Financial News Bites: What Happened This Week? May 4th, 2023

By Chika


Last Updated: May 4, 2023


This week in financial news we see more investment in AI, Fox Corp fires Tucker Carlson, The Gap lays off 1,800 workers and student loan payments are expected to resume. 


Fox Corp fires Tucker Carson

Shares of Fox Corp plummetted by as much as 4% on Monday, but recovered during the week after the media outlet and news anchor Tucker Carlson parted ways.

The network on Monday said that it had fired the prime-time host, a surprising move that comes after disparaging remarks Carson made about colleagues were disclosed during a legal battle with voting-machine company Dominion Voting Systems.

This comes less than a week after Fox Corp agreed to pay $787.5 million to settle the lawsuit with Dominion. 


Gap lays off 1,800 workers

Gap is shedding its workforce by 1,800.

This comes as the embattled fashion retailer rolls out plans for a broad restructuring aimed at making the company more nimble and less bureaucratic. This round of job cuts comes after Gap laid off roughly 500 corporate positions in September.

The current layoffs are expected to result in $300 million in annualized savings, the company said Thursday. Last year’s layoffs were part of efforts to save about $250 million annually. 


Student loan payments expected to resume

Shortly after the Supreme Court's anticipated judgment on the Biden administration's expansive plan to forgive student debt, loan payments are anticipated to resume. The U.S. Department of Education has stated that payments will be due again 60 days after the resolution of litigation concerning its student loan forgiveness program.

If the legal issues surrounding the administration's relief are not resolved by the end of June, or if the administration is not permitted to forgive student debt by that time, payments will resume at the end of August.

With the average monthly bill around $400 a month, many borrowers may be unprepared to take a financial hit, given the rise in living costs.


A third of new crypto buyers are influenced by friends

According to the FINRA Investor Education Foundation and NORC at the University of Chicago, roughly one-third of new crypto investors in 2022 cited a friend's recommendation as their primary reason for purchasing cryptocurrencies

This contrasts to the 8% of new investors in more conventional assets such as equities and bonds. This disparity suggests that cryptocurrency investing contains a social element that is absent from equity and bond investing.

 The survey also shows that many people that buy into cryptocurrencies may not be doing so out of due diligence, but to keep up with trends.


Tech companies' earnings remain resilient in the face of a faltering economy

Though still a low point in their recent fortunes, tech companies still managed to deliver an earnings surprise. 

Alphabet, Amazon, Meta, and Microsoft reported first-quarter growth rates of 3 to 9%. Along with heavy cost-cutting that stemmed partly from a wave of job cuts, the revenue rebound buttressed the industry’s profit margins.

Buoyed by the solid financial performance from big tech, Wall Street is prepping itself for the tech industry’s next change in financial direction: AI.

A lot of companies have announced big spending plans on AI as they hope to capture market share in the fast-evolving product. Companies that have announced plans to prop up their AI investments include Amazon and Google.


Meta returns to growth, shares spike 14% in single trading day

Meta delivered a surprise return to growth, prompting its shares to spike 14% in a single trading day.

Meta, parent of Facebook, posted its first sales increase in nearly a year due to its improving advertising business. A slew of negative press, a slowing economy, regulatory pressures, and Apple 2021 ad-tracking changes have weighed on Meta's revenue.

Meanwhile, Meta continues to pare back spending as Chief Executive Mark Zuckerberg has called 2023 a “year of efficiency.” 


Hedge funds lose $18bn betting against tech stocks

Hedge funds betting against tech stocks are nursing $18bn in losses after robust earnings from the biggest tech companies helped fuel a sharp rebound in the sector.

Tech stocks produced better-than-expected earnings, which extended a powerful stock market rally that has been narrowly focused on a handful of giant tech concerns. The latest gains have seen the combined market value of the five biggest tech companies increase by $1.9tn higher so far this year. 

Hedge funds that shorted semiconductor stocks have lost $8bn so far this year, while investors who bet against technology hardware and storage businesses lost $4.6bn. Bets against other parts of the US tech industry amount to more than $5bn.


More trouble for First Republic Bank

With the stock down 75% for the week and 97% this year, the woes of First Republic Bank are far from over as bankers and regulators have been stuck in a standoff.

Both sides are looking to avoid steep losses and hoping the other will shoulder the risk of handling the troubled firm.

 A consortium of 11 banks that deposited $30 billion into First Republic last month to enable the embattled bank to buy time have been reluctant to invest in the firm itself, even if that means they might lose some cash in their accounts. 

The stronger banks within the group are waiting for the government to offer aid or put the bank in receivership. This could potentially end with a sale of business lines or assets at attractive prices.

But the FDIC on the other hand is avoiding a receivership, as the outcome would mean incurring a multibillion-dollar hit to its own deposit insurance fund. The agency is already planning to impose a special assessment on the industry to cover the cost of Silicon Valley Bank and Signature Bank’s failures last month.


Green funds see massive outflows

Enthusiasm for green investments has begun to wane among US investors as the backlash against  “woke capitalism” mounts.

Although money is also flowing out of the broader spectrum of US investment funds, the ESG outflows have been larger relative to overall assets. In the last year, funds tagged with a sustainable label have witnessed about  $12.4bn in net outflows.

BlackRock, the largest asset manager in the world, decided last month to remove the largest sustainable fund in the United States from one of its most popular portfolio allocation strategies, creating an additional headwind.

The change resulted in a decline of approximately a third of the fund's total assets ($6.5bn) between January and March. 


Photo by Lisa Fotios


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