” of a years-long investigation because Virtu CEO Doug Cifu has been openly critical of the SEC’s market structure rule proposals, which have yet to be adopted. 
“Unfortunately, the SEC’s position appears to be driven by politics and headlines rather than the facts and the law,” Cifu said in a recent statement. “Therefore, under these circumstances, we look forward to vigorously defending ourselves in court against these meritless allegations while maintaining our focus on serving clients and markets globally and creating long-term value for our shareholders.” 
Gensler grilled for proposed and adopted rules 
Republicans will be particularly keen to talk about some of the bigger issues Gensler has been tackling. 
Take Climate-Related Disclosures, which were proposed in March 2022 but have not been adopted yet. They would require publicly-traded companies to disclose detailed emissions data and climate risk management strategies, including direct and indirect greenhouse gas emissions from their supply chains.  Republicans have claimed this is beyond the SEC’s mandate. Gensler, in his prepared testimony, says the SEC “has no role as to climate risk itself. We, however, do have an important role in helping to ensure that public companies make full, fair, and truthful disclosure about the material risks they face.” 
Other rules that have been adopted (like cybersecurity, which mandates disclosure of a cybersecurity incident within four business days after a company determines the incident is material) will again be attacked for overreaching. 
Then there’s crypto. Gensler has brought numerous enforcement actions against crypto intermediaries on the grounds that the tokens they offer are securities. Republicans will again attack him for over-reaching. 
And what about that bitcoin ETF lawsuit? Gensler made it clear he “will not be able to comment on any active, ongoing litigation.” Translation: don’t ask about the bitcoin ETF lawsuit. 
What’s next? 
By now, it’s clear Gensler is not backing down and will continue passing new rules because he has a 3-2 majority at the commission. 
Gensler will repeat that he is being reasonable and listening to industry complaints. On the climate change proposal, for example, Gensler noted that the SEC has received more than 15,000 comments and that it “will consider adjustments to the proposed rule that the staff, and ultimately the Commission, think are appropriate in light of those comments.” 
Given what has happened already, that will not mollify the critics. 
Some are hoping that a few Democrats will join the Republicans and ask Gensler to slow down. Last year, a dozen Senate Democrats did just that, sending a letter to Gensler urging him to extend the deadlines for proposed rules and to provide a sufficient period for notice and comment.  
But given the head of steam Gensler has worked up, that too is unlikely to sway him much. 
Now that he has begun adopting many of these rules, the financial services industry seems to be saying, “See you in court.” More

The world’s largest economy is once again facing the prospect of a government shutdown unless lawmakers in Washington can pass a spending bill before an Oct. 1 deadline.
S&P downgraded the long-term credit rating from AAA representing a “risk free” rating to AA+ as early as 2011, citing political polarization after a debt ceiling squabble in Washington.

Washington, D.C. – March 17, 2023: President Joe Biden and House Speaker Kevin McCarthy speak outside the Annual Friends of Ireland Luncheon at the U.S. Capitol.
Drew Angerer | Getty Images News | Getty Images

The U.S. is in a weaker position now than when S&P downgraded its sovereign credit rating in 2011, according to the former chairman of the agency’s sovereign rating committee.
The world’s largest economy is once again facing the prospect of a government shutdown unless lawmakers in Washington can pass a spending bill before an Oct. 1 deadline.

House Speaker Kevin McCarthy cannot afford to lose more than four votes among fellow Republicans in the House of Representatives, but faces resistance from hard-right members within his caucus, who are demanding deeper domestic spending cuts.
Moody’s earlier this week warned that a government shutdown would harm the country’s credit, after Fitch downgraded the long-term U.S. sovereign credit rating by one notch in August on the back of the latest political standoff over raising the debt ceiling.
S&P controversially downgraded the long-term credit rating from AAA representing a “risk free” rating to AA+ as early as 2011, citing political polarization after another debt ceiling squabble in Washington.
John Chambers, former chairman of the Sovereign Rating Committee at S&P Global Ratings at the time of that 2011 downgrade, told CNBC’s “Capital Connection” on Tuesday that a government shutdown is likely and that the whole episode was a “sign of weak governance.”
This was a factor that led to S&P’s downgrade of 2011, and Chambers said the U.S. fiscal position is now even weaker than it was back then.

“Right now the deficit of the general government — which is the federal and the local governments combined — is over 7% of GDP and the government debt is 120% of GDP. At the time, we forecasted that it might get to 100% of GDP, and the government ridiculed us for being too scaremongering,” he said.

“The external position is about the same, but I think the governance has weakened and the fractiousness of the political settings is much worse, and that has led to government shutdowns, it’s led to fears that the government might default on its debt because of the debt ceiling, and it’s led to a failed coup d’état on the 6th [of] January, 2021.”
House Speaker McCarthy needs almost all of his Republican colleagues on the side, but the Freedom Caucus, which had 49 members in January, has stalled budget negotiations by demanding harsher domestic spending cuts.
McCarthy may seek help from Democrats to shore up the necessary votes to avoid a shutdown, but hard-line Republicans have discussed ousting him as speaker if such a compromise is agreed.
In May of this year, another standoff between the White House and opposition Republicans over raising the U.S. debt limit once again pushed the world’s largest economy to the brink of defaulting on its bills, before President Joe Biden and McCarthy struck a last-minute deal.
In its August downgrade, Fitch cited “expected fiscal deterioration over the next three years” and an erosion of governance in light of “repeated debt-limit political standoffs and last-minute resolutions.”
However, the downgrade was dismissed by many big-name bank bosses and economists as largely immaterial. More

The Levi Strauss & Co. label is seen on jeans in a store at the Woodbury Common Premium Outlets in Central Valley, New York, U.S., February 15, 2022. 
Andrew Kelly | Reuters

Check out the companies making headlines in premarket trading.
Sirius XM — Shares of the media company fell roughly 2% in premarket trading. A day earlier, Liberty Media proposed combining the Sirius XM tracking stock with the radio company. A special committee composed of board members of Sirius XM is currently considering the proposal.

Levi Strauss — The apparel maker advanced 1.3% in premarket trading after TD Cowen initiated coverage of the stock at an outperform rating. TD Cowen said Levi’s is in the “early innings of a favorable denim cycle.”
Costco — Shares of the club retailer fell more than 1% even though Costco’s fiscal fourth-quarter response came in better than expected. The company generated $4.86 in earnings per share on $78.9 billion of revenue. Analysts surveyed by LSEG were looking for $4.79 per share on $77.9 billion of revenue. Comparable sales were up just 0.2% in the U.S., however.
ChargePoint – The electric vehicle charging stock popped more than 4% after UBS initiated coverage of ChargePoint with a buy rating, saying that the recent stock performance creates an attractive risk-reward.
XPO — The trucking company climbed about 2% following an upgrade to outperform from Evercore ISI. Analyst Jonathan Chappell forecast greater margin expansion and pricing power from the company.
Lucid, Rivian —- Shares of the electric vehicle makers ticked up 2.1% and 2%, respectively. Both stocks rose a day earlier as the United Auto Workers strike deepened and garnered support from President Joe Biden, who joined a picket line in Michigan.

Mattel — Shares of the toymaker gained 2.4% in premarket trading Wednesday after Morgan Stanley initiated Mattel with an overweight rating, calling it a top pick. The firm said Mattel offers some of the best risk-adjusted returns despite a tough macroeconomic environment.
— CNBC’s Alex Harring, Jesse Pound, Samantha Subin and Pia Singh contributed reporting More

Improbable, which is backed by SoftBank, recorded a loss of £19 million in the 2022 fiscal year, down more than 85% from the £131 million loss it posted a year prior.
Improbable said that a part of the reason behind the company’s reduction in losses was a dramatic lowering of costs for running mass-scale virtual events.
Founded in 2012, Improbable has for years been attempting to build vast, continuously rendering worlds in which thousands of people can play games and interact with each other.

Herman Narula, co-founder and CEO at Improbable, speaks during a session at the Web Summit in Lisbon.
Henrique Casinhas | Sopa Images | Lightrocket | Getty Images

Virtual reality startup Improbable said Wednesday that it reduced losses by 85% in 2022, a year that saw the company pivot its focus to powering new “metaverse” experiences.
The British company said in a press release that its revenues more than doubled last year to £78 million ($95 million), as its work on metaverses expanded significantly.

It reduced losses in the 2022 fiscal year by £131 million to £19 million.
Improbable CEO Herman Narula said the company had reported its “best financial year” on record which reflected how its bet on the metaverse had paid off.
Speaking with CNBC in an interview Tuesday, Narula said Improbable has managed to ship more products with fewer people thanks to advances in generative artificial intelligence. Coders in the company are using generative AI “daily” to write code and come up with solutions to business problems, he said.
“We’re starting to think that the model of a successful tech company in 2023 … the optimal size is probably not that big,” Narula told CNBC. “You probably want to be thinking about much smaller companies overall.
One driver for downsizing tech firms beyond generative AI, according to Narula, is remote work, which he said has made it “harder to motivate a group of people, especially if those people feel distant from management.”

“You’re really looking at a world where we’re moving from big battleships down to swarms of very nimble entities,” he added.
“It gives me a lot of hope that companies like ours have a shot at becoming really successful because we don’t have to adopt the same tactics [Big Tech companies like Microsoft and Meta] had to, such as hiring tens of thousands of people.”
Improbable has historically burned through lots of money as it attempts to make its vision for vast virtual worlds a success. Critics have raised questions about the commercial sustainability of the business.
Improbable said that part of the reason behind the company’s reduction in losses was a dramatic reduction in the cost of running mass-scale virtual events.
Whereas initially it took millions of pounds to host one event, it now takes hundreds of thousands of pounds, the company said, and it anticipates this to continue to fall.
The year also saw Improbable divest two of its games studios, Inflexion Games and Midwinter Entertainment, and sell off a business unit focused on servicing defense clients.
Improbable finished the year with £140 million cash in the bank, signaling ongoing support from shareholders, the company said.
Improbable’s backers include the likes of SoftBank, Andreessen Horowitz, and Temasek.
Full accounts for Improbable are yet to be released on Companies House, the U.K.’s official register of companies.

Metaverse pivot

In 2022, Improbable unveiled its ambition to become a major player in the so-called “metaverse” — the concept for a vast world, or worlds, in the digital sphere where people can work, buy and sell things, or just hang out.
The company has been working with players in the digital asset sphere, including Yuga Labs, which it worked with to build out the Otherside metaverse, where people can make their own digital avatars, attend events, and more.
The company doubled down on its metaverse strategy earlier this year with a white paper detailing its vision for MSquared, a “network of interoperable Web3 metaverses.”
MSquared, which is a separate business entity from Improbable, raised $150 million from investors last year.
The service — a complex piece of technical engineering with significant computing requirements — is intended to be accessible via cloud streaming, meaning you won’t have to download any software to jump into one of its worlds, similar to how movies and TV shows are accessed on Netflix. 
It’s drawn interest from big names in sports and entertainment, like Major League Baseball (MLB).
The company struck a major deal with MLB to launch a new virtual ballpark based on Improbable’s metaverse technology. People in the MLB metaverse can choose any seat they’d like to watch a game, or pick a camera spot to focus on a particular player.
The tech industry has been betting that virtual and augmented reality will prove to be something of a “paradigm” shift in technology akin to the invention of the internet or the smartphone.
Some are calling it the technology’s “iPhone moment,” in reference to effect Apple’s now ubiquitous handset had on consumers and businesses globally.
Apple recently announced its first virtual and augmented reality headset, called the Vision Pro, while Meta unveiled its Quest 3 headset in June. 
Improbable is taking a different route to companies like Apple, Meta, and Microsoft, which is behind the HoloLens mixed reality products.
For one, you won’t need a headset to enter an MSquared space, as the software will be desktop-based. The experience is also intended to be more decentralized and interoperable, with the ability to take content from one metaverse to another.
Founded in 2012, Improbable has for years been attempting to build vast, continuously rendering worlds in which thousands of people can play games and interact with each other.
The London-headquartered firm, one of Japanese tech investment giant SoftBank’s biggest bets in Britain, was founded by Cambridge computer science students Narula and Rob Whitehead with the ambition of developing large-scale computer simulations and “synthetic environments.” More

A customer uses an ATM at a Wells Fargo Bank in San Bruno, California, on April 14, 2023.
Justin Sullivan | Getty Images

Check out the companies making headlines in midday trading.
Cintas — Shares fell 5.3% after the company reported its 2024 fiscal first-quarter earnings. The corporate apparel company posted $3.70 in earnings per share on $2.34 billion in revenue, topping analysts’ consensus estimates of $3.67 per share in earnings and matching revenue forecasts, per StreetAccount. Cintas raised its full-year guidance but the lower end of its EPS and revenue predictions came in below analysts’ estimates.

Pinterest — Shares of the image-sharing platform declined 0.6% after HSBC initiated coverage of the stock with a buy rating. The Wall Street firm said Pinterest has “the right management team in place, a product fit for shopping and a differentiated capital-light strategy to deliver on its foray into social commerce.”
United Natural Foods — Shares sank 27.4% Tuesday after United Natural Foods forecast earnings per share and adjusted EBITDA in the coming year below analysts’ estimates, citing profitability headwinds. The food company’s guidance ranges between a loss of 88 cents per share to earnings of 38 cents per share, excluding items, while analysts called for $1.94 per share, according to StreetAccount. The company’s fiscal fourth-quarter revenue missed analysts’ $7.47 billion estimate.
Fisker — The electric vehicle maker climbed 9.6% after Bank of America initiated coverage of shares at a buy rating. The firm said the company offers pure-play exposure in a growing market.
Wells Fargo, JPMorgan, Goldman Sachs — Bank stocks declined Tuesday after JPMorgan Chase CEO Jamie Dimon warned the Federal Reserve could still raise interest rates even further to tamp down inflation, which added to overall bearish sentiment. Shares of Wells Fargo and Goldman Sachs declined 2.2% and 1.5%, respectively, while Morgan Stanley and JPMorgan both lost about 1%. 
SiriusXM — Shares of the media company slipped 3.2% following news of a proposal from Liberty Media to SiriusXM’s special committee of independent directors to combine the two corporate structures into one entity.

DraftKings — DraftKings’ shares jumped just above 2% after JPMorgan upgraded the sports betting stock to overweight from neutral, saying the company’s recent underperformance creates an attractive entry point for investors.
Barclays — U.S.-listed shares of the bank added 2.2% after Morgan Stanley upgraded Barclays to overweight from an equal weight rating, citing an improved revenue outlook and opportunity for U.S. credit card growth.
Amazon – Shares dropped 4% after the Federal Trade Commission and 17 state attorneys general sued Amazon on Tuesday, hitting the e-commerce retailer with antitrust charges. The suit alleges that Amazon uses its “monopoly power” to hike prices and prevent rivals from competing against it.
— CNBC’s Hakyung Kim, Alex Harring, Brian Evans, Samantha Subin and Yun Li contributed reporting. More