Finance

Take a look at some of the biggest movers in the premarket:
Ford (F), General Motors (GM) – Ford fell 2.8% in premarket trading while GM slid 3.4% after Wells Fargo double-downgraded both stocks to “underweight” from “overweight.” Wells Fargo said 2022 could represent a profit peak for legacy automakers, with the shift toward electric vehicles eroding profits in the years ahead.

Tapestry (TPR) – Tapestry gained 2.9% in the premarket after the company behind the Coach and Kate Spade luxury brands reported an adjusted 51 cents per share quarterly profit, 10 cents above estimates. Tapestry did cut its outlook for the fiscal year ending in June, due in part to the impact of Covid-related shutdowns in China.
Six Flags (SIX) – The theme park operator’s shares jumped 7.7% after Six Flags reported a smaller than expected loss, as well as revenue which exceeded Street forecasts. The results were helped by an increase in attendance and in spending per guest.
WeWork (WE) – WeWork shares surged 9.8% in the premarket following the release of its quarterly results. The office-sharing company reported revenue that exceeded its prior guidance, plus a quarterly loss that was 37% lower than in the prior quarter, as well as its best gross sales since the first quarter of 2020.
Sonos (SONO) – The maker of high-end audio products saw its stock rally 6.8% in the premarket following its quarterly results. Sonos saw better than expected revenue amid continued high demand, although it did say growth might be impacted by ongoing supply chain issues.
Walt Disney (DIS) – Disney slid 4.2% in premarket trading after reporting lower than expected profit and revenue for its latest quarter. Disney had initially risen in off-hours trading, as investors focused on a better than expected increase in subscriber numbers for its Disney+ streaming service.

Beyond Meat (BYND) – Beyond Meat shares plummeted 26.3% in the premarket, as the maker of plant-based meat alternatives reports a larger than expected quarterly loss and revenue which fell shy of analyst estimates. CEO Ethan Brown said the company’s results were impacted by costs associated with strategic launches that he said would pay off over the long term.
Rivian Automotive (RIVN) – Rivian jumped 5.3% in premarket action, despite a wider than expected quarterly loss and lower than expected revenue. The electric vehicle maker maintained its 2022 production forecast, saying it expected supply chain issues to ease later this year.
Lordstown Motors (RIDE) – Lordstown surged 15.9% in the premarket after the electric vehicle company completed a deal to sell various assets to contract manufacturer Foxconn. Lordstown will receive $260 million in proceeds from the deal.
Bumble (BMBL) – Bumble shares jumped 9.8% in premarket trading after the dating-service operator reported quarterly results that exceeded analyst estimates. Bumble saw a 7.2% rise in paying users during the quarter, with a Covid-19 resurgence helping dating apps keep the users they gained during the pandemic.

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IT HAS BEEN a vicious year for financial markets, and more punishing still for crypto assets. More than half the market capitalisation of cryptocurrencies has been wiped out since November. On May 12th bitcoin traded at around $29,000, just 40% of its all-time high in November; ether has slumped by a similar amount. The share price of the leading crypto-industry stock, Coinbase, an exchange, is half what it was a week ago, falling 26% in a single day after it reported earnings and disclosed that users’ deposits on its platform were not necessarily protected in the event that the firm went bust. The sell-off comes at the same time as tech stocks, high-yield bonds and other risky assets have swooned as the Federal Reserve has begun raising interest rates.Much of the technology (and the jargon) of the crypto-sphere is bewildering, still, to most people in traditional finance. Yet the dynamics of recent days bear the hallmarks of spectacular financial collapses of old. Take what has happened to stablecoins, a type of cryptocurrency that is pegged to another currency, sometimes a conventional one like the dollar. These are part of the plumbing of the crypto system: they act as a bridge between conventional banks, where people use dollars, and the “on-blockchain” world, where people use crypto. It is stablecoins’ interaction with traditional finance that has led regulators to fret about the impact they could have on financial stability.Added together all stablecoins, the largest of which are tether and USD coin, operated by Circle, are worth around $170bn. Terra, a smaller stablecoin that had a market capitalisation of $18.7bn a week ago, has unravelled in recent days. Even tether’s peg came under pressure on May 12th. The events resemble the confidence crises that have preceded every bank run.Every stablecoin has a mechanism to maintain its peg. The simplest (and safest) method is to hold a dollar in a bank account, or in safe, liquid assets like Treasury bills, for each stablecoin token. The token can be traded freely by buyers and sellers; when a seller wants to offload their stablecoin they can either sell it on the open market or redeem it for its dollar value from the issuer. USD coin uses this method.Others, like terra, are called “algorithmic stablecoins” because they use an automated process to support the peg. But their main distinguishing feature is the way in which they are backed. Terra is backed with luna, a cryptocurrency issued by the same firm that issues terra. The theory was that holders of terra could always redeem it for one dollar’s worth of luna. A week ago, when luna was trading at $85 a piece, that meant a terra holder could redeem it for 0.0118 lunas. The process was managed by a smart contract—lines of code that execute automated transactions—that created more luna when a terra holder wanted to redeem. If for some reason terra was trading at less than $1 then arbitrageurs would swoop in, buy a terra, redeem it for luna and sell them for a profit.That system worked well enough as long as luna had some market value. But on May 9th the price of luna began to slide. On May 10th it was worth around $30. The following day it fell to less than $1.50. At present it is trading at about 3 cents. As luna fell, people began to sell terra too—and arbitrageurs failed to swoop in to save the peg, by redeeming their terra for luna, instead staying away. The terra peg broke and by May 11th had dipped as low as 30 cents, before recovering to 40 cents.It is unclear what will happen to terra now. Its market cap has sunk to $4.5bn. Its founders have supposedly propped it up by selling off some of the $3.5bn-worth of bitcoin they had in reserve, and are trying to come up with a new way to restore the peg. Its unravelling has had wider consequences. For one, the broken peg put pressure on other stablecoins, notably tether, the biggest, which briefly dipped to 95 cents on May 12th. That jeopardises the plumbing of the crypto system as a whole. The perception that these assets might not be stable will deter widespread adoption, and damage trust in them.Perhaps reassuringly for the crypto universe, though, the flight from stablecoins has not been indiscriminate—just as in bank runs past, where depositors would flee the bad banks for the good. Holders have sold off terra and tether, which has previously been fined by New York’s Attorney General for misleading investors about the amount and quality of the assets backing its stablecoin. But they have seemingly bought tokens perceived to be of higher quality, like USD coin, which publishes regular audited reports on what backing it holds. The trouble with terra did not even upset the other major “algorithmic” stablecoin, dai.Still, the failure of the terra-and-luna system does not come at an auspicious time. That the rout in cryptocurrency has troubled stablecoins—a core part of the crypto-financial plumbing—may augur ill for the resilience of the system writ large. And there are strains appearing in the traditional financial system. The stock and bond market routs have caused some risky issuers to delay planned debt sales, citing poor “market conditions”. Others could not attract investors even at double-digit yields. The era of free money in America has come to an end, and cracks are appearing in all kinds of financial markets.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Stock futures were slightly higher Wednesday evening after the latest CPI data showed inflation is still running hot.
Futures tied to the Dow Jones Industrial Average added 70 points, or 0.2%. S&P 500 futures and Nasdaq 100 futures each added 0.2% also.

Shares of Bumble and Rivian jumped 10% and 7%, respectively, in extended trading on upbeat results for the most recent quarter. Meanwhile, Disney shares fell about 2% after hours despite strong earnings for its most recent quarter. The company said Covid is still weighing on its theme parks in Asia.
In regular trading, the Dow fell 326 points, or 1.02%. The S&P 500 slipped 1.65% and the Nasdaq Composite dropped 3.18%.
The moves came as investors assessed the latest inflation data, which showed consumer prices in April jumped 8.3%, which was higher than expected and still running close to their 40-year high of 8.5%. Analysts are mixed on whether the data suggests inflation has hit a peak.
While the market briefly turned positive at one point in the session, the S&P 500 at one point touched a new 52-week low and eventually closed at its lowest level of the year. The S&P 500 is more than 18% off its high and down more than 17% since the start of the year.

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Still, market bull Tom Lee of Fundstrat remains bullish on stocks. He said if the market finds its footing “we’re in a world of double digit expected returns.”

“This week is interesting because the stock market declines have accelerated downwards, so the waterfall is accelerating but things that normally would corroborate a waterfall decline like yields or the VIX have not been,” Lee told CNBC’s “Closing Bell: Overtime.” “The bond market’s actually been pretty stable even in the face of a hot CPI and the VIX actually has been falling.”
He noted that of the 16 times since 1940 that the market has declined 16% in a four-month period, it was higher six months later in 12 of those events.
SoftBank is set to report earnings on Thursday morning before the bell. Affirm, Poshmark and Toast are on deck after the bell.
In economic data, investors will be looking out for the latest on jobless claims, which will be released at 8:30. They’re also looking forward to fresh data on the producer price index, which measures prices at the wholesale level.

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Close-up detail of the Disney+ app icon on an Apple iPhone 12 Pro smartphone screen.
Phil Barker | Future Publishing | Getty Images

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An attendee tries out a Electronic Arts video game during the annual Studio Showcase media event at the company’s headquarters in Redwood City, California.
Tony Avelar | Bloomberg | Getty Images

Check out the companies making headlines in midday trading.
Unity Software — The stock plunged 37% after the video game software company posted revenue below expectations. Unity Software reported $320 million in revenue in the first quarter, while analysts surveyed by Refinitiv expected $322 million.

Coinbase — Shares sank 26.4% after Coinbase reported first-quarter revenue below expectations. Coinbase posted revenue of $1.17 billion versus the Refinitiv consensus estimate of $1.48 billion. The company said lower crypto asset prices and market volatility impacted first-quarter results.
Electronic Arts — The video game publisher’s shares jumped 8% after the company posted its recent earnings and announced it will end its partnership with FIFA. MoffettNathanson analysts recommended shares of Electronic Arts because of the company’s stable foundation to weather market volatility ahead.
Roblox —  Shares of the online gaming platform jumped 3.4% despite weaker-than-expected quarterly results. Roblox reported a loss of 27 cents in its most recent quarter, compared with a loss of 21 cents expected by analysts polled by Refinitiv. Revenue came in at $631.2 million, compared with the $645 million consensus estimate from Refinitiv.
Wendy’s — The fast-food chain’s shares sank 11.2% after Wendy’s missed first-quarter estimates on the top and bottom lines. The company reported an adjusted 17 cents in per-share earnings on $489 million of revenue. Analysts surveyed by Refinitiv had penciled in 18 cents per share on $497 million of revenue. U.S. sales growth was just 2.4% despite a rising number of total restaurants, and the margins at company-operated restaurants declined.
The RealReal — Shares of the secondhand luxury seller dropped 22% after the company reported a wider-than-expected loss for its most recent quarter. The RealReal said it’s poised to benefit from rising prices that could be reflected in the prices of new luxury goods.

Krispy Kreme — The doughnut stock jumped 3.8% after a better-than-expected first quarter. Krispy Kreme reported adjusted per-share earnings of 8 cents on $373 million of revenue. Analysts surveyed by Refinitiv were expecting 7 cents per share and $368 million of revenue. The company’s operating income margin expanded year-over-year.
Occidental Petroleum — The stock rose 1.2% after a better-than-expected quarterly report. Occidental reported first-quarter earnings of $2.12 per share on revenue of $8.53 billion. Analysts had expected a profit of $2.03 per share on revenue of $8.08 billion, according to Refinitiv.
Perrigo — The pharmaceutical stock climbed 2.9% after Perrigo’s first-quarter revenue came in higher than expected. The company also hiked its full-year net sales growth guidance to 8.5%-9.5% from 3.5%-4.5%, due to an acquisition, as well as its organic sales growth guidance. First-quarter earnings per share did miss expectations, however.
H&R Block — The tax prep company saw shares jump 19.5% after reporting better-than-expected earnings and revenue for the most recent quarter and issued positive financial guidance on upbeat results from tax season.
 — CNBC’s Hannah Miao, Jesse Pound and Sarah Min contributed reporting.

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The so-called rule of 72 is a rule of thumb investors often use to gauge how quickly their money will double in value.
The rule also works with inflation, but in reverse: It approximates the length of time for money to lose half its value.
If April’s 8.3% inflation rate were to remain constant, it would take just nine years.

Luis Alvarez | Digitalvision | Getty Images

Inflation is hovering near 40-year highs. The Consumer Price Index, a key inflation metric, increased 8.3% in April from a year ago, the largest jump since the summer of 1982, the U.S. Department of Labor said Wednesday.
While a slight reduction from the 8.5% rate in March, the readings tell a similar story: Consumers are losing buying power at a faster-than-usual rate.

That happens because the prices they pay for goods and services of all kinds are increasing. Their money buys less.
But just how quickly is inflation eating away at your savings? The “rule of 72” can help gauge its long-term impact.

Rule of 72

This rule of thumb is generally applied to investment returns. It’s a back-of-the-envelope calculation that approximates how many years it will take investors to double their money at a certain interest rate.
Here’s how it works: Divide 72 by the annual interest rate to determine the amount of time it takes for an investment to double.
For example, a mutual fund that yields 2% a year will double in 36 years. One with a 6% annual return will do so in 12 years.

With inflation, the rule works in reverse: Consumers can approximate how quickly higher prices (for food, energy, rent and other household budget items) will halve the value of their savings.
Applied to the Rule of 72 formula, April’s 8.3% inflation rate halves the value of consumers’ money in roughly nine years. (Seventy-two divided by 8.3 equals 8.67.)
“[The rule] works the same whether you’re implying an inflation factor — which is essentially deflating the purchasing power of your money — or whether you’re applying the rule of 72 to growing your money,” Charlie Fitzgerald III, a certified financial planner and founding member of Moisand Fitzgerald Tamayo in Orlando, Florida, told CNBC.

What to keep in mind

There are a few caveats, however.
For one, this rule assumes the inflation rate will stay elevated (and constant) for a while. It’s unclear how long higher-than-normal inflation will persist. The Federal Reserve is quickly raising its benchmark interest rate to increase borrowing costs, cool the economy and bring inflation more in check.
A healthy economy experiences at least some inflation. The Federal Reserve aims for a long-term rate around 2%. (That inflation rate would halve the value of money in approximately 36 years, according to the rule of 72.)
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Further, rising costs don’t impact all households the same way. Some families may have a personal inflation rate that’s lower (or higher) than the national average, depending on what they buy.
Wage growth and earnings on savings also serve to offset at least some inflation. Workers have seen hourly pay increase at the fastest pace in decades, and some gains have outpaced inflation — meaning their purchasing power hasn’t eroded.
However, the average worker saw hourly pay fall 2.6% in April from a year ago after accounting for inflation, according to the Labor Department.

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UST, a so-called stablecoin that’s meant to maintain a $1 peg, was trading at less than 50 cents Wednesday.
Sister token luna dived more than 80%.
Terra creator Do Kwon said Tuesday he was “close to announcing a recovery plan” for UST.

Bitcoin, the world’s largest cryptocurrency, has fallen over 50% since setting an all-time high of nearly $69,000 in November.
Dan Kitwood | Getty Images

The two main tokens from embattled crypto project Terra are now in free fall.
TerraUSD, or UST, is a so-called stablecoin that’s meant to maintain a 1-to-1 peg with the U.S. dollar. But the cryptocurrency plunged to as low as 31 cents Wednesday morning. It was last trading at less than 50 cents, according to CoinGecko data.

Sister token luna dived 95% to just $1.69. The latest plunge means luna has erased more than 98% of its value in the last seven days.
Bitcoin and ether saw more muted moves. Bitcoin fell about 1% to $31,378 while ether slipped 0.6% to $2,393.
Stablecoins are akin to bank accounts for the crypto economy, offering a sound store of value to avoid the kind of volatility cryptocurrencies like bitcoin have become notorious for — in theory, at least.
UST is what’s known as an “algorithmic” stablecoin. It uses a complex system of minting and burning tokens to adjust supply and stabilize prices. UST’s price has crumbled under the pressure of a sell-off in cryptocurrencies recently, resulting in further panic in the market.

Do Kwon, the coin’s creator, has amassed billions of dollars’ worth of bitcoin through his Luna Foundation Guard fund to support UST in times of crisis. The fear now is that Luna Foundation Guard dumps those bitcoins onto the market, resulting in an even bigger sell-off.

Bitcoin briefly slumped below $30,000 late Monday, its lowest price since July 2021. The world’s biggest digital coin is now hovering slightly above that level. It’s fallen over 50% since setting an all-time high of nearly $69,000 in November.
David Moreno Darocas, a research analyst at CryptoCompare, said the situation highlights the “fragility” of algorithmic stablecoins like UST.

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“UST has grown to be both an integral and controversial piece of the crypto ecosystem,” he said.
The phenomenon is still relatively new. But UST has grown to become a major player in the crypto economy, with a circulating supply of 16 billion tokens.
Investors are now closely watching for how Luna Foundation Guard responds to prop up its ailing stablecoin. Kwon said Tuesday he was “close to announcing a recovery plan” for UST. “Hang tight,” he tweeted.
Elsewhere, crypto traders were also rattled by concerns over Coinbase’s financial health.
CEO Brian Armstrong clarified Tuesday that there was “no risk of bankruptcy” for the crypto exchange even as digital currency prices slide.
“For our retail customers, we’re taking further steps to update our user terms such that we offer the same protections to those customers in a black swan event,” he said in a series of tweets. “We should have had these in place previously, so let me apologize for that.”
Coinbase shares were down 19% in pre-market trading Wednesday after the company reported a 27% slide in first-quarter revenue.

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Check out the companies making headlines before the bell:
Wendy’s (WEN) –Wendy’s reported adjusted profit of 17 cents per share, 1 cent below estimates, with revenue and same-store sales also missing analyst forecasts. The restaurant chain is seeing a negative impact from higher costs for supplies and labor, and its shares slid 3.4% in premarket trading.

Krispy Kreme (DNUT) – Krispy Kreme gained 1.6% in the premarket after beating top and bottom line estimates for its latest quarter. The donut chain’s “sales per hub” metric jumped 49.2% for international markets and 19.4% for the U.S. and Canada.
Perrigo (PRGO) – Perrigo fell 4.1% in premarket trading after reporting a mixed quarter, with adjusted profit of 33 cents per share falling short of the 42 cent consensus estimate. However, the over-the-counter drug maker did report better than expected revenue and raised its full-year outlook after completing the acquisition of consumer health care company HRA Pharma earlier this month.
Roblox (RBLX) – Roblox posted a wider than expected loss for its latest quarter as well as sales that fell shy of Street forecasts. The gaming platform company also said it expects losses to continue for the foreseeable future, as expenses rise and as pandemic-induced demand increases fade. Roblox fell 1.1% in premarket action, paring an earlier 10% off-hours loss.
Unity Software (U) – Unity Software plunged 23% in the premarket, after the video game software developer issued weaker than expected revenue guidance. Its latest quarterly loss matched estimates, but it sales were shy of consensus.
Coinbase (COIN) – Coinbase slumped 14.4% in premarket trading after it reported an unexpected quarterly loss. The cryptocurrency exchange operator lost $1.98 per share for its latest quarter, compared to consensus forecasts of an 18 cents per share profit. Coinbase noted a decline in users amid an ongoing slump in the crypto market.

Occidental Petroleum (OXY) – Occidental Petroleum added 1.3% in premarket action following an earnings beat for its latest quarter, helped by surging oil prices. Occidental is the top gainer among S&P 500 stocks, having more than doubled this year.
Toyota (TM) – Toyota said its profit for the current fiscal year could take a 20% hit due to a jump in raw materials costs. The automaker said it would work with suppliers to come up with alternative materials and other ways to reduce expenses. Shares fell 2.2% in premarket trading.
RealReal (REAL) – RealReal rallied 9.3% in the premarket after the seller of secondhand luxury goods reported better than expected quarterly sales. It did report a wider than expected loss, but it said it was poised to benefit from an inflationary trend in the prices of new luxury goods.
H&R Block (HRB) – H&R Block reported better than expected quarterly sales and profit, with the tax-preparation company also raising its forecast on upbeat tax season results. H&R Block shares jumped 3.3% in premarket trading.

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