Finance

Check out the companies making headlines before the bell:
PepsiCo (PEP) – The beverage and snack giant reported an adjusted quarterly profit of $1.86 per share, 12 cents above estimates, and revenue topped Wall Street forecasts. The company also raised its full-year forecast as consumer demand holds up even as prices rise. PepsiCo gained 1.2% in the premarket.

Gap (GPS) – The apparel retailer’s stock slumped 6.3% in the premarket after CEO Sonia Syngal stepped down after two years on the job. She’ll be replaced on an interim basis by executive chairman and former Walmart executive Bob Martin.
Peloton (PTON) – The fitness equipment maker announced it will fully transition to third-party manufacturing, expanding its partnership with Taiwan-based manufacturer Rexon Industrial. Peloton fell 1.8% in premarket trading before erasing those losses and going positive.
Twitter (TWTR) – Twitter sent a letter to Elon Musk saying it did not breach any of its obligations under their takeover agreement and that his effort to back out of the deal was “invalid and wrongful.” Twitter shares have fallen 15.8% over the past 2 trading days.
Dave & Buster’s (PLAY) – The entertainment-themed restaurant chain announced a series of new executive appointments, including the appointment of a new chief operating officer. The changes take effect August 1, and the stock gained 1.7% in the premarket.
PriceSmart (PSMT) – The discount retailer’s shares slid 4.2% in premarket trading after it reported lower-than-expected earnings despite sales that exceeded analyst estimates. PriceSmart was impacted by supply chain disruptions and excess inventory levels prompted by shifts in consumer demand.

Canoo (GOEV) – The electric vehicle maker’s stock soared 73.4% in the premarket after it struck a deal to sell 4,500 delivery vehicles to Walmart (WMT) for an undisclosed amount. Walmart also has an option to purchase up to 10,000 units.
Lennar (LEN) – The home builder’s shares fell 1.7% in premarket trading after J.P. Morgan Securities downgraded the stock to “neutral” from “overweight” as the industry faces a number of headwinds, including softening sales and higher incentives.
American Express (AXP) – American Express shares fell 2.6% in premarket action after Morgan Stanley downgraded the financial services giant to “equal-weight” from “overweight.” The firm said the risk of recession is not fully priced into American Express’ stock.

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Temasek Holdings reported Tuesday that the net value of its portfolio grew to $286.48 billion (403 billion Singapore dollars) at the end of March.
That’s S$22 billion higher than the previous year, surpassing last year’s record high.
The investor also warned the outlook for the global economy remains in a “fragile state.”
Geopolitical uncertainties coupled with “rising inflation, surging commodity prices and severe supply chain bottlenecks have uncovered further fault lines in the global marketplace,” Temasek said.

A signage for Temasek Holdings is displayed during a news conference following the company’s annual review in Singapore on July 9, 2019.
Bryan van der Beek | Bloomberg | Getty Images

SINGAPORE — Temasek Holdings reported Tuesday that the net value of its portfolio grew to $286.48 billion (403 billion Singapore dollars) at the end of March — that’s S$22 billion higher than the previous year, surpassing last year’s record high.
Still, the state-owned investor warned that the outlook for the global economy remains in a “fragile state.”

“Amid the uncertainty in global markets, we steadily invested and divested to capture opportunities aligned with long-term structural trends,” Temasek said in a statement. “We aim to construct a resilient and forward-looking portfolio, with sustainability at the core of all that we do.”
In its annual report released Tuesday, Temasek said one-year shareholder return was 5.81% in Singapore dollar terms. Returns for the 20-year and 10-year were respectively 8% and 7% compounded annually, the firm added.
During the financial year, the company invested S$61 billion and divested S$37 billion.

Global economy

Geopolitical uncertainties coupled with “rising inflation, surging commodity prices and severe supply chain bottlenecks have uncovered further fault lines in the global marketplace,” Temasek said.
Given the “likelihood of a recession in developed markets over the next year, we maintain a cautious investment stance while staying focused on constructing a resilient portfolio underpinned by the structural trends we have identified,” said Rohit Sipahimalani, Temasek’s chief investment officer.

More than 60% of Temasek’s portfolio is in Asia, with Singapore making up 27% of it and China accounting for 22%.
China may face challenges achieving its 2022 growth target of 5.5%, given weakness in its growth so far this year, Temasek said. 
“Policy agencies are likely to maintain a supportive stance to buffer headwinds from soft property activity and pandemic restrictions,” the report noted.
As for Singapore’s economy, the Singapore investor expects expansion to be slower than earlier projected.
“Even though pandemic reopening will facilitate a stronger recovery in domestically-oriented and travel-related sectors, growth prospects in Singapore’s externally-oriented economy will be weighed down by the global backdrop and a risk of recession in developed markets,” Temasek said.
In the U.S., the labor market remains tight and inflationary pressures continue to be strong, the report added.
Given tightening financial conditions and elevated geopolitical uncertainty, “growth is likely to slow meaningfully and below trend, raising the  risks of a recession into 2023,” Temasek said.

Climate investments

Over the year, Temasek boosted its efforts to invest in climate-related opportunities, and encouraged decarbonization efforts in businesses. 
In June, it set up GenZero — an investment platform company wholly owned by Temasek — which seeks to deliver positive climate impact together with sustainable financial returns for the long term.
It has also invested in Ambercycle, an LA-based materials science company, which utilizes novel molecular separation technologies to recycle textiles into virgin-grade polyester. Temasek also increased its exposure in Solugen, a sustainable chemical start-up working to decarbonize the chemicals industry. 
The state investor said it continues to engage with its portfolio companies in growing capacity for sustainability leadership and climate transition management.
For example, Singapore Airlines is working on a pilot with the Civil Aviation Authority of Singapore to use sustainable aviation fuel on SIA and Scoot flights. Separately, Sembcorp Industries hopes that by 2025, the company will be able to make its sustainable solutions portfolio contribute 70% of the group’s net profit, Temasek said.

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Klarna said it raised $800 million in fresh funding at a $6.7 billion valuation — down sharply from $45.6 billion a year ago.
Klarna CEO Sebastian Siemiatkowski insisted the deal was a “testament to the strength of Klarna’s business.”
The development is an indication of grim investor sentiment surrounding high-growth tech stocks and “buy now, pay later” lenders.

Currently, most buy now, pay later services don’t impact a person’s credit score. That’s now set to change in the U.K.
Jakub Porzycki | NurPhoto | Getty Images

Klarna saw its valuation slashed by 85% in a new financing round announced Monday, reflecting grim investor sentiment surrounding high-growth tech stocks and “buy now, pay later” lenders.
The Swedish fintech firm said it raised $800 million in fresh funding from investors at a $6.7 billion valuation — down sharply from the $45.6 billion value it secured in a 2021 cash injection led by Japan’s SoftBank.

It follows weeks of speculation that Klarna was seeking a so-called down round, where a privately-valued firm raises capital at a valuation lower than when it last sold investors new shares.
Klarna CEO Sebastian Siemiatkowski attempted to downplay the significance of the company’s valuation decline Monday, insisting the deal was a “testament to the strength of Klarna’s business.”
“During the steepest drop in global stock markets in over fifty years, investors recognized our strong position and continued progress in revolutionizing the retail banking industry,” Siemiatkowski said in a statement Monday.

As well as securing backing from existing investors Sequoia and Silver Lake, Klarna also attracted additional investment from the Canada Pension Plan Investment Board Abu Dhabi’s Mubadala Investment Company in the round.
Klarna said it would use the funding to continue pursuing expansion in the United States. The company said it now has almost 30 million U.S. users in total.

Goldman Sachs served as advisers to Klarna for a proportion of the funds raised, the company added.

What next for buy now, pay later?

Klarna’s down round is a sign of how turmoil in tech stocks is unnerving investors in the private markets.
Numerous venture capital-backed tech firms have seen their valuations fall due to fears of a nearing recession. They’ve also made a series of layoffs and other cost-cutting measures in a bid to appease skittish investors.
Klarna itself cut about 10% of its global workforce earlier this year.
The development is also an indication of trouble in the buy now, pay later, or BNPL, market.
Services like Klarna and Affirm, which let clients spread the cost of their purchases over equal monthly installments, have faced questions over the sustainability of their business models against a backdrop of rising inflation and higher interest rates.

They’re also facing escalating competition from a multitude of new entrants in the space — including Apple, which announced the launch of its own installment loans feature in June.
Shares of Affirm, which debuted in early 2021, have fallen more than 77% since the start of this year.
PayPal and Square parent company Block — which acquired Australian BNPL firm Afterpay — are down 64% and 61%, respectively, over the same time frame.
In a series of tweets Monday, Siemiatkowski said Klarna was “not immune” to the pressures facing its peers and that the company planned to “return to profitability” after racking up hefty losses as a result of aggressive international expansion.
The fact that Klarna is valued only slightly higher than the $5.5 billion it was worth in mid-2019 was “odd considering all the things achieved” by the company since, Siemiatkowski said.
“What does not kill you makes you stronger,” he added.

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Traders work on the floor of the New York Stock Exchange. 

Check out the companies making headlines in midday trading.
Twitter — Shares of the social media company dropped more than 8% after Elon Musk walked away from his $44 billion deal to buy Twitter. Musk alleged that Twitter under-reported the number of spam bots on the platform. The two parties are likely set for a protracted court battle, and Musk could also be faced with paying a $1 billion breakup fee.

Casino stocks — Shares of Wynn Resorts and Las Vegas Sands dove 9.4% and 8.8%, respectively, after Macao ushered in a week-long shutdown as it grapples with a Covid-19 outbreak. Monday marked the first time in more than two years that Macao has shut down all of its casinos.
Lululemon, Under Armour — Shares of the activewear retailers were lower following downgrades by Jefferies. Lululemon fell 4% after the firm lowered its rating on the stock to underperform from hold, citing “rising competition.” Under Armour declined by some 4.7%. Jefferies downgraded it to neutral from buy, saying fundamentals are “lagging.”
Meta Platforms — The social media company’s stock dropped 4.2% after Needham downgraded it to underperform from hold. The firm pointed to Meta’s heavy investments into the metaverse, which may take too long to pay off.
Uber — The ridesharing stock fell more than 4% following a report by the International Consortium of Investigative Journalists that said Uber has lobbied extensively to relax labor and tax laws and used “stealth technology” to block government scrutiny. The company issued a statement acknowledging prior mistakes and emphasizing Uber “is a different company today.”
Nio — Nio shares slid 8.4% as China appears to be battling another wave of Covid-19. Reuters reported that multiple Chinese cities have imposed new health restrictions. The automaker also announced that it has formed a committee to investigate allegations made against Nio by a short-seller last month.

Amazon — The ecommerce giant lost 2.3% after Bloomberg reported that the number of U.S. Prime customers stalled in the first half of the year, possibly in part because of the $20 membership price hike that took place in February. Amazon had 172 million members on June 30, level with six months prior, the report said, citing Consumer Intelligence Research Partners.
Upstart — Upstart jumped as much as 2.6% Monday as investors looked to buy the dip. The company’s stock took a hit last week after it announced it would not meet its already-reduced financial targets for the second quarter and JMP Securities downgraded it. Shares are down more than 80% this year.
 — CNBC’s Yun Li, Sarah Min, Samantha Subin, Carmen Reinicke and Jesse Pound contributed reporting.

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Take a look at some of the biggest movers in the premarket:
Twitter (TWTR) – Twitter slid in premarket trading after Elon Musk announced late Friday that he was abandoning his $44 billion takeover deal. Twitter responded by saying it plans legal action to hold Musk to the agreed-upon transaction.

Wynn Resorts (WYNN), Las Vegas Sands (LVS) – Wynn Resorts dropped 6% and Las Vegas Sands fell 5.4% in the premarket, as the gambling enclave of Macau begins a one-week shutdown to try to contain the spread of Covid-19.
Lululemon (LULU), Under Armour (UAA) – Lululemon fell 3.9% in the premarket while Under Armour lost 3% after Jefferies downgraded both apparel makers. Lululemon was cut to “underperform” from “hold,” with Jefferies noting increased competition and an easing of the COVID-related spike in demand. Under Armour was downgraded to “hold” from “buy” on concerns about management volatility and lagging fundamentals.
Uber Technologies (UBER) – Uber is said to have lobbied extensively to relax labor and tax laws, and used so-called “stealth technology” to block government scrutiny and gain public trust, according to a report by the International Consortium of Investigative Journalists. Uber issued a statement saying it had made mistakes in the past and that it is a different company today. Uber lost 2.6% in premarket action.
China tech stocks – These stocks fell after the Chinese government fined Alibaba (BABA), Tencent and other China tech companies for failing to comply with anti-monopoly rules and not disclosing transactions. Alibaba lost 3.9% in the premarket, with JD.com (JD) off 3.4%, Pinduoduo (PDD) slipping 4.4% and Baidu (BIDU) down 3%.
Mattel (MAT) – Mattel was upgraded to “buy” from “neutral” at Goldman Sachs, which thinks the toy maker will benefit from demand related to new TV and film releases. Mattel rallied 2.9% in premarket trading.

Nio (NIO) – The China-based electric car maker said its board had formed an independent committee to investigate allegations made by short-selling firm Grizzly Research. Grizzly had accused Nio of exaggerating its revenue and profit margins, allegations that Nio said were without merit. Nio lost 3.2% in the premarket.
Qorvo (QRVO) – The provider of radio frequency technology was downgraded to “market perform” from “outperform” at Cowen, which thinks weakness in the Android market will weigh on revenue and profit margins. Qorvo lost 2.9% in premarket action.

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Traders on the floor of the NYSE, June 24, 2022.
Source: NYSE

U.S. equities futures dipped Sunday evening as Wall Street looked ahead to big company earnings reports and key inflation data, on the heels of a strong employment report.
Futures tied to the Dow Jones Industrial Average slipped by 51 points, or 0.1%. S&P 500 futures fell 0.2% and Nasdaq 100 futures lost 0.4%.

On Friday the Dow and S&P finished trading slightly lower, while the Nasdaq Composite rose for a fifth straight day. All of the major averages secured a winning week after a stronger-than-expected jobs report Friday showed that the economic downturn worrying investors has not yet arrived and added to positive sentiment.
Treasury yields jumped, with the 2-year Treasury yield holding above the 10-year yield, an inversion many see as a recession indicator.
“While the markets ended in solid green for the week, investors should brace for continued volatility in July, with ongoing uncertainties looming with respect to inflation, Fed policy, recession concerns, the enduring Russia-Ukraine war, all as we also move into corporate earnings season,” said Greg Bassuk, chief executive officer at AXS Investments.
The jobs report, while good for the economy, could embolden the Federal Reserve to continue its aggressive rate hikes in the coming months to fight persistently high inflation. It will be tested this week with a slew of earnings from major banks and consumer inflation data this week on deck.
“With recessionary fears weighing on the markets, investors are hyper-focused on corporate earnings for greater clues about the health of corporate America and the broader U.S. economy,” Bassuk said.

“A sharper lens will be needed to dissect these earnings reports, as a strong second quarter might be accompanied by very conservative outlooks,” he added. “As commodity and other producer costs remain high, companies will be factoring in the extent to which those heightened prices can be passed on to consumers and, likewise, how to keep earnings vigorous amid economic, geopolitical and other key headwinds.

Stock picks and investing trends from CNBC Pro:

PepsiCo and Delta Air Lines are scheduled to report earnings Tuesday and Wednesday. JPMorgan Chase, Morgan Stanley, Wells Fargo and Citigroup are set to report at the end of the week.
Investors are also looking ahead to key inflation data this week. The June consumer price index will be released Wednesday and is expected to show headline inflation, including food and energy, rising above May’s 8.6% level.
“Investors expect more aggressive Fed rate hike actions, unless the inflation data shows an outsized reduction in prices, balanced against concerns that an over-aggressive boost in rates could tip the U.S. into recessionary territory,” Bassuk said.
The June producer price index is due out Thursday and the University of Michigan consumer sentiment report for July will be released Friday.

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Traders on the floor of the NYSE, May 27, 2022.
Source: NYSE

It’s a type of ETF seeing near-record inflows.
New data shows dividend exchange-traded funds totaled almost $50 billion in fresh money in the first half of 2022, according to Todd Rosenbluth of VettaF, a financial services company.

“We recently did a survey of advisors at VettaFi, and dividend strategies were most popular in terms of getting income,” the company’s head of research told CNBC’s “ETF Edge” on Wednesday. “Higher than corporate bonds, higher than Treasurys, higher than more narrowly focused sectors like real estate.”
Both dividend and ultrashort-bond ETFs are experiencing significant market activity due to intensifying concerns of a serious economic downturn and the increasing appeal of traditionally safer investments. These funds are considered big winners in the year’s first half because investors were on the hunt for gains and safety.
Rosenbluth expects strong demand for dividend and ultrashort-bond ETFs in the second half, as well, citing a “hawkish” Federal Reserve, high equity market volatility and investors on the lookout for “relatively safe alternatives.”
“Advisors and institutional investors are seeking strategies beyond traditional core equity and bond funds this year,” he told CNBC.
Will Rhind, founder and CEO of GraniteShares, said his business is seeing people prioritize cash while facing a potential recession. 

“One of the main themes in equity markets this year is people getting out of growth names that, you know, typically don’t pay much of a dividend — if anything at all — and into cash-yielding names,” Rhind said.
More dividend stocks can equate to more value plays, he added.
Investment advisors are looking to dividend strategies as a form of income, according to Rosenbluth. His main reason: Ultrashort-bond “cash-like strategies” remain insensitive to fixed income interest rates over short periods of time.
“We’re seeing this [ultrashort-bond ETF] asset base grow significantly, and it’s another one of those trends we’re watching here at VettaFi,” he said.
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The Twitter logo and trading information is displayed as a trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 3, 2022.
Brendan Mcdermid | Reuters

Check out the companies making headlines in midday trading.
Upstart — The consumer lender’s shares tumbled 19.7% after the company issued a profit warning saying it will not meet already-reduced financial targets for its second quarter, pointing to a constrained lending marketplace and moves to convert loans to cash. JMP also downgraded the stock citing “limited revenue visibility” going forward.

Vita Coco — Shares of beverage company Vita Coco surged 11.4% when Bank of America upgraded the stock to buy and raised its price target. The firm said that a stabilizing ocean freight marketplace should drive down costs and help boost the company’s earnings in the years to come. In addition, Bank of America sees Vita Coco as solidly positioned to withstand a potential recession.
WD-40 — The lubricant maker’s shares slid 14.9% after the the company reported weaker-than-expected quarterly earnings. WD-40 Chairman and CEO Garry Ridge cited a “challenging macroeconomic environment” and rising inflation as pressuring gross margins for the company.
XPO Logistics — Shares of freight company XPO Logistics jumped 2.3% after Morgan Stanley upgraded the stock to overweight from equal weight. The bank considers XPO Logistics a buying opportunity now that shares have dropped 35% year to date.
Spirit Airlines — The airline company’s shares added 4.2% after Spirit Airlines postponed yet another shareholder vote on its plan to merge with Frontier Group. It is the third time Spirit delayed a vote, as Frontier Group and JetBlue Airways compete in a bidding war for the airline company.
Twitter — Shares of Twitter lost 5.1% following a Washington Post report that Elon Musk’s deal to buy the social media company is in jeopardy.

Tesla — Tesla’s shares gained 2.5% following a report from the China Passenger Car Association that showed Tesla sold a record number of China-made vehicles. Tesla sold 78,906 China-made vehicles in June, compared to 32,165 vehicles in May.
GameStop — Shares of the video game retailer fell 4.9% a day after the company said it has fired its chief financial officer, Mike Recupero, and is making staff cuts across departments as part of an aggressive turnaround plan. CEO Matt Furlong explained the changes in the memo to employees and said the company has to take bold steps as it invests in its digital future.
Six Flags Entertainment — Shares of Six Flags declined 7% after Citi downgraded the stock to neutral from buy, and cut the price target to $26 from $41. Citi cited falling attendance numbers against rising inflation.
— CNBC’s Yun Li, Tanaya Macheel and Carmen Reinicke contributed reporting

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