Finance

SINCE TIME immemorial the investment industry has sought to turn money into more money. This is not a simple trick to pull off—hence the rewards proffered to those who do it well. The complexity of picking which assets to own—rich-world equities or poor-country bonds, office blocks or orange-juice futures—contrasts with the simplicity of judging the success of those investments. The winner, put crudely, is whoever snags the most marbles while taking the fewest risks. That the money in question has helped build companies or kept governments ticking over seems almost incidental to the exercise.This approach is starting to feel old-hat. More savers want a better idea of what their money gets up to. What if their cash could be used both to generate a pension, and improve the state of the world? “Sustainable” investment funds in the broadest sense managed $35trn of assets in 2020, reckons the Global Sustainable Investment Alliance, an industry group, up from $23trn in 2016. No issuer of shares or bonds can ignore virtuous investing. Banks increasingly refuse to lend to firms with insufficiently impressive environmental, social or governance (ESG) credentials. Consultancies assessing whether bosses are doing their bit to combat climate change or social inequality have proliferated.Savers may bask in the feeling that their money is nudging capitalism in the right direction—while still generating returns. But the new approach is prompting the first signs of a backlash. The answers to two uncomfortable questions remain elusive. Are supposedly virtuous funds investing in appropriately virtuous companies? And is what these financial do-gooders are trying to pull off even such a good idea?Start with whether money purportedly chasing ESG-friendly investment is reaching the right targets. Regulators have their doubts. America’s Securities and Exchange Commission (SEC) has said it wants to crack down on “greenwashing” funds that flaunt their virtuous credentials but cannot prove that they have done the needed legwork when picking investments.On August 25th reports emerged that the SEC and its German counterpart were investigating whether DWS, a large German asset manager that has boasted of its sustainable edge, had misled customers about how much it used ESG metrics to place money. This came after its former head of sustainability questioned claims that half of the fund’s assets were invested in ways that looked beyond mere profit.The firm denies wrongdoing. But industry practitioners admit there are so many variants of sustainable investing that savers may well be confused. Selecting firms to invest in often involves little more than a box-ticking exercise confirming that the right grade of recycled paper was used to publish the annual report. A push to improve disclosure in Europe—the place keenest on virtuous investing—led funds defined as sustainable to contract by $2trn between 2018 and 2020.Kinks around metrics may iron themselves out as the industry matures. But that will not help with the second, deeper critique: that investors chasing virtuousness are, at best, deluding themselves and, at worst, doing more harm than good. That is the argument made by Tariq Fancy, a former sustainable-investing bigwig at BlackRock, in a blog post published on August 20th. ESG investing, he says, merely “answers inconvenient truths with convenient fantasies”.Mr Fancy points out that for all its trumpeting of virtue, the investment industry is self-interested: keeping tabs on companies’ pledges to be better corporate citizens gives asset managers an opportunity to charge fatter fees. And for every disgruntled investor selling a company’s stock, he argues, there is another to buy it.Even if the new approach does tweak firms’ cost of capital (by funnelling more investment to solar firms, say, and less to oil giants) this merely promotes the dangerous illusion that business can lead the way on fighting, say, climate change or racism. And if anything, Mr Fancy thinks, that pushes back the day when government action will actually take care of such problems.What does all this mean for savers and their pots of cash? Keeping tabs on what a company is up to is no bad thing, but funds might need monitoring too. Prioritising a CEO’s statements on Black Lives Matter over the viability of her investment plans is a recipe for poor returns and a flabby corporate sector. And that would not so much nudge the capitalist model as derail it.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Profit and dross” More

WHEN ASKED if anyone has tried to use bitcoin to pay her, a woman selling coffee and pastries in San Salvador, the capital city of El Salvador, replies “thank God, no”, and rebuffs an attempt to do so. A man selling soup for lunch brushes off the idea with laughter. By dinnertime, low on phone battery and morale, your correspondent is pointed to a bar called Leyendas where the logo for Strike, a digital bitcoin wallet, adorns the walls. But the attempt to pay with bitcoin is met with confusion. The bar’s owner, who controls the wallet, is missing. A few frantic texts later he sends his wallet address. At last, 26,618 Satoshis (one hundred millionth of a bitcoin), $12.50-worth, are swapped for beers.On September 7th bitcoin will become legal tender in El Salvador, alongside the dollar. The Central American country of 6.5m people is the first to attempt such a feat. A week before the big day those who had put plans in place to use bitcoin were the exception, rather than the norm. Three-quarters of Salvadoreans surveyed in July by Disruptiva, a polling firm, were sceptical of the plan to adopt bitcoin. Two-thirds were not willing to be paid in it and just under half knew nothing about it. Both the World Bank and the IMF have warned against adoption, citing the potential impact on macroeconomic stability and bitcoin’s environmental costs.Legal tender is ordinarily defined as the money that courts of law must accept to settle debts. But El Salvador’s bitcoin law goes further, saying that businesses must accept the cryptocurrency as payment for goods or services. It has also come into effect very quickly. Nayib Bukele, the country’s president, who controls a large majority in the legislative assembly, announced his plan to make bitcoin legal tender at a cryptocurrency conference on June 5th. The law was approved just three days later.Sceptics have posited that the move is just a stunt: a sop to Ibrajim and Yusef Bukele, the president’s brothers, who are crypto-enthusiasts. But the president claims the move will help El Salvador win foreign investment and reduce the cost of remittances. He may not be entirely wrong. The gambit might lure in deep-pocketed crypto-investors (though it may deter more conventional ones). And its experience may provide a case study in whether one of the long-touted benefits of bitcoin works for regular people. A diaspora of some 2m Salvadoreans sends remittances worth 20% of GDP home each year. But cross-border bank and wire transfers are slow and expensive. Wallet-to-wallet bitcoin transfers are quick and free.The attempt will probably reveal bitcoin’s limitations, too. Many locals understandably fear its volatility, which makes it ill-suited for payments and debt. Those accepting it, like Leyendas, do not quote prices in it, but convert from dollars at the point of sale. And there can be unexpected fees, which might stymie its use. There are 200 bitcoin cash machines being installed across the country to enable cash dollars to be converted into bitcoin in digital wallets. The one used by The Economist took a 5% fee. “I am not going to use it,” says Irma Gómez, who runs a diner near one such ATM in Santa Tecla, a town just outside San Salvador. But she is also intrigued. “Let the people try it.” ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Satoshis for cervezas” More

IN RECENT YEARS regulators have begun warning about the threat that climate change poses to the stability of the financial system. Following its strategy review in July, the European Central Bank (ECB) will assemble a “climate change action plan”. Mark Carney, the former governor of the Bank of England, warned of financial risks from climate change as long ago as 2015. In America the Commodity Futures Trading Commission last year published a 200-page report beginning “Climate change poses a major risk to the stability of the US financial system.” But progressive Democratic politicians are calling on President Joe Biden not to reappoint Jerome Powell as the chairman of the Federal Reserve, partly because they think he has done too little to eliminate climate risk.Just how damaging does climate risk stand to be, though? Early stress tests by central banks and disclosures of companies are starting to shed light on the question. For the most part, the evidence that it could bring down the financial system is underwhelming. But a lot hangs on whether governments set out a clear path for reducing emissions, such as through carbon taxes and energy-efficiency standards, giving banks enough time to prepare.Climate change can affect the financial system in three ways. The first is through what regulators describe as “transition risks”. These are most likely to arise if governments pursue tougher climate policies. If they do, the economy restructures: capital moves away from dirty sectors and towards cleaner ones. Companies in polluting industries may default on loans or bonds; their share prices may collapse.The second channel is financial firms’ exposure to the hazards of rising temperatures. Attributing individual natural disasters to climate change is tricky, but the Financial Stability Board, a group of regulators, estimates that global economic losses resulting from weather-related catastrophes went from $214bn in the 1980s, in 2019 prices, to $1.62trn in the 2010s, roughly trebling as a share of global GDP. These losses are often borne by insurers (though over time the costs should be passed on to customers through higher premiums).The financial system could also be exposed to any wider economic damage caused by climate change, say if it triggered swings in asset prices. This third channel is harder to quantify. Academic estimates of the effect of 3°C of warming (relative to pre-industrial temperatures) veer from financial losses of around 2% to 25% of world GDP, according to the Network for Greening the Financial System, a group of supervisors. Even the gloomiest estimate might prove too rosy if climate change triggers conflicts or mass migrations.Perhaps the worst-case scenario for the financial system is where transition risks crystallise very suddenly and cause wider economic damage. In 2015 Mr Carney described a possible “Minsky moment”, named after Hyman Minsky, an economist, in which investors’ expectations about future climate policies adjust sharply, causing fire sales of assets and a widespread repricing of risk. That could spill over into higher borrowing costs.The value of financial assets exposed to transition risk is potentially very large. According to Carbon Tracker, a climate think-tank, around $18trn of global equities, $8trn of bonds and perhaps $30trn of unlisted debt are linked to high-emitting sectors of the economy. That compares with the $1trn market for collateralised debt obligations (CDOs) in 2007, which were at the heart of the global financial crisis. The impact of losses, however, would depend on who owns the assets. Regulators might be especially concerned about the exposures of large, “systemically important” banks and insurers, for instance.Preliminary stress tests conducted by central banks suggest that the impact of climate change on these sorts of institutions might be manageable. In April the Banque de France (BdF) released the results from such an exercise. It found that French banks’ exposures to transition risks were low. Claims on insurers, though, did rise as a result of worse droughts and flooding, by more than five times in some regions.In a recent paper the ECB and the European Systemic Risk Board found similar results. The exposures of euro-area banks and insurers to the highest-emitting sectors were “limited”, although losses in a “hot-house world” scenario where temperatures rise by 3.5°C compared with pre-industrial times were more severe. Still, in both cases, banks’ losses on their corporate loan books were only around half the level of those in the regular stress tests of euro-area lenders, which they were deemed to be well-capitalised enough to pass.Those findings are consistent with an exercise by the Dutch central bank (DNB) in 2018, which found that the impact on Dutch financial firms from transition risks was “manageable”. In its most severe scenario there was a sudden change in climate policy alongside rapid progress in renewable energy development, causing a “double shock” for companies and a severe recession. Even then, banks’ capital ratios fell by about four percentage points. That is sizeable, but still less than what the banks experienced in this year’s regular stress tests by the European Banking Authority, which they were deemed to pass.To what extent are these stress tests realistic? Mark Campanale of Carbon Tracker is sceptical, pointing out that most firms are using out-of-date models. If auditors were ever to stress companies’ assets against a much lower oil price, the associated write-downs could trigger a collapse in investor sentiment of the sort regulators fear, he claims. Nor do the stress tests include a full-blown Minsky crisis.Yet in other respects they are conservative. Most of the tests used an accelerated time frame—five years in the DNB and BdF cases—in effect assuming that firms are stuck with the balance-sheets they have today. But it seems reasonable to think that banks and insurers will change their business models as the climate transition progresses, curbing the impact on the financial system. The BdF ran a second exercise where firms were allowed to make realistic changes to their business models over 30 years. Unsurprisingly, that allowed banks to sharply reduce lending to fossil-fuel sectors, and insurers to raise premiums.Nonetheless, the stress tests reveal the importance of giving firms time to adapt. And that makes a predictable path for government policy important. The BdF found that credit losses were highest when policy was delayed and there was a sudden transition. Perhaps the most plausible scenario in which climate change affects financial stability is one in which governments dawdle, and then have no choice but to take drastic action in the future. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Hot take” More

Check out the companies making headlines before the bell:
Hormel (HRL) – The food producer reported adjusted quarterly earnings of 39 cents per share, matching forecasts, with revenue coming in above estimates. However, Hormel gave a weaker-than-expected full-year outlook, noting the impact of higher costs, although it said price hikes and cost cuts should help its margins moving forward. Hormel fell 3.5% in premarket trading.

Lands’ End (LE) – The apparel retailer beat estimates by 6 cents with quarterly earnings of 48 cents per share and revenue above estimates as well. However, the company also said its profit margins would moderate in the back half of its fiscal year due to supply chain challenges, and the stock fell 3% in premarket action.
Hill-Rom Holdings (HRC) – The medical equipment maker agreed to be bought by medical products maker Baxter International (BAX) for $156 per share in cash or about $10.5 billion. It had been reported earlier this week that the two sides were in talks about a potential $10 billion deal. Hill-Rom gained 3.1% in premarket trading, while Baxter edged higher by 0.7%.
Signet Jewelers (SIG) – The jewelry retailer reported adjusted quarterly earnings of $3.57 per share, well above the consensus estimate of $1.69, with revenue exceeding forecasts as well. Comparable store sales surged 97%, more than the 79.2% increase that analysts were anticipating. Signet also raised its full-year outlook, and its stock rallied 5.4% in the premarket.
Chewy (CHWY) – Chewy tumbled 10.2% in the premarket, following a wider-than-expected quarterly loss and revenue that fell slightly short of estimates. The pet products retailer’s adjusted loss of 4 cents per share was twice as wide as analysts had anticipated, with Chewy noting a higher-than-usual level of out-of-stock products. The company also issued a weaker-than-expected outlook.
ChargePoint (CHPT) – The electric vehicle charging company saw its shares soar 12.3% in the premarket after quarterly sales beat estimates and the company raised its full-year revenue guidance. For its most recent quarter, ChargePoint matched Street forecasts with an adjusted loss of 13 cents per share.

Okta (OKTA) – The identity management software company posted an adjusted quarterly loss of 11 cents per share, smaller than the 35-cent loss that analysts were anticipating. Revenue came in above estimates, and the company issued a better-than-expected outlook, but the shares fell 1.5% in the premarket.
C3.ai (AI) – The artificial intelligence software provider’s stock tumbled 7.7% in premarket trading after it reported a surprise quarterly loss. C3.ai lost an adjusted 37 cents per share for its latest quarter, compared with analyst forecasts of a 28 cents per share profit, and it also issued a weaker-than-expected current-quarter revenue outlook.
Five Below (FIVE) – The discount retailer saw its stock slide 8.6% in the premarket, despite a 4-cent beat with quarterly earnings of $1.15 per share. Five Below’s revenue was shy of Street forecasts, and it is not giving sales or earnings guidance for the full year due to uncertainties surrounding Covid-19.
Ciena (CIEN) – The networking equipment maker earned an adjusted 92 cents per share for its latest quarter, beating estimates by 13 cents, while revenue beat estimates as well amid what the company calls “robust demand.” Separately, Ciena announced the acquisition of AT&T’s (T) Vyatta virtual routing and switching technology unit. Ciena jumped 6.3% in premarket trading.

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IRS chief Charles Rettig told Sen. Elizabeth Warren that relying on banks to report on their customers’ accounts could help cut the tax gap.
Rettig, a Trump administration holdover, touted a provision in the American Families Plan that would require banks to report on their customers’ withdrawals and deposits.
The IRS estimates that for every 1% improvement in voluntary tax compliance, federal annual revenues could increase by about $30 billion per year.

A man walks past the U.S. Capitol building in Washington, June 25, 2020.
Al Drago | Reuters

The head of the IRS believes more rigorous disclosures from the nation’s banks could help fix a yawning tax gap and recoup billions in owed revenues.
In a letter viewed by CNBC, IRS Commissioner Charles Rettig told Sen. Elizabeth Warren, D-Mass., that relying on banks to report basic information about their customers’ deposits and withdrawals could put a big dent in annual tax evasion.

A source provided CNBC access to the letter, which is expected to be released Thursday. The source disclosed its contents on condition of anonymity.
The IRS chief told Warren in Friday’s letter that years of budget cuts have left the agency unable to prosecute those who fail to pay their fair share in federal taxes.
“Every measure that is important to effective tax administration has suffered tremendously,” Rettig wrote, referring to years of budget reductions.
However, President Joe Biden’s American Families Plan and the bipartisan infrastructure deal “would result in significant volumes of new data regarding financial transactions,” said Rettig, a Trump administration holdover. “The new data will provide the IRS with a lens into otherwise opaque sources of income with historically lower levels of reporting accuracy.”
Specifically, Rettig touted one provision in the American Families Plan that seeks to shrink the tax gap by requiring banks to report on their customers’ withdrawals and deposits instead of relying on the taxpayers themselves. The tax gap is the difference between taxes paid and taxes owed by law.

Rettig noted that for every 1% improvement in tax compliance, federal annual revenues are projected to increase by about $30 billion per year. Overall tax compliance — defined as, voluntary, accurate and on time — is estimated by the IRS to fall in the 82% to 84% range.
Sens. Bernie Sanders, I-Vt., and Sheldon Whitehouse, D-R.I., joined Warren last month in requesting that the IRS and its commissioner offer a detailed report on how better enforcement could help generate billions for the federal government in owed taxes.
“This new information from the IRS makes clear that unless we significantly increase IRS funding, wealthy tax cheats and big corporations will be able to continue to avoid paying their fair share to the tune of billions of dollars per year while everyone else suffers,” Warren said of Rettig’s reply letter. “This is why congressional leadership must include in the budget reconciliation package significant, multiyear funding for the IRS to boost enforcement and bring in billions more in revenue each year.”
The IRS analysis “makes it clear we need new reporting requirements in order to improve tax compliance among the wealthiest Americans, and to reduce the burden for honest taxpayers,” she added.

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Central to Rettig’s argument is a simple behavioral problem: Few people enjoy paying income taxes.
That statement is likely even more pertinent for Americans with annual incomes greater than $1 million. Those high-income earners are required to pay a greater percentage of their income to the IRS, and therefore have a greater incentive to find ways to skirt the taxman.
The banking industry, which would bear the burden of sending the U.S. government more data, protested the provision in May.
In their springtime letter, the American Bankers Association, the Bank Policy Institute, the Consumer Bankers Association and others argued that the “new reporting requirements for financial institutions would impose cost and complexity that are not justified by the potential, and highly uncertain, benefits.”
“Furthermore,” the trade groups added, “we believe additional reporting requirements guided by subjective criteria have privacy and fairness implications and the potential to put financial institutions in an untenable position with their account holders.”

The collective suggested that financial institution reporting is “already robust” and that providing more funding for audits would be a more efficient and fair approach.
Complicating matters for the budget-strapped IRS is the fact that wealthy earners tend to have access to a variety of ways to obscure the true value of their income or otherwise have more complicated tax returns. The tax return of a business owner, for example, is far more complicated than that of an employee whose hourly wage or annual salary can be verified by third-party reports.
While the specific disclosure requirements would ultimately be hammered out by the Treasury Department, they could inform the IRS about the size and frequency of deposits and withdrawals from those accounts.
On the upside, if the tax gap is caused by human error — honest mistake or intentional — more thorough communication between U.S. banks and the IRS could ease the problem.
Right now, any person who earns $10 or more in interest from an account at a U.S. bank, brokerage firm or mutual fund is required by law to tell the IRS about those earnings. That document is called a Form 1099-INT.
If banks themselves are compelled to provide the IRS with information about their customers’ deposits and withdrawals, those customers may be more likely to fill out their returns accurately. And, if not, the IRS would now be armed with information to prosecute those less than honest.
That, Rettig says, could spell a big win for the tax collector.

“Taxpayers are more likely to be compliant when they know the IRS has the information necessary to pursue them should they not meet their tax obligations,” the IRS chief told Warren. “Our research shows that compliance is as low as 45 percent when income is subject to little or no information reporting or tax withholding. When there is substantial information reporting, compliance rises above 95 percent.”
Using banks to crack down on unreported income would likely represent just one step in narrowing the gap. Simply knowing how much money flows through an account doesn’t necessarily alert the IRS to unreported income. People can receive nontaxable gifts or spend on deductible business expenses, which the tax collector would need to consider.
Still, the benefits of moving forward with the provision could offsets the hurdles.
That fact isn’t lost on some of the nation’s most prestigious economic authorities. Former Treasury Secretaries Tim Geithner, Jacob Lew, Henry Paulson Jr., Robert Rubin and Lawrence Summers all defended President Joe Biden’s effort in a recent New York Times op-ed.
“Relying on financial institutions to relay some basic information about account holders is a sensible way forward,” they wrote in June, after the White House had published the American Families Plan. “With better information for the I.R.S., voluntary compliance will rise through deterrence as potential tax evaders realize there is a risk to evasion.”

The IRS letter also noted that the wealthiest taxpayers are also the most likely to have accounts at international banks that may not provide U.S. regulators with regular access or adhere to the same standards.
“Increased technology funding is essential to link foreign-held assets back to their beneficial owners and to detect potential non-compliance,” Rettig wrote. Added resources will enable the IRS to build “analytical systems that use information reporting to detect unreported income and identify when account holders or foreign financial institutions may be engaging in non-compliant or fraudulent behavior.”
In advocating for additional funds, Rettig reiterated the need to modernize IRS technology not only to fend off “increasingly sophisticated cybersecurity attacks,” but to increase the agency’s speed, reduce errors and allow operations to continue all day instead of relying on staff availability.
The years of budget and staffing cuts have left the IRS with about 74,000 full-time employees, a level not seen since 1973. But the challenges facing the agency, especially in the last 16 months, have only grown, Rettig said.
There is perhaps no better way to document demand for IRS services than the number of customer service phone calls. In 2021 alone, the IRS has received over 199 million calls, about 400% more than the agency receives in an average calendar year.
The agency has answered nearly 50 million of those calls between live “assistors” and automated providers. The IRS received 42 million calls in 2018, 40 million calls in 2019 and 55 million calls in 2020, according to Rettig’s letter.
In totality, such fixes could over time generate hundreds of billions in owed revenues.
The Treasury Department’s own analysis shows that efforts to close the tax gap will generate $700 billion in additional tax collections over the first 10 years of budgetary relief and an additional $1.6 trillion over the course of the second decade.

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Traders on the floor of the New York Stock Exchange
Source: The New York Stock Exchange

U.S. stock futures were little changed on Wednesday night after the S&P 500 finished the first trading session of the month near the flatline.
Dow Jones Industrial Average futures rose 5 points, or 0.01%. S&P 500 and Nasdaq 100 futures edged 0.03% and 0.04% higher, respectively.

Shares of ChargePoint, the maker of charge systems for electric vehicles, jumped more than 13% in extended trading after reporting stellar quarterly earnings. Pet retailer Chewy and the youth-focused retailer Five Below saw shares tumble 10% and 9%, respectively, after reporting quarterly results.
In the regular trading session, the Dow dipped 48.20 points, or 0.1%, to 35,312.53. The S&P 500 finished the day near the flat line, gaining just 1.41 points, or 0.03% to 4,524.09. The Nasdaq Composite advanced 0.3% to 15,309.38, hitting a record close.
“The relentless march higher on low volatility in U.S. equities continues and with breadth, volume positioning and sentiment measures all positive in our view we look for the rally to extend further into new highs yet,” Credit Suisse said in a note Wednesday.

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Energy stocks fell during the day as oil and gas prices continue to rise with Hurricane Ida shutting down oil production and refining operations. Those losses were offset by gains in utility and real estate stocks.
Small-cap stocks made bigger moves, with the Russell 2000 index gaining 0.6% on Wednesday following a 2.1% gain in August. Analysts and investors say that movement in small caps is tied to a move higher in value stocks.

U.S. companies created fewer jobs in August than expected, according to ADP private payrolls data released Wednesday. That did little to move the equities markets but turned bond yields flat.
Investors are expecting the weekly initial jobless claims report Thursday and the Labor Department’s nonfarm payrolls report on Friday, which could provide clues on Fed policy.
Chipmaker Broadcom is scheduled to report quarterly results after the bell Thursday.

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A dog sits in front of the New York Stock Exchange (NYSE) during Chewy Inc.’s initial public offering (IPO) in New York, U.S., on Friday, June 14, 2019.
Michael Nagle | Bloomberg | Getty Images

Check out the companies making headlines after the bell.
ChargePoint Holdings — ChargePoint, which makes charging systems for electric vehicles, soared more than 13% in extended trading after reporting quarterly revenue of $56.1 million, compared to the $49.1 million expected. The company also gave strong third-quarter and full-year revenue guidance.

Chewy — Shares of the pet retailer took a 10% hit after it reported quarterly results. Chewy recorded a loss of 4 cents per share, which was greater than the 2 cents estimated by analysts. It also missed revenue expectations, reporting $2.16 billion for the quarter compared to estimates of $2.20 billion. 
Five Below — The pre-teen-focused retailer’s shares plummeted about 9% after reporting quarterly results late Wednesday. Its second-quarter earnings came in at $1.15 per share beating analysts’ estimates, however, it missed on revenue, reporting $646.6 million compared to forecasts of $648.3 million. Five Below also gave third-quarter revenue guidance of $550 million to $565 million.
Okta — Okta shares slipped 3.5% despite reporting strong quarterly results. The identity company recorded a loss of 11 cents per share, though that was smaller than than the loss expected by analysts by 24 cents. It also beat on revenue, reporting $315.5 million, compared to the $296.5 million forecasted by analysts.

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Air travelers wait in the ride share lot near a sign for Uber at Los Angeles International Airport (LAX) on August 20, 2020 in Los Angeles, California.
Mario Tama | Getty Images

Check out the companies making headlines in midday trading.
Ambarella — Shares of the semiconductor company surged 27% after Ambarella beat expectations on the top and bottom lines for its second quarter. The company reported 35 cents in adjusted earnings per share on $79.3 million in revenue. Analysts surveyed by Refinitiv were expecting $75.7 million. Ambarella’s third-quarter revenue guidance also topped expectations, and the company said it expects a second-half recovery after the Texas freeze earlier this year hit its supply chain.

PVH Corp — The clothing company’s stock soared more than 15% on stellar earnings. The Calvin Klein owner reported earnings of $2.72 per share, well above the $1.20 per share expected by Wall Street, according to Refinitiv. PVH made $2.31 billion in revenue, topping expectations of $2.14 billion. Digital revenues for the company rose 35% year-over-year.
Sunrun — Shares of the solar company jumped more than 6% after JPMorgan reiterated its overweight rating and added the stock to its analyst focus list. The firm cited Sunrun’s strong inventory position, which should allow it to navigate any shortages that may hit the industry. JPMorgan’s $86 12-month price target on Sunrun indicates a rally of over 90%.
Kansas City Southern — The freight rail holding company climbed 3.8% higher after Citi upgraded the stock to buy from neutral. The company has been in the middle of a bidding war between Canadian National Railway and Canadian Pacific Railway. This week, a U.S. regulator rejected a proposed voting trust for the deal. An activist investor in Kansas City Southern has also been moving to stop the deal. Shares of Canadian National Railway gained 3.7% and Canadian Pacific Railway added nearly 5%.
Wells Fargo — Shares fell more than 4.9% as its phony accounts scandal from five years ago continues to plague the company. Shares extended their losses from Tuesday, when banking regulators warned about the possibility of imposing new sanctions on the bank. The Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau said they were unsatisfied with the pace of the bank’s efforts to compensate the victims of the scandal. Examiners at the OCC are among those expected to testify against former Wells executives later this month.
Uber — The ridesharing company saw its stock jump 3.7% after KeyBanc reiterated it as overweight, saying the company has a big opportunity to gain market share in the grocery delivery space. Uber also said Tuesday that it’s selling stakes in several Russian businesses for $1 billion.

Apple — Shares of Apple jumped before pulling back to less than 1% after the company announced the rollout of a feature that will allow users to add driver’s licenses and state IDs to their Apple Wallet. Arizona and Georgia will be the first states to adopt the feature. Connecticut, Iowa, Kentucky, Maryland, Oklahoma and Utah will follow. Apple didn’t specify a timeline.
Campbell Soup — Shares of the food producer rose more than 2% after it beat top- and bottom-line estimates for the second quarter. It also issued a fiscal 2022 adjusted earnings outlook of $2.75-$2.85 per share, compared to a consensus estimate of $2.87, citing higher input costs and a constrained labor market.
 — CNBC’s Maggie Fitzgerald, Jesse Pound and Yun Li contributed reporting

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