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The party ends at Robinhood. But the meme mania still lasts

A version of this story first appeared on the CNN Business newsletter ‘Before the Bell. Not a subscriber? You can register right here. You can listen to the audio version of the newsletter by clicking the same link.


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CNN Business

Robin Hood hero got off to a rough start when it first launched on Wall Street a year ago, but hopes for the vibrant trading app remain high as armchair investors flock to the market in hopes of making a quick fortune.

The stock market is booming and monthly active users more than doubled year-on-year to 21 million. The number of people trading cryptocurrencies has skyrocketed as dogecoin, the digital currency that started out as a joke, has skyrocketed into the stratosphere. The retail business is growing strong, and Robinhood is ready to make money.

12 months passed, and the picture looked very different. Robinhood is get a hundred jobs because inflation and recession fears sent stock and crypto prices plunging back to Earth. Monthly active users in June fell to 14 million as “customers navigate a volatile market environment”.

“For our customers, many of whom are younger, it looks like they might be facing a recession for the first time in their adult lives,” CEO Vlad Tenev said on a call with analysts. Wednesday analysis. “Customers are seeing this high inflation coupled with high interest rates, a bear market [in] stocks and a crypto winter”.

All of this adds up to less money to spend and therefore less to save and invest.

Shares of Robinhood rose nearly 12% on Wednesday after announcing cost-cutting measures and reporting a net loss of $295 million, smaller than in the first quarter. The stock is still down more than 40% so far.

That said: Retail investors are still a powerful force that Wall Street is keeping a close eye on – as evidenced by a sharp increase in shares of AMTD Digital, a little-known company, this week.

Shares of a company based in Hong Kong has increased by 14,000% since they went public less than a month ago. They were 126% higher on Tuesday alone, before plummeting on Wednesday.

That sparked speculation that coordinated traders on social media were involved in the christening of another meme stock.

“Where does AMTD Digital come from,” wrote one user on the Reddit forum WallStreetBets. “What did I miss?”

AMTD Digital said this week that to the best of its knowledge, nothing “significant” has changed since going public that could cause “significant volatility.”

Important Note: It is unclear exactly what sparked the massive protest. But this rally is a reminder of the extent to which outsized moves in single stocks have become the norm in the age of Reddit traders, placing the vast investor community to alert status of sudden deformities.

Once a stock becomes a supernova, investors of all stripes now begin to act.

AMTD’s parent company was the #1 commerce on Fidelity’s platform on Tuesday. On Thursday, billionaire Li Ka-shing’s CK Group announced that it had entered talks to sell less than 4% of its stake in AMTD Digital’s parent company – a sign he doesn’t want to be left out. again when the bubble pops.

Central banks in the United Kingdom announced their biggest rate hikes in 27 years, as spiraling inflation continues to cripple the finances of millions of households.

This just happened: The Bank of England raised borrowing costs by half a percentage point to 1.75% – the sixth time the central bank has raised rates since December, Anna Cooban, my colleague on CNN Business, report.

In June, annual consumer prices rose 9.4%, the highest level in four decades. The Bank of England has forecast that inflation will rise above 13% this autumn, when energy bills will rise and “remain very high throughout much of 2023.”

The Resolution Foundation, a think tank, said Wednesday that it expects energy costs to drive consumer price inflation past 15% next year.

Salary increases have not kept pace. Official data showed last month that real wages for British workers suffered their steepest drop in more than two decades from March to May.

Britons have tightened their belts in response, spending less in supermarkets and giving up their streaming subscriptions.

On the radar: The fear is that as central banks raise borrowing costs to try to control inflation, people will begin to constrain spending more aggressively. That could cause a chain of downturns.

The BOE said on Thursday that it expected the UK to enter a recession in the last three months of this year.

The Federal Reserve is also raising interest rates faster than ever. The European Central Bank, the latecomer, ended a long era of negative rates last month.

The Bank of England’s job is made more difficult by Britain’s exit from the European Union, which has made the world’s fifth-largest economy less competitive.

Oil companies aren’t the only ones benefiting from sky-high energy costs. Mining Giant Glencore

(GLCNF)
also reaped record profits as coal prices skyrocketed.

The Latest: The company said on Thursday that its earnings more than doubled to $18.9 billion in the first half of the year, driven by record coal prices amid surging demand for the product due to the global recession. Russian war in Ukraine.

Efforts to move away from coal have been pushed aside as countries try to make sure they have enough energy to weather the winter, especially in Europe. For example, Germany has restarted coal-fired power plants in an effort to conserve natural gas supplies.

“The real standout this time around is coal,” CEO Gary Nagle said on a call with analysts. “You will remember a year ago, the first half of last year, coal income was less than $1 billion, but with the energy crisis and the world’s demand for primary load energy stabilizing, coal prices have get a raise.”

Remember: According to the International Energy Agency, coal is the largest source of energy-related carbon emissions. The Paris-based agency said that global consumption is expected to increase in 2022 to 8 billion tonnes, matching the record high in 2013.

Shares in Glencore rose more than 3% in London on Thursday. Its shares are up 23% so far, while the FTSE 100 index is up just over 1%.

Alibaba

(TORTOISE)
ConocoPhillips

(COP)
Kellogg

(K)
Lordstown Motors, Nikola, Papa John’s

(PZZA)
and WeWork reports results before the US markets open. AMC Entertainment

(AMC)
Beyond Meat, DoorDash, Live Nation

(LYV)
Lyft

(LYFT)
Redfin

(RDFN)
Zillow

(Z)
and CNN, parent company Warner Bros. Discovery

(DISCA)
Follow up after finishing.

Also today: First US jobless claims for last week’s post at 8:30 a.m. ET.

Coming up tomorrow: Economists are expected to learn that the US economy added 250,000 jobs in July. That’s a pretty big number, albeit smaller than the 372,000 positions created in June.

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