Finance

Stock futures were flat in overnight trading Thursday as the S&P 500 tried to avoid another losing week amid busy earnings and rising bond yields.
Futures on the Dow Jones Industrial Average dipped 20 points. S&P 500 futures and Nasdaq 100 futures both traded 0.1% lower.

The overnight action followed a dramatic reversal Thursday that saw major averages wiping earlier gains and closing lower. The Dow ended the day more than 300 points lower, while the S&P 500 dropped nearly 1.5%. The tech-heavy Nasdaq Composite bore the brunt of the sell-off on surging rates, sliding 2%.
“Stagflation concerns resurface on the back of real-time signs of a tight labor market and waning business sentiment, coupled with another bounce in 10-year Treasury yields — and all peppered with a deluge of earnings releases,” Chris Hussey, a managing director at Goldman Sachs, said in a note.
For this week, the Dow is up 1% and on pace to break a three-week losing streak. The S&P is up less than 0.1% on the week and attempting to break a two-week losing streak. The Nasdaq, however, is down 1.3% week to date, on track to post its third negative week in a row.
Weighing on sentiment Thursday was Federal Reserve Chair Jerome Powell’s comment on the possibility of a larger-than-usual rate hike for next month.
Powell said during an International Monetary Fund panel moderated by CNBC’s Sara Eisen that taming inflation is “absolutely essential” and a 50-basis-point hike is on the table for May.

Meanwhile, the first-quarter earnings season continues to roll on. Snap saw its shares jump more than 6% during extended trading after the social media platform reported first-quarter earnings that included strong growth in daily users.
Gap shares plunged 10% after the company announced the CEO of its Old Navy division, Nancy Green, is leaving the business this week. Gap also slashed its outlook for net sales growth in fiscal 2022.
Verizon is slated to post results before the bell Friday.

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People walk past Snap Inc. Snapchat signage displayed in downtown Los Angeles, California on October 2, 2021.
Patrick T. Fallon | AFP | Getty Images

Check out the companies making headlines after the bell: 
Snap — Shares of the social media platform jumped more than 6% in volatile after-hours trading after the company’s first-quarter earnings report. Snap missed Wall Street expectations for profit and sales, and forecast disappointing revenue growth in the current quarter. However, daily users grew 18% annually, which was more than expected.

Gap — Shares of the retailer plunged 10% after the company announced the CEO of its Old Navy division, Nancy Green, is leaving the business this week. In light of execution challenges within its Old Navy business, Gap also slashed its outlook for net sales growth in fiscal 2022.
FirstEnergy — Shares of the energy company dipped more than 1% in extended trading after the firm reported first-quarter earnings that came in lower than expected. FirstEnergy reported adjusted operating earnings per share of 60 cents, missing the 62 cents estimate per Refinitiv. Its revenue beat expectations, however.
PPG Industries — The materials company saw its shares rise about 1% in after-hours trading after better-than-expected quarterly results. PPG posted earnings of $1.37 per share, beating Refinitiv’s estimate of $1.11 per share. The company reported revenue of $4.3 billion, also topping expectations.

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A United Airlines Holdings Inc. Boeing 777-200 aircraft on the tarmac at San Francisco International Airport (SFO) in San Francisco, California, U.S., on Thursday, Oct. 15, 2020.
David Paul Morris | Bloomberg | Getty Images

Check out the companies making headlines in midday trading Thursday.
United Airlines – Shares of the airline surged 9.3% after the company said it expects to return to profitability in 2022 as travel bounces back. United cited a strong increase in bookings and a willingness for passengers to pay more to travel for its upbeat guidance.

American Airlines – Shares of the country’s biggest airline jumped 3.8% after the company forecast a second-quarter pretax profit as strong bookings help it cover soaring fuel costs. American said March was the first month since the Covid pandemic began that its revenue surpassed 2019 levels and added that bookings continue to rise.
Blackstone – Blackstone beat analyst estimates on the top and bottom lines for the previous quarter. The private equity firm’s stock dipped 6.5%, however, after rising earlier in the session.
AT&T — The telecom giant gained 4% after reporting its first-quarter results. AT&T reported $38.1 billion in consolidated revenue for the quarter and 65 cents in earnings per share, which includes results of the now spun-off WarnerMedia. Revenue for AT&T’s communications segment, including its mobile phone service, was up 2.5% year over year at $28.9 billion.
Tesla — Tesla shares jumped 3.2% after the electric vehicle maker beat Wall Street estimates on the top and bottom lines and saw an increase in car deliveries in the first quarter. Analysts responded positively to the news, with one calling Tesla a “must own.”
Xerox – Shares fell 15.7% after Xerox reported weaker-than-expected earnings. The company posted a profit of 12 cents per share, 1 cent below the Refinitiv consensus. The office equipment maker said it was hurt by inflation pressures and supply chain issues.

Dow Inc. – The chemical maker’s stock added 2.9% on the back of better-than-expected quarterly results. Dow Inc. reported first-quarter adjusted earnings of $2.34 per share on revenue of $15.26 billion. Analysts had expected a profit of $2.06 per share on revenue of $14.54 billion.
Carvana – Shares of the online auto seller dropped 10.1% after the company beat reported a wider-than-expected loss per share for the previous quarter. Carvana lost $2.89 per share, while analysts polled by Refinitiv expected a $1.44 loss per share.
CSX — Shares of the rail transportation company added 2.8% on the back of better-than-expected quarterly revenue. CSX posted revenue of $3.41 billion versus $3.3 billion expected, according to Refinitiv.
Netflix — Netflix shares fell an additional 3.5% on Thursday, building on the previous session’s massive drop. Pershing Square’s Bill Ackman said in a shareholder letter after the bell Wednesday that the hedge fund sold its entire stake in Netflix for a loss.
— CNBC’s Samantha Subin, Yun Li and Jesse Pound contributed reporting.

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The bank is widening internal testing for the no-fee, interest-bearing account to all 20,000-plus of its U.S. employees, according to Stephanie Cohen, Goldman’s global co-head of consumer and wealth management.
“This week we extended exclusive beta access to all of our U.S. employees,” Cohen said in a statement provided to CNBC.
The bank is expected to release the account to the public later this year, CFO Denis Coleman told analysts this month.

Stephanie Cohen, currently Goldman Sachs’ global co-head of consumer and wealth management, speaking at the 2018 New York Times Dealbook conference in New York City.
Michael Cohen | Getty Images

Goldman Sachs’ long-awaited checking account is one step closer to reality.
The bank is widening internal testing for the no-fee, interest-bearing account to all 20,000-plus of its U.S. employees, according to Stephanie Cohen, Goldman’s global co-head of consumer and wealth management.

“This week we extended exclusive beta access to all of our U.S. employees,” Cohen said in a statement provided to CNBC. “As beta participants, they have the opportunity to be the first to explore the new product, test select features and share feedback with us. … This beta is only the beginning of what we hope will soon become the primary checking account for tens of millions of customers.”
Goldman’s play to manage Americans’ primary transaction hub is one of the more significant steps it has taken to compete directly with retail giants such as Bank of America and Wells Fargo. Goldman first announced the account in January 2020, but its release has been delayed as the firm worked through its product roadmap. Beginning with savings and personal loans under the Marcus brand in 2016, it added the Apple Card as well as personal finance and investment tools via a smartphone app.
The bank is expected to release the account to the public later this year, CFO Denis Coleman told analysts this month.
Goldman declined to say what interest rate it will offer on the accounts, but a person with knowledge of the matter said it would likely be competitive with other online offers.

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Check out the companies making headlines before the bell:
American Airlines (AAL) – American soared 10.5% in premarket trading after reporting a smaller-than-expected loss and predicting profitability for the current quarter.

United Airlines (UAL) – United lost an adjusted $4.24 per share for the first quarter, 2 cents more than expected, and the airline’s revenue was also slightly below forecasts. However, United said it expects a return to profitability this quarter as travel demand surges, and the stock rallied 8.3% in the premarket.
Blackstone (BX) – The private equity firm’s shares jumped 4% in the premarket after reporting better-than-expected profit and revenue for the first quarter, helped by strong results from its real estate and credit operations.
AT&T (T) – AT&T earned an adjusted 63 cents per share for the first quarter, 4 cents above estimates, and beat on the top line as well. Those numbers exclude the results of the now spun-off WarnerMedia unit, with AT&T benefiting from an increase in wireless revenue. AT&T added 1.4% in premarket action.
Tesla (TSLA) – Tesla surged 7.4% in premarket trading after reporting record quarterly profit and beating Wall Street’s top and bottom-line estimates. Tesla cautioned that production would be constrained for the remainder of the year due to shortages of computer chips and other parts, but it expects to increase deliveries.
Xerox (XRX) – Xerox tumbled 7.3% in the premarket after reporting an adjusted quarterly profit of 12 cents per share, 1 cent below consensus. The office equipment maker was hurt by inflation pressures and supply chain issues.

Dow Inc. (DOW) – The chemical maker’s stock added 2.1% in the premarket after beating estimates on both the top and bottom lines, helped by strong demand and higher prices.
Sleep Number (SNBR) – Sleep Number shares tanked 10.6% in premarket trading following a top and bottom-line miss for its latest quarter. The mattress company earned 9 cents per share, well short of the 33-cent consensus estimate, with supply chain issues impacting its results.
Carvana (CVNA) – Carvana lost $2.89 per share for its latest quarter, wider than the $1.44-per-share loss analysts were anticipating. Revenue beat estimates, but the online auto seller saw its first-ever quarterly sales decline. Carvana fell 5.1% in the premarket.
Lam Research (LRCX) – Lam Research fell 11 cents short of estimates with adjusted quarterly earnings of $7.40 per share, and the chipmaker’s revenue also fell short of Wall Street forecasts. Lam’s expenses increased as it spent more to deal with supply chain disruptions. Lam lost 1.3% in the premarket.
CSX (CSX) – CSX beat estimates by 2 cents with quarterly earnings of 39 cents per share, and the railroad operator’s revenue also topped forecasts. CSX handled fewer shipments, but that was more than offset by an increase in shipping rates. CSX rose 2.1% in premarket trading.

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Binance launched an emoji on Twitter depicting a block with the company’s logo surrounded by four pixelated arms each bent at a right angle.
The emoji drew outcry from Twitter users, who pointed out its resemblance to a swastika.
“Well that was obviously really embarrassing,” the company wrote on Twitter.

The logo of cryptocurrency exchange Binance.
STR | NurPhoto via Getty Images

Cryptocurrency exchange Binance removed and redesigned an emoji on Twitter, after outcry from users who pointed out it looked like a swastika.
Twitter sometimes lets brands design their own custom emojis to include in hashtags in order to promote their business. In this case, Binance launched an emoji for several hashtags, including #Binance, #BNB and #BitcoinButton.

The associated emoji for these hashtags depicted a block with Binance’s logo surrounded by four pixelated arms each bent at a right angle, similar to the swastika symbol.
Twitter users were quick to pick up on its resemblance to a swastika. “The new Binance logo is a literal swastika emoji,” one user wrote.
Other users highlighted the significance of the day Binance chose to launch the emoji: Apr. 20, Adolf Hitler’s birthday.
The Binance symbol wasn’t tilted, suggesting it may have been inspired by Asian symbolism — it is used to represent spirituality in the Hindu and Buddhist religions — rather than the emblem of the German Nazi party which was abolished in 1945.
Binance has since removed the emoji and replaced it with a new one that looks more like a coin.

“Well that was obviously really embarrassing,” the company wrote on Twitter.
“We’re not sure how that emoji got through several layers of review without anyone noticing, but we immediately flagged the issue, pulled it down, and the new emoji design is being rolled out as we speak,” Binance said.
Founded in 2017 by Chinese-Canadian entrepreneur Changpeng Zhao, Binance is the world’s largest digital currency exchange, handling more than $18 billion in trading volumes in a single day, according to CoinGecko data.

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The rapid rise in the U.S. 10-year Treasury yield to three-year highs has erased its gap with its Chinese counterpart, something that hasn’t happened for more than a decade.
The narrowing gap reflects diverging monetary policy between the two countries, analysts said.
Investors are watching the implications of the narrowing yield gap for the Chinese yuan.

Jason Lee | Reuters

BEIJING — The U.S. 10-year Treasury yield has risen rapidly to three-year highs, and erased its gap with its Chinese counterpart, something that hasn’t happened for more than a decade.
As the yields cross paths – the U.S. one rising above China’s – that theoretically reverses an investment strategy that bought Chinese bonds for the greater return they offered relative to U.S. Treasurys.

It’s not immediately clear whether the move is sustained and big enough to have large-scale implications, but the development is a market signal that investors are watching.
The U.S. 10-year Treasury yield traded near 2.857% as of Wednesday night, slightly below the Chinese 10-year government bond yield of 2.873%, according to Refinitiv Eikon data. The U.S. yield climbed above its Chinese counterpart early last week for the first time since 2010, and has tried to hold onto a small premium in the last few days.

The market development reflects diverging monetary policy between the two countries, analysts said.
The People’s Bank of China is loosening monetary policy and cutting rates, while the U.S. Federal Reserve is tightening monetary policy and raising rates.
China and the U.S. also face different inflation dynamics, with surging producer prices in both countries, but smaller consumer price increases in China.

Chinese yuan in focus

Investors are watching the implications of the narrowing yield gap for the Chinese yuan. A worry is that if the yuan weakens too much, that could lead to capital outflows.
“Currently, there is no sign China or the United States will shift their monetary policy focus,” Gao Xiang, bond analyst at Hangzhou-based Nanhua Futures, said in a Chinese statement translated by CNBC.
“Both sides’ interest rates will continue to exhibit relative independence,” Gao said. “In this process, the yuan exchange rate will play an important role as a buffer, and also be an important indicator for the future.”

In the last few months, the yuan has traded near three-year highs against the U.S. dollar, and weakened slightly in recent weeks. The onshore yuan traded near 6.37 versus the greenback Tuesday afternoon, 0.38% weaker for the year so far.
But right now, China’s high trade surplus more the offsets the impact of the narrowing yield gap on the yuan, Larry Hu, chief China economist at Macquarie, said in an email.
The Chinese yuan will face more depreciation pressure from a decline in China’s trade surplus, Hu said. To him, the convergence in the U.S. and China 10-year yield is not that big of a deal since the gap has been narrowing for more than a year.
A country has a trade surplus if its exports exceed its imports. China reported a trade surplus of $47.38 billion in March, down sharply $115.95 billion in the January to February period.

Read more about China from CNBC Pro

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Melvin Capital, the embattled hedge fund run by its once high-flying founder Gabe Plotkin, has been discussing a novel plan with its investors under which the firm would return their capital, while giving them the right to reinvest that capital in what would essentially be a new fund run by Plotkin.
Plotkin, according to people familiar with his plans, has committed to keeping his “new” fund at or below $5 billion in capital and returning to a focus on shorting stocks.

Gabe Plotkin, chief investment officer and portfolio manager of Melvin Capital Management LP, speaks during the Sohn Investment Conference in New York, May 6, 2019.
Alex Flynn | Bloomberg | Getty Images

Melvin Capital, the embattled hedge fund run by its once high-flying founder Gabe Plotkin, has been discussing a novel plan with its investors under which the firm would return their capital, while giving them the right to reinvest that capital in what would essentially be a new fund run by Plotkin.
Under the terms being discussed, Plotkin would unwind his current fund at the end of June. That fund was down 21% at the end of the first quarter.

Plotkin would then start what would essentially be a new fund on July 1 with whatever money his investors decided to reinvest, but he would do so without having to bring those investors back to even on their invested capital before he could earn a performance fee.
This so-called high water mark, which requires hedge fund managers to return their investors’ capital to par prior to earning fees, is virtually impossible for Plotkin to meet on much of the capital in Melvin, given the fund’s losses of 39% last year and at least 21% so far this year.
Plotkin, according to people familiar with his plans, has committed to keeping his “new” fund at or below $5 billion in capital and returning to a focus on shorting stocks, a talent for which he was known for many years prior to suffering significant losses during the meme stock craze of early 2021.
The plan would essentially give Plotkin a do over after 18 months of very poor performance, allowing him to keep his employees, many of whom might otherwise choose to leave given his lack of performance fees from which to pay them.

Melvins’ strong track record of success, prior to its horrid recent performance, was often due to Plotkin’s ability to make significant profits by shorting stocks. But as his fund grew in size that ability was muted.

Investors, who include Point72 founder Steven Cohen, are being presented with the prospect of getting a chance to have Plotkin run their money in a smaller fund focused on his strength of shorting stocks, but forever giving up the hope of having him work to get them back to even on their current funds.
It’s unclear how that plan will be received and how much capital Plotkin’s investors will be willing to reinvest with him.
While a number of well-known hedge fund managers, faced with onerous high water marks have chosen to shut down and then re-opened a new fund as soon as a year later, this would be a unique transition from one fund to another with the immediate elimination of the high water mark.
Representatives for Plotkin could not be reached for comment and officials at Point72 declined comment.

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