Top Fed official sees surge in private credit as potential vulnerability

The S&P 500 narrowly missed out on recording its longest winning streak since January after closing fractionally lower.

The benchmark index shed less than one-tenth of single index point to close at 5,187.67. That ended a four-day winning streak, as the majority of sectors weakened.

The Nasdaq Composite fell 0.2 per cent, and the small-cap focused Russell 2000 declined 0.5 per cent.

Treasury yields moved higher in a muted session, continuing a trend of minor moves in a week during which there are few top-tier US economic data releases. The yield on the 10-year note rose 0.04 percentage points to 4.5 per cent.

Stocks making the biggest moves after hours: Airbnb, Robinhood, Arm Holdings, Equinix and more

A key is seen in front of a computer screen displaying the Airbnb logo in Ankara, Turkey, on Nov. 22, 2023. Dilara Irem Sancar | Anadolu | Getty Images

Check out the companies making headlines in extended trading:

Airbnb — The hoteling company issued disappointing forward guidance, dragging shares down 8%. Airbnb said second-quarter revenue would range between $2.68 billion and $2.74 billion, but analysts were calling for $2.74 billion, per LSEG. The company beat on the top and bottom lines for the first quarter.

Robinhood — The retail investing company jumped about 6% after the company’s first-quarter report surpassed Wall Street estimates. Robinhood reported earnings of 18 cents per share on revenue of $618 million, while analysts polled by LSEG expected 6 cents in earnings per share and $549 million in revenue.

Klaviyo — Shares climbed 7% after the marketing automation company issued promising revenue guidance for the second quarter. Klaviyo expects revenue in the current quarter of $211 million to $213 million, while analysts polled by LSEG expected $210 million.

Arm Holdings — Shares pulled back 6%. The chip company posted full-year revenue guidance of $3.8 billion to $4.1 billion, while Wall Street called for $3.99 billion in revenue, per LSEG.

Equinix — The data center real estate investment trust climbed more than 11%. Equinix posted adjusted earnings before interest, taxes, depreciation and amortization of $992 million for the first quarter. Analysts polled by FactSet called for $981.3 million.

AppLovin — The mobile tech company surged 10%. First-quarter earnings for AppLovin came in at 67 cents per share, while revenue was $1.06 billion. Analysts called for earnings of 57 cents a share and revenue of $974 million.

SolarEdge — The solar energy company slid nearly 7%. SolarEdge posted a wider-than-expected loss for the first quarter, coming in at $1.90 a share, while analysts polled by LSEG anticipated a loss of $1.57 per share. Second-quarter revenue guidance was also weak, ranging between $250 million and $280 million, versus analysts’ estimates for $306 million.

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Robinhood climbs after reporting record earnings for first quarter

Robinhood shares rose after the retail brokerage announced stronger-than-expected first-quarter results. Net income rose to $157 million, or 18 cents per share, on record revenue of $618 million. Cryptocurrency transactions accounted for $126 million in revenue in the quarter, the company said. Spencer Platt | Getty Images

Shares of Robinhood rose in extended trading Wednesday afternoon after the retail brokerage announced stronger-than-expected first-quarter results.

Robinhood reported net income of $157 million, or 18 cents per share, for the first quarter. That is a positive swing from the same period last year, when the company had a net loss of $511 million, or 57 cents per share.

Here is how Robinhood’s results compared to Wall Street estimates, according to analysts surveyed by LSEG:

Earnings per share: 18 cents vs. 6 cents expected Revenue: $618 million vs. $549 million expected

The company said the earnings per share and revenue numbers were both records for the firm. The stock jumped more than 5% in after-hours trading.

Robinhood surged in popularity during the Covid-19 pandemic in 2020 and 2021, but has since seen user activity and revenue that mirrors action in the broader market. Stocks and cryptocurrencies rose during the first quarter, which likely helped the company’s results.

Cryptocurrency transactions accounted for $126 million in revenue in the quarter, the company said. Regulatory uncertainty has clouded the future of that business. Robinhood disclosed on Monday that the U.S. Securities and Exchange Commission had issued a Wells Notice to the company, signaling potential legal enforcement action over the company’s cryptocurrency business.

Dan Gallagher, Robinhood’s chief legal, compliance and corporate affairs officer, said in a blog post that the company was “disappointed” in the SEC’s decision and still believes that the crypto assets on its platform are not legally securities.

Robinhood said its number of funded customers rose by 810,000 year over year to 23.9 million. Assets under custody rose 65% year over year to $129.6 billion, according to the press release.

Shares of Robinhood were up nearly 40% year to date before Wednesday’s earnings announcement.

Read the full earnings release here.

Correction: A previous version of the story misstated the date of Robinhood’s quarterly report.

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Arm shares drop as revenue forecast falls short despite AI boom

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Shares in Arm dropped by about 8 per cent after the UK chip designer issued lacklustre projections for revenue this year, raising concerns that spending by tech companies on artificial intelligence hardware could slow down.

The SoftBank-backed group, which has been one of the biggest beneficiaries of an AI spending boom since it listed on Nasdaq in September, forecast revenues of between $3.8bn and $4.1bn for the year to March 2025. Analysts had expected revenues of $4.01bn.

The share price fall in after-hours trading came despite Arm reporting a 47 per cent surge in fourth-quarter revenue to $928mn on Wednesday, which pushed annual turnover to more than $3bn for the first time and exceeded its own guidance of between $850mn and $900mn.

The results are Arm’s third since its blockbuster IPO, which valued it at $65bn, the biggest US listing in almost two years. Since then its market capitalisation has soared, reaching a peak of about $117bn in February. Its market value on Wednesday before the earnings announcement was $109bn.

Chief executive Rene Haas said as AI software models such as OpenAI’s ChatGPT and Meta’s Llama, “become larger and smarter, their requirements for more compute with greater power efficiency can only be realised through Arm”.

Revenues were boosted by a surge in royalties for its V9 chip designs, which are licensed to power smartphones, data centres and AI chips manufactured by companies including Nvidia and Amazon to run large language models. Arm sells chip design licences to manufacturers that pay royalties on each unit shipped. Royalty revenue rose 37 per cent to $514mn in the quarter. Arm said chips based on its V9 technology now contribute a fifth of its royalty revenues, compared with 15 per cent in the previous quarter.

Arm revised up its revenue guidance for the fourth quarter in February due to the surging demand for new AI applications that had driven higher demand for its chip architecture.

Shares in AI chip manufacturers such as Nvidia and AMD have rallied this year as tech companies outlined plans to keep spending heavily on AI computing infrastructure, raising forecasts for capital spending in 2024 by billions of dollars.

Traders boost bullish bets on European gas prices

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Traders have boosted their bets on a rise in European gas prices to the highest level in more than two years, indicating growing concerns about potential disruption to supplies.

Net long positions held by investment funds in futures contracts linked to Europe’s main gas benchmark have soared to 96.4 terawatt hours, worth about €30bn at current prices, according to data from Intercontinental Exchange released on Wednesday. That represents the largest bullish bet since February 2022, days before Russia started its full-scale invasion of Ukraine and made deep cuts to its pipeline gas supplies to Europe, sending prices soaring.

Prices have since fallen dramatically as European economies reduced their gas usage and found alternatives to Russian imports, helping to fill storage facilities close to record levels. But those efforts have left the continent more reliant on the often volatile global market for liquefied natural gas.

Already in recent months, there have been disruptions at exporting facilities in the US and Australia, two big LNG producers. Investment funds have been building up their long positions since the start of Israel’s war in Gaza in October, which led to concerns about the transport of LNG through the Red Sea, where 13 per cent of Europe’s LNG supply passed last year, and other Middle Eastern waters.

“Funds are taking into consideration a possible reduction in LNG flows passing through two key straits” of Bab al-Mandab and the Strait of Hormuz, said Tom Marzec-Manser, head of gas analytics at ICIS, a consultancy. “There is upside risk and therefore a rationale for taking a long position.”

The European gas benchmark traded at about €30 per megawatt hour on Wednesday. While that is far below the peak of more than €300/MWh in the summer of 2022, it remains higher than about the €10 to €20/MWh typically seen before the gas crisis started in 2021.

Bullish bets by speculators come despite the EU’s gas storage being 63.8 per cent full as of Monday, the second-highest level on record for this time of year.

Most traders and analysts believe the EU will not have a problem refilling its gas storage facilities ahead of winter when demand rises. But they do not rule out further big price swings, particularly with gas demand rebounding recently, having remained subdued during the energy crisis.

Analysts at Morgan Stanley said “underlying gas demand”

Stocks making the biggest moves midday: Uber, Intel, Lyft, Shopify, Rivian and more

Visualizing the Copper Investment Opportunity in One Chart

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May 8, 2024 Graphics & Design Visualizing the Copper Investment Opportunity in One Chart

Copper is essential for clean energy applications such as solar panels, wind turbines, and electric vehicles (EVs), as well as for expanding electrical grids.

The surge in demand for the metal, driven by the growing adoption of these technologies, presents a unique investment opportunity for early investors in copper mining companies.

This chart by Sprott explores the growing gap between copper supply and demand until 2050, based on projections from BloombergNEF’s Transition Metals Outlook 2023.

Projected Copper Supply vs. Demand

Copper is naturally abundant on Earth, but extracting the metal at the pace necessary for an electrified economy could be a challenge. The timeline for bringing a copper mine from discovery to production is lengthy, averaging over 16 years.

Top producers like Chile and Peru are facing strikes and protests, along with declining ore grades. Russia, ranked seventh in copper production, faces an expected decline in production due to the ongoing war in Ukraine.

Meanwhile, the increasing adoption of carbon-free technology only highlights copper’s significance. 

High Demand for Transport and Electricity Grid

The demand for copper in the transport sector is projected to increase by 11.1 times by 2050, from 2022. EVs, for example, can contain more than a mile of copper wiring.

Additionally, the demand for copper needed to expand the global electricity grid is projected to increase by 4.8 times by 2050, from 2022.

By 2030, the copper supply gap is projected to approach 10 million metric tons, with both copper prices and copper mining stocks potentially set to benefit.

As the world embraces clean technologies, the search for and expansion of copper mines will be essential. Early investors who gain exposure to copper miners may benefit from the rapidly increasing demand.

Sprott offers convenient exchange-traded alternatives for investors seeking exposure to copper miners. 

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Willkie opens Dallas office and adds three new Partners

Law firm Willkie Farr & Gallagher has opened a new office in Dallas, which will be supported by a team of seven Partners, three of whom have just joined the business – Tom Tippetts, Brandon McCoy and Chase Proctor.

In addition, existing Partners Tony Johnston, Jessica Sheridan, Archie Fallon and Sarah McLean, who have strong private equity experience, will also be based in Dallas.

According to a press statement, each member of the team supporting the opening has experience in the Dallas market, particularly in private equity and M&A across various industries.

The Dallas opening brings Willkie’s total number of offices globally to 15, following the launch of the firm’s Munich office earlier this year, Los Angeles in 2021, Chicago in 2020, San Francisco in 2019 and Palo Alto in 2018.

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