Bloomberg

(Bloomberg) — Commerce Secretary Gina Raimondo said she would be willing to consult Elon Musk on how to improve semiconductor supply chain shortages impacting the auto industry, despite President Joe Biden’s repeated snubs of the Tesla Inc. founder.

“None of this is personal,” Raimondo said in an interview Thursday with CNBC. “These issues are way too important for anyone to have, you know, feelings hurt. Like – let’s just do the work. And as I said, anyone who has good ideas or is willing to help us, absolutely we want the help.”

Raimondo said that she believed Tesla had better navigated the chip shortage that has badly impacted auto manufacturing because of its origins as a technology company, while traditional Detroit automakers were still “learning quickly” about how to manage semiconductor supply chains. 

The Commerce Secretary also downplayed animosity between Biden and Musk, saying she did not know of a policy within the administration that would preclude her from soliciting advice from Tesla.

Musk in recent weeks has tweeted his frustration with Biden over White House events highlighting electric vehicle efforts by companies like General Motors Co. and the Ford Motor Co. 

Biden’s reluctance to recognize Tesla is rooted in Musk’s opposition to autoworker unions, a person familiar with the president’s thinking told Bloomberg.

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(Bloomberg) — Wall Street may have been caught off-guard by Meta Platforms Inc.’s dismal earnings, but a band of ETF traders saw this renewed rout in tech stocks coming.

Short interest as a percentage of shares outstanding in the Invesco QQQ Trust Series 1 ETF (ticker QQQ) almost doubled in the past seven trading days to the highest since March 2020, according to data from IHS Markit Ltd. More than 5% of the fund is now out on loan.

The $195 billion product, one of the largest exchange-traded funds in the world, tracks the tech-focused Nasdaq 100 Index. Futures for that gauge pointed to a 2% slump on Thursday morning after Meta reported faltering growth in the fourth quarter while delivering an underwhelming forecast for the current period.

Data overnight also showed that on Tuesday, investors added another $135 million to the ProShares UltraPro Short QQQ ETF (SQQQ), a leveraged fund that aims to deliver three-times the inverse performance of QQQ. It has now lured almost $400 million in 2022 to take assets to more than $2 billion.

SQQQ was one of the biggest ETF gainers in early trading, jumping around 6% as of 8:03 a.m. in New York. QQQ was down about 2%

Mark Zuckerberg-founded Meta could see about $180 billion wiped off its shares at the open. Other social media-focused stocks including Twitter Inc., Snap Inc. and Pinterest Inc. are also poised to drop.

While the miserable results from the Facebook parent were a surprise, short sellers in QQQ were likely betting that a recent rebound in U.S. tech stocks wouldn’t hold regardless. After plunging in the first few weeks of 2022 as the prospect of rising interest rates spurred investors to ditch expensive-looking growth stocks, QQQ had gained 8% in the past week.

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(Bloomberg) — E-commerce company Cart.com Inc. raised $240 million in equity and debt funding for its end-to-end platform for online retailers.

The Austin, Texas-based company has increased revenues by 400% in the past year and reached $380 million in total funding with this new round. The company has more than 3,000 brands using its services, including Haymaker Coffee Co., Pathway Homes and Guess.

Cart.com also recently acquired fulfillment and customer-care provider FB Flurry, which will allow Cart.com to provide two-day delivery options to most customers in the continental U.S. Chief Executive Officer Omair Tariq said Cart.com’s expansion into logistics was necessary to reach the company’s goal of making it easier and cheaper for businesses to create a brand that can sell everywhere.

“Anywhere a consumer is shopping, you should be selling your product at, and Cart.com is on a mission to enable that in the most convenient way ever done before,” Tariq said.

In addition to FB Flurry, Cart.com has acquired eight companies since its founding in September 2020, and its offerings now include marketing services, data analytics and a direct-to-consumer online store. Cart.com is looking next to improve its existing services and expand into European markets. 

“We’re investing significant amounts of calories to make sure that the experience a brand has on our end-to-end platform, or any part of our platform for that matter, is perfect,” Tariq said. “What we don’t want to do is just get too big before we get too good.” 

The latest funding round was led by Dallas, Texas-based Legacy Knight Capital Partners, a branch of the family investment company Legacy Knight: Multi-Family Office. David Sawyer, Legacy Knight’s chief operation officer and managing partner, said Cart.com first caught his eye as a fast-growing company in Texas. Sawyer said he was most impressed by the company’s ability to quickly acquire and integrate businesses, which will naturally feed into more growth within the U.S. and internationally.

“The broader macro tailwind here that was largely caused by Covid-19 of more e-commerce businesses, more sales online versus brick and mortar – Cart.com can take that globally. There’s nothing preventing them,” Sawyer said. “I think that obviously at the right time for the company, it can be a huge growth area for them, and we are excited to support and assist in that.”

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©2022 Bloomberg L.P.

(Bloomberg) — Meta Platforms Inc. ranks among the top two holdings of long-only active equity funds, putting them on the front line of what could be one of the worst one-day stock tumbles in history.

The Facebook parent plunged more than 20% in early U.S. trading on the back of poor earnings results, meaning it could be on track to lose about $180 billion in market value when cash trading begins.

That looks like bad news for large-cap fundamental funds which oversee more than $1 trillion of assets. This collection of retail and mutual funds generally underweights megacaps, but Meta is one of the exceptions, according to Wells Fargo. The company was one of their largest overweights coming into the year, strategists at the bank said.

That set-up means not only do they risk getting burnt by Meta, they also missed out on recent gains following upbeat results from the likes of Microsoft Corp. and Apple Inc. An above-benchmark holding in Google’s parent Alphabet Inc., which recently delivered consensus-beating earnings, might help to cushion wrong-way bets.

The funds have grown increasingly bearish on Microsoft and Apple, even as the tech giants outperformed over the past three to five years, according to Wells Fargo.

“Why would the average PM have their largest active underweights in the most efficient part of the market?” Chris Harvey, head of equity strategy at Wells Fargo, wrote in note on Thursday. “It is hard for us to see the logic, and the results do not help.”

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(Bloomberg) — Meta Platforms Inc.’s one-day crash may rank as the worst in stock-market history.

The Facebook parent plunged 22% in early U.S. trading on the back of poor earnings results, putting it on track to erase about $195 billion. 

At current levels, that’s the biggest collapse in market value for any U.S. company. But there’s no certainty the losses will hold, especially given the recent volatility that’s whipped across technology shares. Markets have swung wildly in recent weeks, with buy-the-dip traders sometimes storming in during the final hours of the trading day. 

Still, analysts were bleak in their assessments, pointing out that Meta faces stiff competition from rivals like Tiktok and revenue was far lower than expected. Michael Nathanson, an analyst at brokerage Moffett Nathanson, titled his note “Facebook: The Beginning of the End?” 

“These cuts run deep,” he wrote. The results were “a headline grabber and not in a good way.” 

The sheer size of Facebook’s collapse illustrates just how tech companies have ballooned in size to become behemoths with unprecedented market power, and the drama that can ensue when they stumble.

Another way of illustrating the decline: a 20% decline in Meta would be more than the market value of 452 of the S&P 500’s members.

Meta Slumps 22% With PTs Slashed on TikTok Threat: Street Wrap

Meta “finds itself in the middle of a perfect storm” wrote Youssef Squali, an analyst at Truist Securities. 

Twitter Inc., Snap Inc. and Pinterest Inc. all traded lower, putting pressure on Nasdaq 100 Index futures. Meta traded at $251 as of 7:23 a.m. in New York, down from a close of $323 on Wednesday. 

Meta’s market cap as of the previous close stood at roughly $900 billion. The company makes up one of the original Faang cohort of tech megacaps, including Google’s parent Alphabet Inc., Amazon.com Inc. and Apple Inc. 

Meta Slump Accounts for Half of Nasdaq 100 Futures Losses

It’s not the first time Meta shares have dropped dramatically. The stock plunged 19% in July 2018 on a slowdown in user growth, translating to a about $120 billion decline in market capitalization. At the time, it set the record for the largest-ever loss of value in one day for a U.S. traded company.

“We’re hopeful the company kitchen-sinked the outlook,” said Shyam Patil, an analyst at Susquehanna Financial Group. 

(Adds table on biggest market value wipeouts, analyst comments)

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©2022 Bloomberg L.P.

(Bloomberg) — Nasdaq 100 Index futures tumbled as disappointing earnings and forecasts from technology bellwethers halted a rally in global stocks. The British pound defied broad dollar strength to rise after a U.K. rate increase.

Contracts on the tech-heavy gauge were down 2.3% Thursday, dragged lower by a 20% premarket rout in Facebook parent Meta Platforms Inc. after a weaker-than-expected revenue forecast. S&P 500 Index futures were 1.2% lower. Technology stocks were the worst performers on Europe’s benchmark gauge. The pound erased a loss after the Bank of England raised its key rate and began unwinding its quantitative easing.

Weak numbers from Meta to Qualcomm Inc. and Spotify Technology SA jolted investors who had bet a strong earnings season would keep equities attractive and counter some of their lingering worries including Federal Reserve tightening and stubborn inflation. That’s stalled the biggest four-day gains in MSCI Inc.’s gauge of world stocks and refueled traders’ switch into less expensive value stocks.

“What people care about is earnings and inflation,” said Ipek Ozkardeskaya, a senior analyst at Swissquote. “Disappointing Facebook results, and a plunge in Meta shares in the afterhours trading calls for a red session in the U.S.”  

Meta shares, which had plunged 22% in late New York trading, continued its losses in Thursday’s premarket session. NVidia Corp. and Qualcomm lost more than 3%. Amazon.com Inc., which will post its financial results after U.S. market hours, slid 3.5%.

Europe’s Stoxx 600 gauge fell close to its 100-day moving average. Gains for telecommunications and utilities companies limited the decline.

The BOE hiked interest rates for the second successive meeting, taking the key rate up 25 basis points to 0.5%. Officials also signaled they would start running down their bond holdings, halting reinvestments on their gilt pile and offloading their corporate-bond portfolio. 

The focus in Europe shifted to the European Central Bank’s rate decision. A record regional inflation print is adding pressure on policy makers to act amid concerns they may be too slow in fighting inflation. The pound advanced for a fifth day and traded at $1.3620.

The poorly received earnings reports from the U.S. tech giants are a challenge for dip buyers hoping that corporate performance will ease worries about central bank interest-rate hikes. Markets have swung sharply and stocks are nursing losses this year as officials pare stimulus to curb inflation.

“Volatility is here to stay,” Anna Han, equity strategist at Wells Fargo Securities, said on Bloomberg Television. “Our outlook for 2022 was that we’d see more spikes in volatility. With that choppiness, with that unpredictability, investors are going to express that by compressing multiples.”

Oil fell from a seven-year high eased from a seven-year high as traders waited to see whether OPEC+ can deliver on its latest promised increase in supply.

Meanwhile, ADP figures before Friday’s offical jobs report showed employment at U.S. firms shrank in January by the most since the early days of the pandemic. The omicron virus variant dealt a swift yet likely temporary blow to the labor market.

For more market analysis, read our MLIV blog.

What to watch this week:

• Earnings are due from Amazon, Ford Motor
• Bank of England, European Central Bank rate decisions, Thursday
• Fed Board of Governors confirmation hearing, Thursday
• U.S. factory orders, initial jobless claims, durable goods, Thursday
• U.S. payrolls report for January, Friday
• Winter Olympics kick off in China, Russia’s President Vladimir Putin due to attend opening ceremony, Friday

Some of the main moves in markets:

Stocks

• Futures on the S&P 500 fell 1.2% as of 7:09 a.m. New York time
• Futures on the Nasdaq 100 fell 2.3%
• Futures on the Dow Jones Industrial Average fell 0.3%
• The Stoxx Europe 600 fell 0.6%
• The MSCI World index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro fell 0.1% to $1.1291
• The British pound rose 0.3% to $1.3616
• The Japanese yen fell 0.3% to 114.81 per dollar

Bonds

• The yield on 10-year Treasuries advanced two basis points to 1.80%
• Germany’s 10-year yield advanced three basis points to 0.07%
• Britain’s 10-year yield advanced nine basis points to 1.35%

Commodities

• West Texas Intermediate crude fell 1.5% to $86.98 a barrel
• Gold futures fell 0.4% to $1,802.30 an ounce

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — Deploying funny-sounding strategies like “sandwich trading,” bots have conquered much of the market for Ethereum-based digital tokens, scooping up hundreds of millions — if not billions — of dollars in trading profits over the years. Along the way, they’ve made enemies by front-running others’ transactions, something blockchain-fueled trading fundamentally permits. There’s been a benefit to the broader industry, too: By acting like old-school arbitrageurs, bots have made the Ethereum ecosystem more efficient, reducing price dislocations by methodically buying low and selling high, over and over and over.

They’ve been so successful, in fact, that it’s harder for bot-deploying traders to make money on their original turf in Ethereum. So the bots are searching elsewhere, causing havoc on nascent blockchains in the process. They’ve overrun market infrastructure that couldn’t handle the incredibly brisk pace of their trading. As crypto prices cratered in recent weeks, so-called liquidation bots bogged down Solana, a blockchain favored by many finance pros, when they overloaded it by sending more than 2 million transactions a second. And back in September, Solana was taken completely offline for 17 hours by bot activity.

Solana isn’t alone seeing an influx of computerized traders. Polygon, Avalanche and Binance Smart Chain are also getting swarmed. Flashbots, which makes software that bot traders use, estimates that more than 25% of MEV — crypto-jargon for much of this trading — now takes place on blockchains other than Ethereum.

Luring these kinds of automated traders — a cohort who helped make Ethereum the second-largest cryptocurrency — is a sign decentralized finance, or DeFi, is expanding beyond that realm, bringing the bots with them. But the troubles the bots have caused signal the industry has a long way to go before their underlying infrastructure meets the needs of professionals.

“Outages on a decentralized blockchain are always concerning,” said Avi Felman, a portfolio manager at BlockTower. “Solana’s recent troubles should remind everyone that new consensus mechanisms are inherently untested, and are very much still as experimental as they are exciting.”

Read More About Snafus: Bitcoin at $15 Quintillion Just Another Day in Crypto

Much of what bots do in crypto is make money off something crypto players call MEV — which originally stood for “miner extractable value” but then the term morphed into “maximal extractable value” or “maximum extractable value.” Some of these strategies have parallels in conventional markets, like arbitrage. Or take sandwich trading, in which a bot spots that another user has placed a trade on a decentralized exchange that’s likely to move prices. Because of how blockchains work, the sandwich-seeking bot can actually buy the asset first — meaning the original person gets a worse price — and then sell it after prices move.

Thousands of these software programs, some run by crypto developers out of their bedrooms, have long been a blessing and a curse for Ethereum. They’ve pushed up transaction fees while poaching trades, but also deepened liquidity and supported a slew of lending and borrowing apps. Ethereum’s infrastructure can now largely handle all this volume. But the DeFi movement is branching out to other blockchains, and they’re not holding up nearly as well. “A blockchain isn’t really battle tested until there are millions of dollars at stake and it’s been hammered by MEV bots seeking any edge they can get,” Flashbots’ Robert Miller tweeted last month.

Bots gave that a go on Solana in late January. “Liquidator bots started spamming the network,” Solana co-founder Anatoly Yakovenko tweeted on Jan. 26. That exposed a software bug in Solana, slowing down the network.

In early January, a bot on blockchain Polygon PoS did about 1.5 million transactions to mint pickaxes in crop-planting game Sunflower Farmers. Bot activity eventually shut down the game and drove transaction fees on Polygon to as much as 10 cents from a fraction of a cent. “When you have bot activity, the average player suffers,” Sandeep Nailwal, co-founder of Polygon, said in an interview.

Take the bots’ proliferation as a sign that these young blockchains have arrived. As they attract more DeFi applications, ranging from exchanges to lending services, that spells more money-making opportunities for the bots. DeFi apps on Polygon now have about $3.4 billion in total funds locked — a crypto-industry measure that essential amounts to how much money is invested in a given blockchain’s ecosystem — up from $130 million a year ago, according to DappRadar. Binance Smart Chain is up to $9.6 billion from less than $400 million. These are dwarfed by the $91 billion locked into Ethereum, but they’re growing fast.

“What I am seeing is whenever there’s more DeFi activity in a specific blockchain, it automatically means there’s more bot opportunities and more people will try to exploit those opportunities,” said Jonas Pfannschmidt, principal blockchain engineer at Blockdaemon, which manages blockchain infrastructure.

There are other reasons for the bots’ migration as well: Last year, more bots piled into Ethereum, making operating on the network more expensive and competitive, so some of them are now “moving to greener pastures,” Alex Obadia of Flashbots said in a Jan. 13 YouTube presentation watched in real time by several dozen developers. Some long-time bot operators are simply hedging their bets, particularly as Ethereum is expected to undergo a dramatic technical overhaul this year called Ethereum 2.0. The very foundation of Ethereum — how it orders transactions — is being redesigned, which some bot operators worry could disrupt how they do business.

“If they don’t get it right, they risk losing a lot of the DeFi marketshare to other chains, which have sacrificed decentralization for user experience,” said Nathan Worsley, who runs bots on Ethereum as well as other blockchains to hedge his bets.

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©2022 Bloomberg L.P.

(Bloomberg) — Nasdaq 100 Index futures tumbled as disappointing earnings and forecasts from technology bellwethers halted a rally in global stocks. The dollar strengthened before rate decisions in Europe and the U.K.

Contracts on the tech-heavy gauge were down 2.2% Thursday, even as Facebook parent Meta Platforms Inc. plunged in premarket New York trading on a weaker-than-expected revenue forecast. S&P 500 Index futures were 1.2% lower. Technology stocks were the worst performers on Europe’s benchmark gauge. The euro and British pound lost at least 0.2% against the dollar. 

Weak numbers from Meta to Qualcomm Inc. and Spotify Technology SA jolted investors who had bet a strong earnings season would keep equities attractive and counter some of their lingering worries including Federal Reserve tightening and stubborn inflation. That’s stalled the biggest four-day gains in MSCI Inc.’s gauge of world stocks and refueled traders’ switch into less expensive value stocks.

“What people care about is earnings and inflation,” said Ipek Ozkardeskaya, a senior analyst at Swissquote. “Disappointing Facebook results, and a plunge in Meta shares in the afterhours trading calls for a red session in the U.S.”  

Meta shares, which had plunged 22% in late New York trading, continued its losses in Thursday’s premarket session. NVidia Corp. and Qualcomm lost more than 3.8%. Amazon.com Inc., which will post its financial results after U.S. market hours, slid 3.7%.

Europe’s Stoxx 600 gauge fell close to its 100-day moving average. Gains for energy and commodities companies limited the decline.

The focus in Europe was rather on the European Central Bank’s rate decision. A record regional inflation print is adding pressure on policy makers to act amid concerns they may be too slow in fighting inflation. 

Meanwhile, The Bank of England was on the verge of a historic decision to deliver the first back-to-back interest-rate increase since 2004 and take the initial steps toward unwinding some of its 895 billion-pound ($1.2 trillion) stimulus program.

The poorly received earnings reports from the U.S. tech giants are a challenge for dip buyers hoping that corporate performance will ease worries about central bank interest-rate hikes. Markets have swung sharply and stocks are nursing losses this year as officials pare stimulus to curb inflation.

“Volatility is here to stay,” Anna Han, equity strategist at Wells Fargo Securities, said on Bloomberg Television. “Our outlook for 2022 was that we’d see more spikes in volatility. With that choppiness, with that unpredictability, investors are going to express that by compressing multiples.”

Oil fell from a seven-year high eased from a seven-year high as traders waited to see whether OPEC+ can deliver on its latest promised increase in supply.

Meanwhile, ADP figures before Friday’s offical jobs report showed employment at U.S. firms shrank in January by the most since the early days of the pandemic. The omicron virus variant dealt a swift yet likely temporary blow to the labor market.

For more market analysis, read our MLIV blog.

What to watch this week:

• Earnings are due from Amazon, Ford Motor
• Bank of England, European Central Bank rate decisions, Thursday
• Fed Board of Governors confirmation hearing, Thursday
• U.S. factory orders, initial jobless claims, durable goods, Thursday
• U.S. payrolls report for January, Friday
• Winter Olympics kick off in China, Russia’s President Vladimir Putin due to attend opening ceremony, Friday

Some of the main moves in markets:

Stocks

• Futures on the S&P 500 fell 1.2% as of 6:39 a.m. New York time
• Futures on the Nasdaq 100 fell 2.2%
• Futures on the Dow Jones Industrial Average fell 0.4%
• The Stoxx Europe 600 fell 0.6%
• The MSCI World index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%
• The euro fell 0.2% to $1.1280
• The British pound fell 0.2% to $1.3551
• The Japanese yen fell 0.3% to 114.84 per dollar

Bonds

• The yield on 10-year Treasuries was little changed at 1.77%
• Germany’s 10-year yield was little changed at 0.04%
• Britain’s 10-year yield advanced one basis point to 1.27%

Commodities

• West Texas Intermediate crude fell 1.4% to $86.99 a barrel
• Gold futures fell 0.4% to $1,803.90 an ounce

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.