From Wall Street to Silicon Valley, these are the top stories that moved markets and had investors, business leaders, and entrepreneurs talking this week on Cheddar.
REDDIT REVOLT
The weirdest week on Wall Street in recent memory is ending with small investors up in arms against decisions by Robinhood and other online brokerages to temporarily block investors from buying up shares of GameStop and other so-called “meme stocks.” Those curbs first led to shares of GameStop plummeting from their highs on Thursday before bouncing back on Friday. Robinhood said it had to institute trading curbs for regulatory reasons, but the effect meant that individual traders were blocked from buying, while institutional investors like hedge funds could keep selling out of their positions. Investigations have been launched, Congressional hearings have been scheduled, and Robinhood is under fire for appearing to turn on the very small-time investors that made it so wildly popular.
ECONOMIC SHRINKAGE
Last year, the U.S. economy contracted on an annual basis for the first time since 2009. GDP shrank by 3.5 percent, the widest margin since WWII, even as the fourth quarter showed some signs of growth. (In another somewhat encouraging sign, jobless claims last week came in a bit better than expected.) Economists largely expect the economy to continue to stall until widespread vaccinations end the pandemic. Meanwhile, China’s progress toward becoming the center of the global economy has been rapidly accelerating. China has now overtaken the U.S. as the number one spot for foreign investment, according to new UN figures released this week. Investments from overseas businesses into the U.S. were halved in 2020, while they grew for China. In December, China was projected to overtake the U.S. in terms of GDP by 2028, five years earlier than originally anticipated.
TECH EARNINGS
Apple and Facebook reported record earnings for the holiday period, with Apple topping $100 billion in quarterly sales for the first time thanks to high demand for the iPhone 12, and Facebook posting record profits on the strength of its ad business. Tesla, meanwhile, was more of a mixed bag: the automaker reported its first full-year profit but on weaker-than-expected margins. Tesla made $721 million in 2020, compared to a loss of $862 million in 2019. Google and Amazon report on Tuesday.
NET ZERO IS COMING
Larry Fink, the CEO of the world’s biggest asset manager, BlackRock, and one of the most influential people on Wall Street, is warning companies that they need to commit to a gameplan for achieving net-zero emissions by 2050 or risk BlackRock dumping their stocks. In his annual letter to the world’s CEOs, Fink doubled down on his call last year that corporate America needs to get on board with “net zero,” saying a “tectonic shift” in the investing landscape is accelerating faster than anyone anticipated. BlackRock has $9 trillion in assets under management, and thus the ear of corporate boards and executives just about everywhere. Almost on cue, and in one of the biggest signs yet that the business world sees the switch to renewable energy as not just a foregone conclusion but a profitable goal, General Motors said it would phase out the internal combustion engine by 2035 and sell exclusively electric cars and trucks by then. GM is the largest automaker to commit to such an ambitious timeline for electrification, and it is likely to pressure other American car companies to follow suit.
VACCINES VS. VARIANTS
A crush of new coronavirus vaccine data hit the tape this week, most notably the first results from Johnson & Johnson’s highly anticipated one-dose shot. That vaccine showed 72 percent efficacy in the U.S. and 57 percent efficacy in South Africa, where a new highly contagious virus variant has emerged. Most crucially: the shot prevented 100 percent of cases requiring hospitalization, and may actually become more effective as time goes on. The J&J data followed Novavax, a smaller U.S. biotech firm that has a vaccine it says is 89 percent effective against the dominant strain and significantly less so against the South African variant. AstraZeneca’s vaccine was also granted approval in the EU. The bottom line: even with the mutations taken into account, approved vaccines may still provide measurable and significant -- even if reduced -- protection against Covid-19. The challenge, however, remains the same: getting shots into arms ASAP. The U.S. is now averaging about 1 million doses per day, on track with President Biden’s goal of 100 million doses in 100 days. If and when J&J’s jab is approved in the U.S., it could significantly increase that rate, provided the company is able to produce the 100 million shots it has sold to the government.
