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Live Stock Market Updates: S&P 500 Falls as Tech Stocks Drop and Bond Yields Rise

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By: Ella Koeze·Data delayed at least 15 minutes·Source: FactSet

The S&P 500 had its worst single-day drop since late January on Thursday as major technology stocks fell and bond yields continued to rise.

The benchmark U.S. index fell about 2.5 percent. Tesla was one of the S&P 500’s worst-performing stocks, losing 8 percent. Apple, Alphabet and Facebook each dropped more than 3 percent, and Microsoft fell 2.4 percent.

The drop came as yields on the 10-year Treasury note jumped to as high as 1.56 percent, up from 1.38 percent on Wednesday. The yield has risen each of the past three weeks, and analysts at Bank of America raised their forecast, expecting the 10-year yield to be at 1.75 percent at the end of the year because of stronger economic growth. Last month, they forecast 1.5 percent for year-end.

That sudden jump may also reflect concerns in the bond market about inflation, or that the rebounding economy will prompt the Federal Reserve to cut back on its measures to bolster the financial system. Either would be bad news for stocks, and trading has been turbulent all week as investors react to the sudden moves in bond yields.

Fed officials have generally dismissed the run-up in longer-term interest rates as a problem.

“I’m not worried about that — we’re going to keep an eye out,” Raphael Bostic, president of the Federal Reserve Bank of Atlanta, told reporters during a phone call on Thursday. “I’m not expecting that we’ll need to respond, at this point, in terms of our policy.”

Nor are Fed officials, who are charged with keeping price gains slow and steady, worried about runaway inflation.

“With our economy and the global economy still far below full strength, I expect underlying inflationary pressures to remain subdued for some time,” John C. Williams, president of the New York Fed, said Thursday afternoon.

David Lefkowitz, a strategist at UBS, said rising rates reflected rising optimism about the economy, which is generally good news for stocks.

“While very large and rapid moves in rates can create some short-term equity-market volatility, we would expect this to be very transient,” Mr. Lefkowitz wrote in a recent note to clients.

But the increase in yields has prompted investors to sell their high-flying technology investments in favor of shares of companies like banks and industrial companies that could benefit from growth. That was evident in Thursday’s trading, with the technology-heavy Nasdaq composite index falling 3.5 percent, while the Dow Jones industrial average fared much better, with a decline of about 1.8 percent.

Jeanna Smialek contributed reporting.

Credit…Hiroko Masuike/The New York Times

Airbnb, which has faced sky-high expectations since its blockbuster initial public offering in December, posted declining revenue and a whopping $3.9 billion loss on Thursday in its first earnings as a publicly traded company.

The home rental company brought in $859 million in revenue in the last three months of the year, down 22 percent from a year earlier. Its loss was driven by $2.8 billion in costs associated with stock-based compensation related to its I.P.O., as well as an $827 million accounting adjustment for an emergency loan it took out last year to weather the pandemic.

Airbnb’s loss topped that of ride-hailing company Uber in its first quarter as a public company and renewed questions about whether unprofitable tech start-ups can turn a profit. Although most money-losing tech companies say that they are spending money to fuel fast growth, Airbnb’s shrinking revenue makes that argument a harder sell.

Airbnb presented its declining revenue as a show of resilience in a year when travel came to a standstill because of the pandemic. Last spring, Airbnb lost $1 billion in bookings, laid off staff and raised emergency funding in response to lockdowns and other restrictions. By the summer, bookings had bounced back, though not enough to make up for the hole in revenue.

In December, the company went public and raised $3.5 billion, valuing it at more than $100 billion. Since then, its valuation has risen to nearly $120 billion on investor expectations that a fast vaccine rollout would spur a new boom in travel.

Even if travel bounces back later this year, Airbnb faces challenges. Its hosts, who provide its inventory in the form of property listings, have become increasingly frustrated with the company and are seeking to list their rentals independently. Its problems with “party houses” worsened in the pandemic and the company has rushed out new rules. And regulators around the world continue to scrutinize the “Airbnb effect” of turning housing stock in residential areas into hotels.

GameStop One-Week Share Price

Shares of GameStop surged again on Thursday, in the second straight day of volatile trading for the video game retailer that was at the center of a retail trading frenzy last month.

On Wednesday, GameStop’s shares doubled to $91.71, and the volume of trading was more than 10 times the level of the previous day. By Thursday afternoon, the shares were up another 50 percent, to about $140.

Some of the popular posts on Reddit’s Wall Street Bets forum, where users stoked last month’s wild rally, read “ROUND 2!” and “THE COMEBACK!!!!!”

Other so-called meme stocks that captured the internet’s attention also rose: Shares of AMC Entertainment gained as much as 18 percent and the headphone maker Koss was up about 50 percent.

The two-day surge by GameStop again made the video-game retailer the center of the market’s attention, just a few weeks after a remarkable rally that created vast on-paper wealth for many small traders, and even made some into millionaires if they sold high. Some notable hedge funds that had bet against the stocks suffered painful losses during last month’s rally, which ended almost as quickly as it began — and left many retail investors with substantial losses if they got in late.

While last month’s rally had a certain logic — retail traders pouring into a stock and executing a squeeze on the hedge funds touched off a buying frenzy — no one knew exactly what resuscitated the frenetic trading in GameStop this week.

Low probability rationales included the departure of the struggling video game retailer’s chief financial officer, in a move announced earlier this week. Others traced the start of the rise to a Twitter post on Wednesday by the GameStop board member and activist investor Ryan Cohen. But it was unclear why the post — a text-free photograph of a McDonald’s soft-serve ice cream cone — would have been seen as a signal to buy.

Other analysts saw a connection to some unusual activity in the options market late in the day on Wednesday. There were a few larger-than-typical purchases of call options — bets that the stock price would rise sharply — which may have forced the dealers that sold those options to buy shares. This is a normal maneuver dealers make to hedge their positions, and as the popularity of trading options has exploded over the past year, some analysts have pointed to that dynamic as exacerbating the volatility of markets.

Some analysts posited that the late-day options purchases helped explain the surge of trading in the stock late in the day as well as during the after-market session on Wednesday, when at times GameStop was up another 100 percent.

“Whoever sold those calls simply did not have enough time to cover their risks in the regular session, and may have felt it prudent to do so after the close,” said Steve Sosnick, chief strategist at Interactive Brokers in Greenwich, Conn. Couple that with the already heightened interest in GameStop, he said, and you have the makings of a rally.

“GME was on everyone’s radar,” he said, “so that brought out another crop of speculators.”

“We know that paying employees good wages and providing affordable benefits makes sense for our business and constitutes a significant competitive advantage for us,” said W. Craig Jelinek, the chief executive of Costco.
Credit…Stefani Reynolds for The New York Times

The chief executive of Costco waded into the political debate over the federal minimum wage, testifying at a Senate hearing on Thursday that the retailer was raising its starting pay to $16 an hour.

W. Craig Jelinek, the chief executive, said Costco, which already pays an hourly minimum of $15, had some of the highest employee retention rates of any retailer.

“This isn’t altruism,” Mr. Jelinek told the Senate Budget Committee. “At Costco, we know that paying employees good wages and providing affordable benefits makes sense for our business and constitutes a significant competitive advantage for us.”

Mr. Jelinek was invited to testify by the committee’s chairman, Senator Bernie Sanders, a Vermont independent who supports raising the federal minimum wage to $15 an hour over the next four years. Mr. Jelinek said he was not there to endorse the proposed federal minimum wage increase, but rather to discuss how his company’s higher-than-average wages had affected his business.

Republicans on the committee, including Senator Lindsey Graham of South Carolina, asked whether Costco, which generated $150 billion in revenue last year, was able to absorb the higher wages because of its size and whether a $15-an-hour mandate was likely to cause smaller retailers to close.

“In my past experience, wages don’t usually put you out of business,” Mr. Jelinek said. “It is how you run your business.”

Mr. Jelinek said the average wage at Costco, which employs 180,000 people in the United States, was $24 an hour.

Costco’s pay contrasts with that of Walmart, whose chief executive, Doug McMillon, declined Mr. Sanders’s invitation to testify. Walmart’s average wage is above $15 an hour, but the company’s minimum wage is $11 an hour.

Mr. Sanders pointed to research by the Government Accountability Office showing that some Walmart employees must depend on food stamps and Medicaid to get by on such low wages, calling it a subsidy for the giant corporation.

Last week, Walmart said that it was raising the wages of 425,000 workers and that about half of its work force in the United States would earn at least $15 an hour. But Mr. McMillon stopped short of saying whether the company would eventually extend a $15 minimum to all employees.

The chief executive of McDonald’s, Christopher Kempczinski, also declined an invitation to testify Thursday. The chain’s average wages are about $12 an hour.

Terrence Wise, a McDonald’s worker in Kansas City, Mo., told the committee that he relied on food stamps to raise his three children and had to live out of a minivan after his family was evicted from its home.

“I work for McDonald’s, one of the richest companies in America,” Mr. Wise said. “This is what generational poverty looks like. This is what I am fighting to end.”

Janet L. Yellen, the Treasury secretary, made clear that the United States was no longer taking an “America First” approach to its relationship with the Group of 20.
Credit…Stefani Reynolds for The New York Times

Treasury Secretary Janet L. Yellen called on members of the Group of 20 nations to coordinate on a global vaccination campaign, arguing in a letter on Thursday that containing the coronavirus pandemic is the best way to aid the world economy.

Ms. Yellen emphasized the importance of working through multilateral institutions and underscored the responsibility of rich countries to help poor nations weather the public health crisis.

“A rapid and truly global vaccination program is the strongest stimulus we can provide to the global economy,” she wrote.

The outreach was the latest example of the new tone being set by the Biden administration and represented a return to America’s leadership role in the G20, a group of finance leaders from some of the world’s largest industrial and emerging economies, after four years in which the U.S. was often an outlier on international policy matters.

“This is a moment made for action and for multilateralism,” Ms. Yellen said in the letter.

Ms. Yellen also warned G20 countries not to withdraw fiscal support for their economies too soon and to take measure to ensure that workers and consumers are benefiting from international trade.

“If there was ever a time to go big, this is the moment,” Ms. Yellen said, echoing the sentiment she has expressed to lawmakers in the United States as the Biden administration pushes a $1.9 trillion economic relief package.

In a notable shift from her predecessor at the Treasury Department, Steven Mnuchin, Ms. Yellen threw her support behind the idea of providing additional emergency liquidity through the International Monetary Fund’s Special Drawing Rights to help emerging markets stabilize their financial reserves. Mr. Mnuchin believed that this would provide little help to poor countries and would risk turning the I.M.F. into something akin to a central bank.

Ms. Yellen said on Thursday that the tool could “enhance liquidity for low-income countries,” but said the G20 would need to work together to ensure it was deployed effectively and with transparency.

She acknowledged that more work needs to be done on fraught international disputes such as the negotiations between the United States and Europe on digital services taxes, but she made clear that the United States was no longer taking an “America First” approach to its relationship with the G20. She said that the United States would work to overcome such disagreements by seeking “workable solutions in a fair and judicious manner.”

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Katherine Tai Testifies Before the Senate Finance Committee

Katherine Tai, President Biden’s pick for U.S. trade representative, testified before the Senate Finance Committee on Thursday about opportunities to boost the economy through trade.

Serving as the U.S. trade representative holds special resonance for me as the daughter of immigrants. My parents were born in mainland China, and grew up in Taiwan. The immigration reforms set in motion by President Kennedy opened a path for them to come here as graduate students in the sciences, and they made the most of their American opportunity. That sense of pride and patriotism will ground me every day if I have the honor to be confirmed as United States trade representative. I know that the challenges ahead are significant. Our first task will be to help American communities emerge from the pandemic and economic crisis. U.S.T.R. has an important role to play in that effort. Working with Congress, the entire Biden-Harris administration and other countries, and trusted partners, U.S.T.R. will help to build out strong supply chains that will get our economy back on track. In the longer term, we must pursue trade policies that advance the interests of all Americans.

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Katherine Tai, President Biden’s pick for U.S. trade representative, testified before the Senate Finance Committee on Thursday about opportunities to boost the economy through trade.CreditCredit…Tasos Katopodis/Agence France-Presse, via Pool/Afp Via Getty Images

Katherine Tai, President Biden’s pick for U. S. trade representative, promised members of the Senate Finance Committee on Thursday that she would work with Congress to help reinvigorate the economy and aggressively enforce American trade rules against China, Mexico and other trading partners.

As trade representative, Ms. Tai would play a part in carrying out several of the Biden administration’s key goals, including helping to restore American alliances abroad, challenging China’s unfair trade practices and reforming and enforcing American trade rules to help alleviate inequality and mitigate climate change.

She would also play an important role in decisions like whether to keep former President Donald J. Trump’s tariffs on Chinese products, how to address new digital services taxes that foreign countries have imposed on American technology companies and whether to aggressively pursue new trade deals.

In her testimony Thursday morning, Ms. Tai promised to ensure that trading partners adhered to new trade rules, including the agreement that Mr. Trump signed with China last year, and new measures included in the revised North American trade deal, the United States-Mexico-Canada Agreement. On China, she said her background challenging China’s unfair trade practices in the Obama administration had given her knowledge of “the opportunities and limitations in our existing toolbox” and that she would explore “all of our options” on improving the U.S.-China trade relationship.

She declined to give many specifics on the trade policies the Biden administration would pursue, saying instead she would review existing tariffs and trade negotiations. But she laid out a philosophy of trade policy that would support broader, more equitable growth and “recognize that people are workers and wage earners, not just consumers,” which she said would be a significant departure from the past.

One of the challenges will be creating trade policy “to break out of that pattern, so that what we are doing in trade is coordinated with what we are doing in other areas, but also not forcing us to pit one of our segments of our workers and our economy against another,” she said.

Asked about the tariffs that Mr. Trump had placed on foreign metals, Ms. Tai said that tariffs were “a legitimate tool in the trade tool box,” but that the global steel and aluminum industries faced larger problems with overcapacity that might require other policy solutions. She also said that she was aware of “the many concerns” that had arisen with the process of companies applying for exclusions from the tariffs, and said that reviewing that system with an eye to transparency, predictability and due process would be “very high on my radar.”

Ms. Tai most recently worked as the chief trade counsel of the House Ways and Means Committee, where she helped to negotiate reforms that brought Democrats on board with U.S.M.C.A., which was negotiated by Mr. Trump. Before that, she served in U.S.T.R.’s general counsel office, where she brought several successful cases against China’s trade practices at the World Trade Organization.

If confirmed, Ms. Tai would be the first woman of color and first Asian-American to serve in the position.

Coronavirus caseloads have been dropping amid vaccination efforts, but until employers and consumers feel that the pandemic is under control, economists say, the labor market won’t fully recover.
Credit…James Estrin/The New York Times

New claims for unemployment fell last week, the government reported on Thursday, the latest sign that the labor market’s recovery, however slow and unsteady, is continuing.

A total of 710,000 workers filed first-time claims for state benefits during the week that ended Feb. 20, a decrease of 132,000, the Labor Department said. In addition, 451,000 new claims were filed for Pandemic Unemployment Assistance, a federal program covering freelancers, part-timers and others who do not routinely qualify for state benefits, a decline of 61,000.

Neither figure is seasonally adjusted. On a seasonally adjusted basis, new state claims totaled 730,000, a decline of 111,000.

Although initial jobless claims are nowhere near the eye-popping levels seen last spring, they are still extraordinarily high by historical standards. There are roughly 10 million fewer jobs than there were last year at this time.

Analysts also cautioned against reading too much into a single week’s changes. The combined average of new state and federal unemployment insurance claims over the first eight weeks of this year is actually slightly higher than it was over the last eight weeks of 2020.

“The numbers look encouraging on the face of it,” said Gregory Daco, chief U.S. economist at Oxford Economics. But when you take step back and look at the broader picture, he said, “it does reflect an environment in which the labor market remains quite fragile.”

Much of last week’s decline in applications for state benefits can be traced to big drops in two states, California and Ohio, where there had been reports of increased fraud.

Coronavirus caseloads have been dropping amid efforts to get vaccines to people who are most vulnerable. But until employers and consumers feel that the pandemic is under control, economists say, the labor market won’t fully recover.

Allison Schrager, an economist at the Manhattan Institute, said: “Until people feel this is sustained and that there’s not another huge wave coming, I can’t imagine we’re going to see big changes in jobless claims for a while.”

Brian Armstrong, the chief executive of Coinbase, which revealed in a regulatory filing that it earned $322.3 million last year.
Credit…Steven Ferdman/Getty Images

Coinbase, the most valuable cryptocurrency company in the United States, filed to go public on Thursday amid a surge in prices in digital money.

It is the latest milestone for Coinbase, which was founded in 2012 as a site for buying and selling cryptocurrencies like Bitcoin and has now become a giant in the industry, with 43 million retail traders and 7,000 institutions as customers. Its fortunes have soared along with the price of Bitcoin, which was trading at more than $51,000 apiece as of Thursday.

Coinbase pulled back the curtains on its finances in a filing with the Securities and Exchange Commission, revealing that it earned $322.3 million last year, on top of $1.3 billion in revenue. That compares with a $30.4 million loss atop $533.7 million in revenue for 2019.

The company makes money from fees charged for customer trades. In a letter to prospective investors, its co-founder and chief executive, Brian Armstrong, warned that the company’s financials may be volatile, because they are tied to the sometimes whipsawing prices of cryptocurrencies.

The company drew controversy last fall when Mr. Armstrong told employees to leave their social activism out of the workplace. Current and former employees have also complained about the company’s management of Black workers.

The company is planning a direct listing, where it simply puts its privately traded shares onto a public stock market — the Nasdaq, in this case — as opposed to a traditional initial public offering.

Such deals have gained popularity among technology companies in recent years for being a simpler way to going public, especially if they do not need to raise money. Last month, Coinbase said it was pursuing a direct listing.

MicroStrategy, a business intelligence software firm,  has spent more than $2 billion on Bitcoin since the summer.
Credit…Dado Ruvic/Reuters

Michael Saylor, the chief executive of the business intelligence software firm MicroStrategy, believes deeply in Bitcoin and has urged other companies to shift their corporate cash into the cryptocurrency. That’s what MicroStrategy has been doing, in a bigger way than the others that have put Bitcoin on their balance sheets, the DealBook newsletter reports.

On Wednesday, MicroStrategy announced a $1 billion Bitcoin purchase, bringing its total spending on the cryptocurrency to more than $2 billion since the summer. MicroStrategy “remains focused on two corporate strategies,” Mr. Saylor said in a statement: expanding its software business and “acquiring and holding Bitcoin.” The company’s finance chief, Phong Le, said Bitcoin investments complemented the software business “by enhancing awareness of our brand and providing opportunities to secure new customers.”

Bitcoin’s price is currently double the average cost that MicroStrategy paid for them, implying a gain of nearly $2.5 billion. Before it started buying Bitcoin in August, MicroStrategy’s market capitalization was just over $1 billion. It is now nearly $8 billion, with its Bitcoin holdings overshadowing its software business.

“It’s amazing that a board of directors allowed this,” said Marc Lichtenfeld, a financial adviser, citing Bitcoin’s extreme volatility and its tenuous link to the company’s software business. Buying crypto in enormous amounts as a marketing tool will not affect the fundamental prospects of MicroStrategy’s business by adding to its earnings and cash flow, he noted.

“Regulators could have concerns,” said Richard Levin, a fintech lawyer at Nelson Mullins. “Any publicly traded company bringing a digital asset onto its balance sheet needs to proceed with caution.” It’s fine to buy an asset because it is appreciating, Mr. Levin said, but companies need to tread carefully to avoid the appearance that they are acquiring it to generate hype.

MicroStrategy isn’t alone in acquiring Bitcoin. The payments company Square announced a $170 million purchase this week and Tesla bought $1.5 billion worth of Bitcoin earlier this month. But money is Square’s business, and Tesla’s purchase was a much smaller share of its corporate cash, less than 10 percent (not around 1 percent, as was previously reported here).

Companies that previously reoriented their businesses around cryptocurrency — beyond just buying a lot of it, like MicroStrategy — have run into trouble with the financial regulators in the past, like Overstock, the retailer and token purveyor, and Long Blockchain, the rebranded iced-tea maker that was delisted this week.

Nirav Modi in 2017. The jeweler has lost an extradition case in Britain’s high court.
Credit…Billy H.C. Kwok for The New York Times

Nirav Modi, a jeweler whose designs once adorned the necks of A-list celebrities, has lost an extradition case in Britain’s high court. Mr. Modi is wanted by the Indian government to face charges of fraud, involving transactions totaling $1.8 billion with a state-run bank.

On Thursday, Judge Samuel Goozee said in a London court that there was enough evidence for Mr. Modi to face charges in India, The Associated Press reported.

The celebrity jeweler suffered a quick fall from grace a few years ago. He went from running an empire of luxury stores around the world, mingling with royalty and meeting with the Indian prime minister, Narendra Modi, to being a fugitive in early 2018 after authorities said they discovered that he used fraudulent documents to get loans from the Punjab National Bank to import diamonds and other jewels. He then fled.

Mr. Modi was eventually arrested in London in March 2019 and was denied bail. He attended the hearing on Thursday via video from prison, Agence France-Presse reported.

The case has captivated many people in India amid scrutiny of state-run banks. The Indian government has also been trying to extradite Vijay Mallya from London to face charges of fraud and money laundering. Mr. Mallya invested in airlines and alcohol brands and built a reputation as India’s “King of Good Times.” A court ruled in December 2018 that he should be extradited, but Mr. Mallya has delayed his departure through appeals.

Mr. Modi has 14 days to file an appeal the ruling. Next, Britain’s home secretary, Priti Patel, has to decide whether to order the extradition.

  • Target said on Thursday that it would roll out Apple shops within its stores, starting with 17 locations with plans for more later this year. The areas will be overseen by Target tech consultants “who will receive specialized training from Apple,” Target said, and the chain will carry more Apple products online. Target has also struck new deals with Levi Strauss & Company and Ulta as malls and department stores continue to struggle.

  • A broad promotional effort to combat Covid-19 vaccine skepticism began rolling out on Thursday, backed by the nonprofit advertising group Ad Council and a coalition of experts known as the Covid Collaborative. The campaign, “It’s Up to You,” encourages Americans to seek out facts about the available vaccines. Public service announcements will appear in English and Spanish on television, social media and other platforms. More than 300 companies, community groups and public figures contributed to the $52 million push, as did the Centers for Disease Control and Prevention.

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