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Robinhood got off to a rocky start when it made its Wall Street debut one year ago, but hopes for the buzzy trading app were high as armchair investors piled into the market hoping to mint quick fortunes.
The stock market was booming, and monthly active users more than doubled year-over-year, topping 21 million. The number of people trading crypto leaped as dogecoin, the digital coin that started as a joke, rocketed into the stratosphere. The retail trading army was flexing its muscle, and Robinhood was poised to cash in.
Fast forward 12 months, and the picture looks very different. Robinhood is slashing hundreds of jobs as inflation and recession fears send stock and crypto prices plunging back down to Earth. Monthly active users in June fell to 14 million as “customers navigated the volatile market environment.”
“For our customers, many of whom are younger, it looks like they may be facing a recession for the first time in their adult lives,” CEO Vlad Tenev said on a call with analysts Wednesday. “Customers are seeing this high inflation along with high interest rates, bear markets [in] stocks and a crypto winter.”
“This all adds up to less money to spend and therefore, less to save and invest,” he continued.
Robinhood’s stock rose nearly 12% on Wednesday after it announced the cost-cutting measures and reported a net loss of $295 million, smaller than in the first quarter. Shares are still down more than 40% year-to-date.
That said: Retail investors remain a powerful force that Wall Street is watching closely — as evidenced this week by the dramatic run-up of stock in AMTD Digital, a little-known company.
Shares of the Hong Kong-based company have rallied 14,000% since their public market debut less than a month ago. They were 126% higher on Tuesday alone, before pulling back sharply on Wednesday.
That sparked speculation that traders coordinating on social media were involved in christening another meme stock.
“Where did AMTD Digital come from,” one user on the Reddit forum WallStreetBets wrote. “What did I miss?”
AMTD Digital said this week that to its knowledge, nothing “material” has changed since its public offering that would have caused the “significant volatility.”
Important caveat: It’s not yet clear exactly what sparked the huge rally. But the run-up is a reminder of the extent to which outsize moves for single stocks have become the norm in the era of Reddit traders, putting the broader investor community on alert for sudden distortions.
Once a stock goes supernova, investors of all stripes now spring into action.
AMTD’s parent company was the No. 1 trade on Fidelity’s platform on Tuesday. On Thursday, billionaire Li Ka-shing’s CK Group announced that it had entered into negotiations to sell its less-than-4% stake in AMTD Digital’s parent company — a sign he doesn’t want to be left holding the bag when the bubble pops.
Bank of England announces biggest rate hike in decades
Central bankers in the United Kingdom have announced the biggest increase in interest rates in 27 years, as spiraling inflation continues to cripple millions of households’ finances.
This just in: The Bank of England raised the cost of borrowing by half a percentage point to 1.75% — the sixth time the central bank has hiked rates since December, my CNN Business colleague Anna Cooban reports.
In June, annual consumer price increased 9.4%, a four-decade high. The Bank of England has forecast that inflation will rise above 13% this fall, when energy bills are due to increase, and to “remain at very elevated levels throughout much of 2023.”
The Resolution Foundation, a think tank, said on Wednesday that it expects energy costs to drive consumer price inflation past 15% next year.
Wage rises are failing to keep up. Real pay for UK workers suffered its biggest drop in more than two decades between March and May, official data showed last month.
Britons have tightened their belts in response, spending less in supermarkets and ditching their streaming subscriptions.
On the radar: The fear is that as central banks raise borrowing costs to try to get inflation under control, people will begin to more aggressively limit their spending. That could trigger a string of recessions.
The BOE said Thursday that it expects the UK will enter a recession in the last three months of this year.
The Federal Reserve is also hiking rates faster than ever before. The European Central Bank, a latecomer, ended its long era of negative rates last month.
The Bank of England’s job is made even harder by Britain’s exit from the European Union, which has made the world’s fifth-biggest economy less competitive.
Coal is still a big moneymaker for this company
Oil majors aren’t the only ones benefiting from the sky-high cost of energy. Mining giant Glencore (GLCNF) is also netting record profits as the price of coal leaps.
The latest: The company said Thursday that its earnings more than doubled to $18.9 billion in the first half of the year, driven by record coal prices amid elevated demand for the product due to Russia’s war in Ukraine.
Efforts to shun coal have been shunted aside as countries try to ensure they have enough energy to make it through the winter, especially in Europe. Germany, for example, has restarted coal-fired power plants in a bid to conserve natural gas supplies.
“The real standout this time around has been coal,” CEO Gary Nagle said on a call with analysts. “You’ll remember a year ago, the first half of last year, coal’s earnings were less than $1 billion, but with the energy crisis and the requirements of the world needs for stable baseload energy, coal prices have surged.”
Remember: Coal is the single-largest source of energy-related carbon emissions, according to the International Energy Agency. Global consumption is expected to rise in 2022 to 8 billion metric tons, matching a record high set in 2013, the Paris-based agency said.
Glencore’s shares climbed more than 3% in London on Thursday. Its stock is up 23% year-to-date, while the FTSE 100 index has gained just over 1%.
Alibaba (BABA), ConocoPhillips (COP), Kellogg (K), Lordstown Motors, Nikola, Papa John’s (PZZA) and WeWork report results before US markets open. AMC Entertainment (AMC), Beyond Meat, DoorDash, Live Nation (LYV), Lyft (LYFT), Redfin (RDFN), Zillow (Z) and CNN parent Warner Bros. Discovery (DISCA) follow after the close.
Also today: Initial US jobless claims for last week post at 8:30 a.m. ET.
Coming tomorrow: Economists expect to learn that the US economy added 250,000 jobs in July. That’s a sizable number, though smaller than the 372,000 positions created in June.