Finance

Employees bring a television to Steve Steward’s car at a Best Buy store on Black Friday, traditionally one of the busiest shopping days of the year. Crowds are smaller this year due to the increasing popularity of on-line shopping amid concerns about the COVID-19 pandemic.
Paul Hennessy | SOPA Images | LightRocket | Getty Images

Check out the companies making headlines in midday trading.
Best Buy — The electronics retailer’s shares popped 8.3% after the company issued better-than-expected quarterly results. Best Buy reported earnings of $2.98 per share on revenue of $11.85 billion. Wall Street expected earnings of $1.85 on revenue of $11.49 billion, according to Refinitiv. Same-store sales rose 19.6%, topping estimates of 18.1%.

Palo Alto Networks — Shares of Palo Alto Networks surged 18.6% after the security hardware and software company reported better-than-expected quarterly earnings late Monday. The company also issued a strong profit forecast for the new fiscal year. Palo Alto Networks reported adjusted earnings of $1.60 per share on revenue of $1.22 billion. Analysts expected earnings of $1.44 per share on revenue of $1.17 billion, according to Refinitiv.
JD.com, Alibaba, Baidu, Pinduoduo – Chinese tech companies rebounded from a recent slump as investors gained more clarity on regulatory risks. Pinduoduo shot up 18%, and JD.com surged 12%. Baidu gained over 8%, and Alibaba jumped roughly 7%.
Planet Fitness — Shares of the gym chain rose 5.2% after Morgan Stanley initiated coverage of the stock with an overweight rating. The firm said in a note to clients that gyms in areas with fewer health restrictions are recovering quickly.
Medtronic — Medtronic shares advanced 3.2% following the company’s first-quarter earnings, which beat expectations on the top and bottom line. Medtronic earned $1.41 per share on an adjusted basis on revenue of $7.99 billion. Analysts surveyed by Refinitiv were expecting the company to earn $1.32 per share on $7.87 billion in revenue. The company said it saw demand return as people underwent non-urgent procedures.
Las Vegas Sands, Wynn Resorts — Shares of the casino operators Las Vegas Sands gained about 7.5%, and Wynn Resorts rose more than 7.0% after Macau eased travel restrictions for visitors from China’s Guangdong province, a key visitor source for the gambling capital. On Monday, Chinese health authorities reported no new locally transmitted cases of Covid-19 for the first time since July.

Didi Global — The Chinese ride-hailing app’s shares surged 12.7% following reports that the company has suspended plans to launch in the U.K. and continental Europe. Investors could be buying the dip after Beijing detailed rules for Chinese companies wanting to go public overseas. Didi has been subject to the country’s regulatory crackdown.
Cara Therapeutics – Shares of the drug maker rose 4.2% after it received approval from the U.S. Food and Drug Administration for its Korsuva injection. Cara Therapeutics announced the news on Monday. The drug is designed to treat a kidney disease-related condition known as pruritus.
— with reporting from CNBC’s Pippa Stevens, Jesse Pound, Yun Li, Hannah Miao and Tanaya Macheel.

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OnlyFans CEO Tim Stokely says the firm had “no choice” but to ban porn after “unfair” treatment by banks.
Starting Oct. 1, OnlyFans will no longer allow “sexually explicit” content on its service.
OnlyFans gained popularity by allowing adult performers to charge their fans to view “not safe for work” content.

In this photo illustration, the OnlyFans logo is displayed on a smartphone.
Sheldon Cooper | SOPA Images | LightRocket via Getty Images

OnlyFans founder and CEO Tim Stokely says the online subscription platform had “no choice” but to ban pornography after “unfair” treatment by banks.
Last week, OnlyFans said it would no longer allow “sexually explicit” content on its service as of Oct. 1 in order to comply with requests from its banking and payment providers. It’s not yet clear how OnlyFans defines such content. The firm said it would continue to allow certain posts containing nudity.

In an interview with the Financial Times published Tuesday, Stokely provided further explanation for the company’s decision to ban porn, saying lenders would often “cite reputational risk and refuse our business.”
“The change in policy, we had no choice — the short answer is banks,” Stokely told the FT.
Stokely name-dropped a few banks, including Bank of New York Mellon, Metro Bank and JPMorgan. He said BNY Mellon “flagged and rejected” every wire transfer linked to the firm, while Britain’s Metro Bank in 2019 closed OnlyFans’ corporate account with short notice.
As for JPMorgan, Stokely claims the U.S. banking giant was “particularly aggressive in closing accounts of sex workers or … any business that supports sex workers.”
BNY Mellon, Metro Bank and JPMorgan declined to comment.

Founded in 2016, London-based OnlyFans gained popularity by allowing adult performers to charge their fans a subscription fee to view “not safe for work” videos and images. The company, which claims to have 130 million users and 2 million content creators, boomed in the coronavirus pandemic as lockdowns stifled big porn productions.
Some have speculated there may be other factors behind OnlyFans’ porn ban. For one, the company is reportedly struggling to attract outside investment, according to Axios.
“We didn’t make this policy change to make it easier to find investors,” Stokely told the FT. He said OnlyFans would “absolutely” welcome porn back to the platform if the banking environment were to change.
Meanwhile, credit card networks like Mastercard have cracked down on porn lately. Last year, Mastercard and Visa cut ties with Pornhub after accusations the porn site showed videos containing underage sex and revenge porn. Pornhub denied it allowed child sexual abuse material, but tightened its policies to prohibit uploads from unverified users.
Mastercard is set to bring in tougher rules for adult merchants, which are due to take effect on Oct. 1, the same day OnlyFans will impose its sexual content ban. However, Stokely said the firm was “already fully compliant with the new Mastercard rules, so that had no bearing on the decision.”
Mastercard wasn’t immediately available for comment when contacted by CNBC.
OnlyFans, which is majority-owned by Ukrainian-American porn entrepreneur Leonid Radvinsky, was reportedly seeking a round of funding that would value it at more than $1 billion, according to Bloomberg.
OnlyFans has attempted to shift its image to become more than just a platform for sex workers. Celebrities like Cardi B and Bella Thorne have joined the platform in the past year, for example. OnlyFans is also used by fitness enthusiasts and musicians. But porn remains the most popular category on the site.

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About 75% of 401(k) plans allow for Roth contributions, according to the Plan Sponsor Council of America. Less than half did so about a decade ago.
Just a quarter of 401(k) investors are saving in a Roth account, a share that hasn’t budged much in recent years.
Increasing automatic enrollment, misunderstanding, inertia and fear of government may be holding savers back.

Carlina Teteris | Moment | Getty Images

Roth accounts are available in more 401(k) plans than ever. Retirement savers aren’t rushing in.    
About 75% of employers with a workplace 401(k) allowed employees to save money in a Roth account in 2019 — up from 69% the year prior and 46% a decade earlier, according to most recent data from the Plan Sponsor Council of America.

Yet the share of 401(k) investors saving in a Roth account remains stubbornly low.
About a quarter of 401(k) investors do so — a share that’s been fairly steady in recent years, according to Nevin Adams, head of research at the American Retirement Association, a trade group that includes the Council.
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A Roth 401(k) is a type of after-tax account. Savers pay tax up front on contributions; they don’t pay tax on contributions or any investment earnings when they withdraw funds in retirement.
This is different from traditional pre-tax savings, whereby savers get a tax break up front but pay later. Workers can contribute up to $19,500 to their 401(k) this year between the two account types. (Those 50 and older can save an extra $6,500.)

“We’ve found the Roth is so underutilized,” said Ellen Lander, principal and founder of Renaissance Benefit Advisors Group, based in Pearl River, New York “It’s amazing to me how much misunderstanding there is.”

Roth benefits

Roth 401(k) contributions make sense for investors who are likely in a lower tax bracket now than when they retire. (They would accumulate a larger nest egg by paying tax now at lower rates.)
Of course, it’s impossible to know what tax rates or one’s exact financial situation will be in retirement, which may be decades in the future.
However, there are some guiding principles. For example, Roth accounts will generally make sense for young people, especially those just entering the workforce, who are likely to have their highest-earning years ahead of them.
“It might be the best decision they make,” Lander said. “If you have the ability to compound your money for 20 to 30 years tax-free, that’s big.”

Some may shun a Roth because they assume their spending — and hence their tax bracket — will fall when they retire. But that doesn’t always happen, according to financial advisors.
And there are benefits to Roth accounts beyond tax savings.
For one, savers don’t need to take required minimum distributions from Roth accounts, unlike with traditional pre-tax 401(k) accounts. Savers can also reduce their Medicare Part B premiums, which are based on taxable income in retirement; Roth accounts, which yield tax-free income, can help keep one’s income below certain thresholds over which premiums may rise significantly.
Some advisors recommend allocating 401(k) savings to both pre-tax and Roth, regardless of age, as a hedge. About 70% of 401(k) plans allow for both, according to the Plan Sponsor Council of America.
“It’s not just about taxes, it’s about flexibility,” Lander said. “We’ve been taught to diversify investments.
“We should be diversifying our tax strategy.”

Road blocks

Despite the benefits, there are several reasons why people may not make Roth contributions.
Automatic enrollment has become a popular feature of 401(k) plans — about 60% of plans use it. Often, companies don’t set Roth savings as the default option, meaning employees would have to proactively switch their allocation.
“Where’s all the new money going?” Adamas said, referring to auto-enrollment. “It’s all going into defaults.
“Tax-treatment wise, it’s going into pre-tax.”
Further, employers that match 401(k) savings do so in the pre-tax savings bucket.

Employees may also just not be aware of the Roth option; if they are, inertia may be a stumbling block for action.
Higher earners may mistakenly think there are income limits to contribute to a Roth 401(k), as there are with a Roth individual retirement account. But that’s not the case.
Others are hesitant because they think Congress will change the tax rules in the future, and double-dip into already-taxed Roth funds, Adams said.
“They’re afraid the government will change its mind,” he said. “I think that’s a remote concern.
“But people are very consistently worried.”

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There may be a new reason to follow the smart money.
According to The Leuthold Group’s Jim Paulsen, the stock and bond markets have been delivering opposing messages about the economic recovery’s strength for months.

But he finds only one is continually right: bonds, which foreshadowed slower growth tied to Covid delta variant hot spots before stocks.
“It was a big collapse in July where the 10-year [Treasury note] yield went all the way down to almost 1.1%,” the firm’s chief investment strategist told CNBC’s “Trading Nation” on Monday. “It was suggesting that Covid, the delta variant, was going to be a big problem for the economy.”
Even though stocks are at or around record highs, Paulsen emphasizes many of the winners aren’t tied to economically sensitive areas of the marketplace. The trend, according to Paulsen, suggests economic sluggishness and perhaps a further slowdown.
Meanwhile, Treasury yields are firming again — a signal that implies a rosier outlook for economic growth. The benchmark 10-year yield is around 1.26%.
“They haven’t gone back down to rechallenge that 1.10% level,” said Paulsen. “That’s a pretty major bottom they put in, and they’re kind of suggesting the Covid variant here is likely to roll over soon and economic activity is likely to pick up.”

Paulsen, who oversees about $1 billion in assets under management, believes it’s best to listen to the bond market.
“They fell long before the stock market did in early 2020. They bottomed before the stock market did in March 2020. They took off solidly in the summer to early this year,” he noted. “And, they were the first to roll over again in the face of the second round of Covid here that we’ve experienced of late.”
However, the longtime market bull acknowledges vulnerabilities exist.
“We’re going to have a sort of higher anxieties again with inflation … in the balance of this year, and overall I think inflation is going to stay hotter for longer,” he said. “Inflation could scare us and maybe even lead to a correction at some point.”
Paulsen speculates a stock market setback would be temporary and inflation would subside next year.
His top market plays are dominated by groups that benefit from the economic recovery. Paulsen particularly likes small caps, cyclicals and international markets.
“I really think that economic surprises which have been negative of late turn positive as Covid peaks out again,” Paulsen said. “I’d stay diversified, but I’d tilt towards those areas of the market. I think it could be a nice run in the last four months of the year.”
On Monday, the tech-heavy Nasdaq jumped 227.99 points to end at 14,942.65, a record close. The broader S&P 500 hit an intraday high.
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Take a look at some of the biggest movers in the premarket:
Best Buy (BBY) – Best Buy shares rallied 4.3% in the premarket after the electronics retailer beat estimates on the top and bottom lines for the second quarter. Best Buy earned $2.98 per share, compared to a $1.85 a share. consensus estimate. Comparable-store sales rose a better-than-expected 19.6%.

Palo Alto Networks (PANW) – Palo Alto Networks surged 11.9% in the premarket, after being estimates by 16 cents a share, with quarterly earnings of $1.60 per share. The cybersecurity company’s revenue was also above estimates, and it issued an upbeat outlook as well.
Camping World (CWH) – The maker of RVs and other recreational products announced it would double its quarterly dividend to 50 cents per share from 25 cents a share, payable on September 28 to shareholders of record on September 14. Camping World shares rallied 6% in premarket trading.
Advance Auto Parts (AAP) – The auto parts retailer reported quarterly profit of $3.40 per share, beating the consensus estimate of $3.04 a share. Revenue came in slightly above forecasts. Comparable-store sales grew 5.8%, slightly shy of the 6% consensus estimate. Advance Auto raised its full-year forecast for overall sales and for comparable-store sales growth. Its shares fell 1% in premarket action.
Medtronic (MDT) – The medical device maker beat estimates by 9 cents a share, with quarterly profit of $1.41 per share. Revenue also topped consensus estimates, helped by a rebound in demand as patients underwent non-urgent procedures that had been delayed by the pandemic. Medtronic added 1.8% in the premarket.
Cigna (CI) – The insurance company’s shares rose 1.1% in premarket trading after it announced a $2 billion accelerated stock repurchase agreement.

Didi Global (DIDI) – Didi Global climbed 3.9% in the premarket, extending Monday gains on reports that it would suspend plans to launch its ride-hailing service in the U.K. and continental Europe.
Las Vegas Sands (LVS), Wynn Resorts (WYNN) – Las Vegas Sands rallied 2.6% in premarket action, with Wynn Resorts up 2.5%. The casino operators are trading higher following the easing of travel curbs in Macau, amid an improving outlook for Covid-19 cases.
Cara Therapeutics (CARA) – The drugmaker’s stock soared 19.8% in premarket trading after it received Food and Drug Administration approval for its Korsuva injection, designed to treat a kidney disease-related condition known as pruritis.
Netflix (NFLX) – The video streaming service’s stock remains on watch after rising for the past seven sessions and gaining 8.4% over that stretch.
JD.com (JD), Alibaba (BABA), Baidu (BIDU), Pinduoduo (PDD) – Investors are scooping up China-based tech stocks, in a rebound from a slump that followed the implementation of new rules for tech companies by the Beijing government. JD.com jumped 7.7% in the premarket, with Alibaba up 4.7%, Baidu up 4.2% and Pinduoduo rising 4.6%. Pinduoduo had been higher earlier but pared gains after reporting lower-than-expected revenue for its latest quarter.

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Ramp is raising $300 million in a Series C round at a $3.9 billion valuation, according to CEO and co-founder Eric Glyman. The start-up was valued at $1.6 billion in April.
Ramp differentiates itself from competitors including American Express by saving the average client 3.3% annually on their spending, according to CEO Eric Glyman. In fact, more than a third of its clients come from American Express, he said.
To help users negotiate annual contracts with software firms and other providers, Ramp is acquiring a start-up called Buyer, its first acquisition, the CEO said.

Eric Glyman and Karim Atiyeh, cofounders of corporate card startup Ramp

Corporate charge card start-up Ramp has more than doubled its valuation since its previous round just five months ago amid torrid revenue growth and strong demand for fintech investments.
Ramp is raising $300 million in a Series C round at a $3.9 billion valuation, according to CEO and co-founder Eric Glyman. The New York-based firm last raised money in April at a $1.6 billion valuation.

The company, which competes with legacy players including American Express and disruptors such as Brex, has struck a chord with small- and medium-sized businesses by promising to save users money and time. That’s led to strong growth since its February 2020 launch: Ramp said total cardholders have surged by five times this year and transaction volumes have tripled since April.
“The speed that this has happened is, I think, fairly unprecedented,” Glyman said in an interview. “Most businesses tend to slow down in terms of growth rate as they get larger, and we’ve actually experienced some of the fastest growth we’ve ever had despite the fact that the absolute size of the business is larger.”
The fundraising is the latest evidence of a fintech boom after the coronavirus pandemic supercharged the category.
Fintech firms around the world garnered a record $98 billion in venture capital, mergers and private equity investments in the first half of 2021, according to KPMG. Fintech giants including Robinhood and Coinbase are now publicly-traded companies, while retail banking start-ups like Chime have swelled in valuation.
Ramp, founded by Glyman and Karim Atiyeh in 2019, is among a new breed of business lenders taking on a sector that hasn’t seen much change in decades. Like Brex, another young company with an eye-popping valuation (it raised at a $7.4 billion valuation in April), Ramp offers cash-back charge cards and a suite of software tools for business owners.

But Ramp differentiates itself by saving the average client 3.3% annually on their spending, according to Glyman. It does that by automatically identifying ways that clients are spending money unnecessarily, like duplicate accounts with the same vendor, or by pointing out that clients may be overpaying for services.

Product image for Ramp

Meanwhile, competitors mostly incentivize clients’ employees to spend more money rather than saving it, he said.
“The industry has evolved to this place where people are trying to outsmart each other, spending a lot of time designing fancy points programs where they give you 5X points on this category and 2X on that,” Glyman said. Ramp’s card offers a flat 1.5% cash back rate.
In fact, more than a third of the firm’s clients are switching from American Express, the biggest U.S. issuer of small business cards, said Glyman.
But Ramp aspires to be more than a card provider; it aims to automate many of the tedious aspects of life for small business owners with an all-in-one platform. The company’s software includes expense management, accounting and bill pay.
To help users negotiate annual contracts with software firms and other providers, Ramp is acquiring a start-up called Buyer, its first acquisition, the CEO said. Buyer is a platform that saved its users an average of 27% on software contracts, said Glyman, who declined to say how much Ramp spent on the deal.
The firm’s latest round, aspects of which were reported earlier by The Information, was led by the Founders Fund and more than a dozen other investors including Stripe, a payments start-up valued at $95 billion. Another investor, Goldman Sachs, has given Ramp a $150 million credit facility to help it grow its business.

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Chinese companies wanting to go public — including overseas — must comply with two aspects of regulation, the vice minister for the country’s cybersecurity regulator said Tuesday.
One is the national laws and regulations, said Sheng Ronghua, vice minister of the Cyberspace Administration of China. The other is ensuring the security of the national network, “critical information infrastructure” and personal data.
The Cyberspace Administration of China has grown its clout in recent months and was the regulator that ordered app stores to remove Chinese ride-hailing app Didi just days after its massive U.S. IPO.

Computer code is seen on a screen above a Chinese flag in this July 12, 2017 illustration photo.
Thomas White | Reuters

BEIJING — Chinese companies wanting to go public — including overseas — must comply with two main aspects of a wider set of regulations, the vice minister for the country’s cybersecurity regulator said Tuesday.
One is the national laws and regulations, said Sheng Ronghua, vice minister of the Cyberspace Administration of China. The other is ensuring the security of the national network, “critical information infrastructure” and personal data.

The comments on the importance of these two rules in particular come as policy uncertainty this summer has essentially halted Chinese listings in the U.S., after a surge in overseas offerings earlier this year.

The remarks also come from the Cyberspace Administration of China, which has grown its clout in recent months. It ordered app stores to remove Chinese ride-hailing app Didi just days after its massive U.S. IPO in late June. The regulator also told subsidiaries of two other Chinese companies that recently listed in the U.S. to suspend new user registrations while undergoing a probe to “prevent national data security risks.”
In late July, a source familiar with the matter said China Securities Regulatory Commission Vice Chairman Fang Xinghai told major investment banks that Chinese companies can still go public in the U.S. using the commonly used legal structure known as the variable interest entity structure — barring national security concerns.
The Cyberspace Administration Vice Minister Sheng was speaking to reporters Tuesday in Mandarin at a press briefing on a new policy to protect critical information infrastructure, set to take effect on Sept. 1.
As he pointed out, article 2 of the policy defines such infrastructure as areas in which dysfunction or data loss would endanger national security, the economy, people’s livelihoods and the public interest. These industries include public communication and information services, energy, transportation, waterworks, finance and public services, according to the policy document.

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The policy calls for a national security review of Chinese purchases of network products and services, with fines or detention upon failure to comply.
In response to a question about whether foreign ownership made a difference, Sheng said the form of business ownership should not define “critical infrastructure.”
“For a long time, we have actively supported internet information companies to finance themselves and develop according to laws and regulations,” he said, according to a CNBC translation.

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Digital currency company Circle says it’s changing the makeup of its dollar-pegged stablecoin’s reserves to just cash and U.S. Treasury bonds.
The firm previously said USD Coin was backed 1:1 by dollars in a bank account, only to then reveal cash made up just over 60% of its reserves.
Centre, a consortium that developed the stablecoin and was founded by Circle and crypto exchange Coinbase, unveiled the change Sunday.

Chesnot | Getty Images

Digital currency company Circle had claimed its stablecoin, USD Coin, was backed 1:1 by actual dollars in a bank account.
In July, it was revealed this was no longer the case, with Circle disclosing in an “attestation” from auditors Grant Thornton that cash made up just over 60% of USD Coin’s reserves. The other 40% was backed by various forms of debt securities and bonds.

What constitutes a stablecoin’s reserves is important. What sets them apart from other cryptocurrencies is the fact they’re pegged to an existing currency like the U.S. dollar or the euro. The aim is to avoid the volatility often found in bitcoin and other major cryptocurrencies.
Now, Circle says it’s changing the makeup of USD Coin’s reserves once again, with just cash and U.S. Treasury bonds underpinning the stablecoin.

Centre, a consortium founded by Circle and crypto exchange Coinbase which developed the stablecoin, unveiled the change on Sunday.
“Mindful of community sentiment, our commitment to trust and transparency, and an evolving regulatory landscape, Circle, with the support of Centre and Coinbase, has announced that it will now hold the USDC reserve entirely in cash and short duration US Treasuries,” Centre said in a blog post. “These changes are being implemented expeditiously and will be reflected in future attestations by Grant Thornton.”

Why it matters

Many crypto traders use stablecoins as an alternative to their bank, to buy or sell digital currencies.

USD Coin is the second-largest stablecoin globally, with $27 billion worth of coins in circulation.
Tether, the largest stablecoin with $75 billion in circulation, has drawn scrutiny from regulators amid fears it doesn’t have enough assets to support its peg to the greenback.
Earlier this year, tether’s issuer revealed that just 2.9% of its reserves were held in cash. The vast majority of its reserves were made up of commercial paper, a form of unsecured, short-term debt that’s riskier than government bonds.
This sparked fears that a sudden mass redemption of tether tokens could destabilize short-term credit markets.

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In their latest policy meeting, officials at the U.S. Federal Reserve said stablecoins should be regulated as they pose a potential threat to financial stability.
Fed Chairman Jerome Powell has previously said a U.S. central bank digital currency could eliminate the need for cryptocurrencies and stablecoins like USDC and tether.

Transparency

There are increasing calls for stablecoin issuers to provide frequent breakdowns of their reserve compositions to address opaqueness in fast-growing crypto industry.
New York Attorney General Letitia James said Tether, the company behind the stablecoin of the same name, should submit quarterly transparency reports. It’s one of the things Tether was required to do as part of an $18.5 million settlement with James’ office.
Both Tether and Circle have since released reports breaking down their reserves.
On Sunday, Centre it was “deepening its commitment to transparency” and “exploring new opportunities to collaborate with the community.”
“By later this year we expect to announce several new opportunities for members to become more formally involved with Centre’s standards and governance activities,” it added.

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