Finance

Check out the companies making headlines before the bell:
Kohl’s (KSS) – Kohl’s tumbled 17.9% in premarket trading after the retailer confirmed an earlier CNBC report that it ended talks to be bought by Vitamin Shoppe parent Franchise Group (FRG). Kohl’s said the deteriorating retail and financial environment presented significant obstacles to concluding a deal. It also cut its current-quarter outlook amid more cautious consumer spending.

Micron Technology (MU) – Micron slid 4.6% in the premarket despite reporting a better-than-expected quarterly profit. The chip maker’s shares came under pressure due to a lower-than-expected sales outlook, stemming from weakening overall demand.
Apple (AAPL) – J.P. Morgan Securities analyst Samik Chatterjee reiterated an “overweight” rating on Apple, saying he is not as worried about Apple’s prospects as others. The firm has a December price target of $200 per share, $46 higher than its Thursday close.
China-based electric vehicle makers – Li Auto (LI) delivered 13,024 vehicles in June, a 69% year-over-year increase for the China-based electric vehicle maker. Rival Xpeng (XPEV) delivered 15,295 vehicles in June, a 133% jump from a year earlier. Nio (NIO) delivered 12,961 vehicles in June, up 60% from a year ago. Li Auto added 1.7% in premarket action, Xpeng rose 2.1%, and Nio gained 1.8%.
Meta Platforms (META) – The Facebook parent is slashing hiring plans and bracing for an economic downturn. In an employee question-and-answer session heard by Reuters, CEO Mark Zuckerberg said it might be “one of the worst downturns we’ve seen in recent history”.
Caesars Entertainment (CZR), MGM Resorts (MGM) – The resort operators reached tentative contract agreements with Atlantic City casino workers, avoiding what might have been a costly strike during the busy July 4th holiday weekend.

FedEx (FDX) – FedEx lost 2.1% in the premarket after Berenberg downgraded the stock to “hold” from “buy”, pointing to near-term earnings risks which could halt a recent rally in the stock.
Coupang (CPNG) – The South Korean e-commerce company saw its stock rise 1.7% in the premarket after Credit Suisse upgraded it to “outperform” from “neutral”. The firm feels Coupang’s bottom-line turnaround prospects are underappreciated by investors.

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Crypto exchange FTX is close to finalizing a term sheet to buy BlockFi and a deal is expected to be signed by the end of this week, three sources familiar with the situation told CNBC. 
It comes after FTX provided a $250 million emergency line of credit to BlockFi.
The price tag is well below BlockFi’s last valuation, leaving equity investors in BlockFi “wiped out” and writing off the value of their losses.

FTX is swooping in to buy crypto lender BlockFi for pennies on the dollar, sources told CNBC.
The term sheet is almost over the finish line and expected to be signed by the end of the week, according to three sources, who asked not to be named because the deal discussions were confidential. FTX is expected to pay roughly $25 million, one source said, 99% below BlockFi’s last private valuation. Another person with direct knowledge of the deal pegged the price closer to $50 million. Jersey City, New Jersey-based BlockFi was last valued at $4.8 billion, according to PitchBook. 

The price tag could shift between now and Friday, the source said. An acquisition could also take multiple months to close. The person added that the deal could end up being options to acquire BlockFi at a later date, pending regulatory approval.
Friday also marks the end of the quarter, which one source said was a catalyst for getting a deal signed. The Wall Street Journal first reported that FTX was seeking an equity stake in the company, while The Block reported this week that an outright deal was in the works. 
An FTX spokesperson said the company “would not be commenting on the matter.” A BlockFi spokesperson said the company “does not comment on market rumors.” BlockFi CEO Zac Prince pushed back on the $25 million figure in a tweet calling the figure “market rumors.”
The fire sale comes a week after FTX provided a $250 million emergency line of credit to BlockFi. FTX CEO Sam Bankman-Fried said at the time that the financing would help BlockFi “navigate the market from a position of strength.” 
It’s the latest fallout for crypto lending companies amid plunging crypto asset prices. Funds have struggled with liquidity issues as counterparties fail to meet margin calls. Celsius and CoinFlex paused customer withdrawals citing “extreme market conditions.” Major cryptocurrency hedge fund Three Arrows Capital has fallen into liquidation, CNBC reported earlier, marking one of the biggest casualties of crypto’s bear market.

Another source said equity investors in BlockFi are “wiped out” and are now writing off the value of their losses. The person said multiple offers were being considered, since there was no “shop clause” in the term sheet. 
“There was more than one deal on the table,” a source told CNBC. 
Billionaire Bankman-Fried has been seen as a lender of last resort in the space. In addition to BlockFi, Bankman-Fried’s company Alameda Research provided a $500 million loan to Voyager.
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U.S. stock futures fell Thursday night after the S&P 500 closed out its worst first-half performance in decades.
Futures tied to the Dow Jones Industrial Average traded 114 points lower, or 0.4%. S&P 500 and Nasdaq 100 futures dipped 0.3% each.

Micron Technology shares fell more than 2% in after-hours trading on the back of disappointing fiscal fourth-quarter guidance.
Thursday marked the end of the second quarter and the first half of the year. For the quarter, the S&P 500 fell more than 16% — its biggest one-quarter fall since March 2020. For the first half, the broader market index dropped 20.6% for its largest first-half decline since 1970. It also tumbled into bear market territory, down more than 21% from a record high set early January.
The Dow Jones Industrial Average and Nasdaq Composite were not spared from the onslaught. The 30-stock Dow lost 11.3% in the second quarter, putting it down more than 15% for 2022. The Nasdaq, meanwhile, suffered its biggest quarterly drop since 2008, losing 22.4%. Those losses pushed the tech-heavy composite deep into bear market territory, down nearly 32% from an all-time high set in November. It’s also down 29.5% year to date.
Those steep first-half and quarterly losses come as investors grapple with sky-high inflation and tighter monetary policy. The core personal consumption expenditures index – the Federal Reserve’s preferred inflation gauge, rose 4.7% last month on a year-over-year basis. While that was slightly below a Dow Jones estimate, it was still near multidecade highs.
The Fed, in turn, has stepped up its efforts against the surge in prices, hiking by 0.75 percentage point in June. That was its biggest rate increase since 1994.

Both of these factors have resulted in escalating recession worries. First-quarter GDP contracted by 1.6%, and the Atlanta Federal Reserve’s GDPNow tracker is pointing to another 1% decline in economic output for the second quarter.
“If we have any words of comfort, it is that universal losses at this pace rarely take place in successive quarters, but this is not the same as saying that further losses should not be anticipated,” wrote Michael Shaoul of Marketfield Asset Management. “This still very much looks to be the middle of the story, the period in which a previously ‘pacific’ outlook is replaced by something far stormier, and we are yet to see any signs that the weather is about to turn for the better.”
Traders will take in more economic data Friday, with the latest ISM manufacturing index and construction spending numbers set for release at 10 a.m. ET.
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The European Commission, EU lawmakers and member states hammered out an agreement on reforms Thursday.
The new law, known as Markets in Crypto-Assets (MiCA), is the first attempt at creating a comprehensive regulatory framework for digital assets in the region.
EU lawmaker Stefan Berger said the rules will “put order in the Wild West of crypto assets.”

Bitcoin is a volatile asset, and has been known to swing more than 10% higher or lower in a single day.
Jakub Porzycki | Nurphoto | Getty Images

EU officials on Thursday secured an agreement on what is likely to be the first major regulatory framework for the cryptocurrency industry.
The European Commission, EU lawmakers and member states hammered out a deal in Brussels after hours of negotiations. The move came a day after the three main institutions finalized measures aimed at stamping out money laundering in crypto.

The new rules come at a brutal time for digital assets, with bitcoin facing its worst quarter in more than a decade.
The landmark law, known as Markets in Crypto-Assets, or MiCA, is designed to make life tougher for numerous players in the crypto market, including exchanges and issuers of so-called stablecoins, tokens that are meant to be pegged to existing assets like the U.S. dollar.
Under the new rules, Stablecoins like tether and Circle’s USDC will be required to maintain ample reserves to meet redemption requests in the event of mass withdrawals. They also face being limited to 200 million euros in transactions per day if they become too big.
While EU member states will be the main enforcers of the rules, the European Securities and Markets Authority, or ESMA, is also being given powers to step in to ban or restrict crypto platforms if they are seen to not properly protect investors or threaten market integrity or financial stability.
“Today, we put order in the Wild West of crypto assets and set clear rules for a harmonized market that will provide legal certainty for crypto asset issuers, guarantee equal rights for service providers and ensure high standards for consumers and investors,” said Stefan Berger, the lawmaker who led negotiations on behalf of the European Parliament.

MiCA will also address environmental concerns surrounding crypto, with firms required to disclose their energy consumption as well as the impact of digital assets on the environment.
A previous proposal would have scrapped crypto mining, the energy-intensive process of minting new units of bitcoin and other tokens. However, it was voted down by lawmakers in March.
The rules won’t affect tokens without issuers, like bitcoin, however trading platforms will need to warn consumers about the risk of losses associated with trading digital tokens.
Regulators also agreed on measures that would reduce anonymity when it comes to certain crypto transactions.
Authorities are deeply concerned about exploitation of crypto-assets for laundering ill-gotten gains and evasion of sanctions — particularly after Russia’s ongoing invasion of Ukraine.
Transfers between exchanges and so-called “un-hosted wallets” owned by individuals will need to be reported if the amount tops the 1,000-euro threshold, a contentious issue for crypto enthusiasts who often trade digital currencies for privacy reasons.
Non-fungible tokens (NFTs), which represent ownership in digital properties like art, were excluded from the proposals. The EU Commission has been tasked with determining whether NFTs require their own regime within 18 months.

Un-stablecoins

The rules follow the collapse of terraUSD, a so-called “algorithmic” stablecoin that tried to maintain a $1 value by using a complex algorithm. The debacle resulted in hundreds of billions of dollars being wiped from the entire crypto market.
“The EU is not happy about stablecoins generally,” said Robert Kopitsch, secretary general of crypto lobbying group Blockchain for Europe.

Policymakers have been skeptical of such tokens — which aim to be pegged to existing assets, such as the dollar — ever since Facebook botched an attempt at launching its own token in 2019. Authorities feared private digital tokens could end up threatening sovereign currencies like the euro.
Paolo Ardoino, chief technology officer of Tether, said the world’s biggest stablecoin issuer welcomed regulatory clarity.
In addition, Dante Disparte, chief strategy officer at Circle, said the EU framework represented a “significant milestone.”
MiCA “will be to crypto what GDPR was to privacy,” he said, referring to groundbreaking EU data protection rules that set the standard for similar laws elsewhere in the world, including California and Brazil.

Reducing fragmentation

Overall, MiCA is the first attempt at creating comprehensive regulation for digital assets in the EU. While some of its stricter policies have rattled a few crypto firms, several industry insiders see the move as a positive step and believe Europe could lead the way on crypto regulation.
The rules are expected to come into force as early as 2024, a landmark move that would put the bloc ahead of both the U.S. and Britain in rolling out laws tailored to the crypto market.
“Harmonization of the market is key in order to really generate bigger and scaling bigger crypto companies in Europe,” said Patrick Hansen, an advisor at the venture fund Presight Capital.
“Europe is lacking huge crypto companies right now, and fragmentation is one of the reasons why.”
Coinbase is seeking licenses in several European countries including France, said Katherine Minarik, the firm’s vice president of legal. She told CNBC the exchange will be able to “passport” its services into all 27 EU countries under MiCA.

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The Atlantic hurricane season is in full swing, and a new exchange-traded fund that focuses on disaster recovery has launched just in time for it.
The first-of-its-kind Procure Disaster Recovery Strategy ETF invests in companies working to reduce risk and motivate sustainable recovery from natural disasters around the world.

“Our partners at VettaFi and the team that helped construct this index looked at things like hurricanes, floods, droughts, wildfires, tornadoes — natural disasters that are occurring all around the globe — and what companies are actually stepping up to help us in those efforts,” ProcureAM CEO Andrew Chanin told CNBC’s “ETF Edge” this week.
The ETF, which trades under the ticker FEMA, bundles companies across sectors including industrials, energy and materials. “These are the companies that really help bring our lives back to normal when we need them most,” Chanin said.
Holdings in the FEMA ETF include communications tech company Fujitsu, risk assessment firm Verisk Analytics, Jacobs Engineering Group and cloud computing firm VMware.
Chanin calls the ETF “a very diversified basket,” including companies in various industries that work on disaster prevention as well as recovery.
Separately, he told CNBC that creation of the FEMA ETF was inspired by Hurricane Katrina, which hit the Gulf Coast in 2005. While attending school at Tulane University in New Orleans, Chanin considered the financial and human tolls that come with major natural disasters.

“One of the first things I did when I was down in New Orleans, when we heard Hurricane Katrina coming, was everyone was going to Home Depot to buy plywood. And, then you need to go and you need to purchase more stuff — whether it’s shingles, whether it’s things to repair, whether it’s paint — after these disasters,” Chanin said. “It’s a wide range of companies that are all involved throughout different parts of the life cycle.”
Since 1980, the U.S. has undergone 323 weather and climate disasters totaling $2.2 trillion in costs, according to the National Centers for Environmental Information, an agency operated by the National Oceanic and Atmospheric Administration.
Since its launch on June 1, the FEMA ETF is off about 11%. More

Investors rolled $516.7 billion from workplace retirement plans into traditional individual retirement accounts in 2018.
Mutual funds in 401(k) plans tend to be cheaper than those in IRAs, according to The Pew Charitable Trusts. Workers who rolled money to IRAs in 2018 would have paid $45.5 billion in extra fees over 25 years, in aggregate, Pew estimates.
However, workers won’t necessarily always be better served by keeping money in their workplace plan. IRAs have some advantages and aren’t always less costly.

andresr | E+ | Getty Images

IRA rollovers are common for job switchers, retirees

Investors rolled $516.7 billion from workplace plans into traditional IRAs in 2018, the latest year for which data is available. That’s nearly 28 times more money than as contributed to traditional IRAs that year.
A Pew survey from 2021 found that 46% of recent retirees rolled at least some of their workplace retirement funds to an IRA, and 16% of near retirees plan to do so.
A rollover may not be optional, either: About 15% of 401(k) plans don’t allow workers to retain funds in the plan when they retire, according to a survey conducted by the Plan Sponsor Council of America, a trade group.

How much money rollover IRA fees may cost investors

The typical “hybrid” fund in a 401(k) plan is 0.19 percentage points cheaper than the same fund available to IRA investors, according to the Pew study. (A hybrid fund holds both stocks and bonds.)
That fee differential, which may seem negligible, amounts to big bucks over many years.

Using those figures, Pew estimates that investors who rolled over in 2018 would have collectively lost about $980 million in a year due to extra fees. Over 25 years, their nest eggs would be reduced by about $45.5 billion in aggregate due to fees and lost earnings, according to the analysis. That’s just from a single year’s worth of rollovers.
The typical fee differential in 401(k) plans versus IRAs is even larger for stock funds and bond funds — 0.34 and 0.31 percentage points, respectively.

Mutual fund share classes have different fees

Pew’s analysis examines fees according to mutual fund “share classes.”
Basically, the same fund can have multiple share classes that carry different fees, also called an “expense ratio.” They fall into two basic camps: “institutional” shares, which carry higher investment minimums and are generally available to employers and other institutions; and “retail” shares that carry lower minimums and are generally meant for individual investors.
Institutional shares generally have lower fees than retail shares.

The Pew study assumes a 401(k) saver invests in the institutional version of a mutual fund, while a rollover would be to the retail version of the fund. The study estimates how such a rollover might impact individual retirees in different circumstances.
In one example, a 65-year-old woman who retires with $250,000 in her 401(k) would end up with about $20,500 less in savings at age 90 due to higher IRA fund fees, given certain assumptions — a “significant loss for a person living on a fixed income,” the study said.
Those assumptions include: annual fees of 0.46% and 0.65% in a 401(k) and IRA, respectively; a 5% average annual rate of return; and account withdrawals of $1,000 a month to supplement Social Security benefits.

What to consider before you roll over retirement funds

When you’re deciding whether to leave assets in a workplace retirement plan or roll them into an IRA, there are many factors to consider:

Cost. Fees won’t always be higher in an IRA relative to a 401(k) plan. Not all 401(k) plans use cheaper “institutional” shares. Many IRA funds may be cheaper than those in your workplace plan. Those who want to roll over should look for funds with equivalent or lower expenses relative to funds they owned in their 401(k), Pew said.

Convenience. IRAs can serve as a central repository for all or most of your retirement funds, Scott said. People with multiple 401(k) accounts can roll all that money into one IRA, which may be easier for some savers to manage.

Flexibility. Many 401(k) plans may not allow for as much flexibility around withdrawing money as retirees would like, either. For example, nearly 31% of 401(k) plans didn’t allow for partial or periodic withdrawals in 2020, according to the PCSA survey.

Investment options. Overall, savers may benefit from leaving money in their 401(k) when they leave an employer if they’re happy with their investments, according to the report. But it’s also worth noting that your investment options in a 401(k) are limited to those your employer and plan administrator have selected. With an IRA, the menu is much broader. Certain retirement investments like annuities are largely unavailable to 401(k) savers, too.

“Certainly there are lots of situations in which a rollover would make sense,” Scott said.
“The rollover [itself] is not the problem,” he added. “It’s really understanding what the fees are.”

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Interior Design area of the Restoration Hardware store in the Meatpacking District of New York.
Source: RH

Check out the companies making headlines in midday trading Thursday.
RH — Shares of RH fell 10.6% after the high-end furniture chain slashed its full-year outlook and said consumer demand for its products could continue to soften in the back half of 2022. That pulled other home retail stocks down. Wayfair slid 6%, and Williams-Sonoma lost 3.9%.

Walgreens Boots Alliance — Shares of the drugstore chain fell 7.3% despite an earnings beat in the company’s most-recent quarter. Walgreens said that a slowdown in demand for Covid-19 vaccines weighed on profits but reiterated its forecast for the full year.
Carnival — Cruise lines fell broadly, building on sharp losses from the previous session. Shares of Carnival slipped 2.5%. Norwegian Cruise Line Holdings’ dipped 3.9%, and Royal Caribbean’s dropped 3.1%. Earlier this week, Morgan Stanley cut Carnival’s price target in half and said it could go down to zero.
Universal Health Services — Universal shares fell 6.1% after the hospital and health-care services company announced it is cutting its full-year guidance. The company reported lower patient volumes and revenues in its acute care hospitals.
Pfizer — The stock climbed 3.1% after Pfizer and BioNTech said they would provide 105 million doses of the Covid vaccine in a $3.2 billion deal with the U.S. government. Shares of BioNTech jumped 5%.
Spirit Airlines — The airline stock jumped 6.4% as the battle for Spirit Airlines heated up between JetBlue and Frontier Group. Spirit postponed a shareholder vote on its proposed merger with Frontier Group to July 8. JetBlue shares fell 6.6%.

Xerox Holdings — Xerox shares declined more than 1.5% after CEO John Visentin died at age 59. Chief operations officer and president Steve Bandrowczak was named interim CEO.
— CNBC’s Tanaya Macheel and Samantha Subin contributed reporting

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Wells Fargo CEO Charles Scharf said at the Aspen Ideas Festival on Wednesday that he expects to see the Federal Reserve continue with more significant rate hikes.
Scharf credited the Fed for being “very clear about how they’re going to think about what the right movements are going to be,” but the bank CEO still thinks the economy will be surprised by the repercussions.

Charles Scharf
Qilai Shen | Bloomberg | Getty Images

Wells Fargo CEO Charles Scharf said he is betting on “more significant rate hikes” as the Federal Reserve tries to rein in high inflation, and that the economy is not as prepared as it should be.
“I wouldn’t bet on a number, but I would bet on more significant rate hikes,” Scharf told CNBC’s Sara Eisen at the Aspen Ideas Festival on Wednesday, adding that he considers 50 and 75 basis point hikes to be “significant themselves.”

“Is it going to be more than that? Maybe, but it would require some change in the data to see something like that,” he said.
Fed Chair Jerome Powell said Wednesday at a European Central Bank forum that he would not allow inflation to take hold of the U.S. economy.
“The risk is that because of the multiplicity of shocks you start to transition to a higher inflation regime. Our job is literally to prevent that from happening, and we will prevent that from happening,” the central bank leader said. “We will not allow a transition from a low-inflation environment into a high-inflation environment.”
Those comments follow several rate hikes from the Fed in recent months, including a 75 basis point hike in June that was its largest since 1994.
Scharf said that he gives the Fed credit for being “very clear about how they’re going to think about what the right movements are going to be.”

“They’ve done as they started this what they said they were going to do, and they’ve been very clear that they intend for it to continue,” he said.
However, Scharf said that while the consumer and small businesses have been strong, the impact of rising rates has not been factored into the broader economy.
“We know rates are going up, it couldn’t be clearer,” he said. “We know that consumers and businesses, while strong today, are going to see deterioration, and we’re going to act surprised when it happens.”
Scharf said “that doesn’t mean the world is coming to an end,” but added that “we should do our best to recognize that and focus on what the solutions are.”

The markets and economy are far from oblivious to the situation and the risks. The stock market is about to finish its worst first half since 1970. Recent CNBC survey data from Main Street and corporate America does show widespread expectations of a recession. The most recent CNBC|Momentive Small Business Survey showed that the vast majority of small business owners expect a recession, and not one chief financial officer responding to the recent CNBC CFO Council Survey said they do not expect a recession.
Powell told Congress on June 22 that inflation has continued to run too hot and needs to come down. The Consumer Price Index in May increased 8.6% compared to the previous year, its highest level since 1981.
“Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2%,” Powell told Congress. “We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy.”
“We’re going into this stronger than we’ve ever been,” Scharf said, “We’ve got the legislators, regulators, the Fed, who have extraordinary conviction, who have extraordinary tools, and that makes me feel pretty good about our ability to get through something.”
Disclosure: NBCUniversal News Group is the media partner of the Aspen Ideas Festival. More