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3 reasons why JPMorgan just doubled down on its US stock bullishness

Wed, 07/01/2020 - 1:33pm

  • JPMorgan's Marko Kolanovic, who called the bottom in stocks back in March and has recommended investors stay bullish throughout the second quarter market rally, just doubled down on his bullish call for US stocks.
  • The bank listed three reasons why investors should remain bullish on stocks over the short to medium term.
  • Investor positioning, strong monetary and fiscal policy support, and COVID-19 infection data support Kolanovic's call to stay bullish on stocks.
  • Visit Business Insider's homepage for more stories.

Investors should continue to stay bullish on US stocks in the short to medium term, JPMorgan's Marko Kolanovic said in a note published on Tuesday.

Kolanovic correctly called the bottom in stocks in March, and has remained bullish on stocks throughout the second quarter, which posted its best quarterly rally since 1987. Kolanovic has often reminded investors why they should stay bullish along the way.

Now, Kolanovic lists three new reasons why investors should continue to favor US stocks.

1. "Positioning remains light around macro and systematic investors." Kolanovic said summer seasonality "should help the volatility spike continue to fade," which could drive investors to further add exposure to stocks throughout the summer. Additionally, momentum signals "are mostly positive for US large caps," which could drive traders to buy.

Read more: GOLDMAN SACHS: Buy these 15 super-cheap stocks now before their prices catch up to their strong growth and earnings prospects

2. "Monetary and fiscal policy support." The COVID-19 pandemic led to a run on liquidity during the February and March sell-off. According to Kolanovic, liquidity "plunged 90% to record lows, as measured by S&P 500 futures market depth." Since then, liquidity "has recovered meaningfully from the March lows," and many investors credit monetary policy by the Fed for assuaging liquidity concerns and keeping credit markets functioning.

3. "Higher COVID-19 incidence is mainly impacting younger populations." Kolanovic said the recent surge in COVID-19 cases over the past few weeks is not impacting the older population like it did in March and April, and that the younger population has "drastically lower mortality rates and likely reflects higher testing rates, recent protests, backlogs of hospital visits, and increased economic activity."

While JPMorgan is bullish on stocks, plenty of investors are skeptical. According to a recent survey by DataTrek, there is zero conviction in this stock market rally as investors are evenly split as to where the market ends the year from current levels. 

Read more: Stock analysts are having a moment in the sun as the market gets flipped upside down. We spoke to 11 of the top-ranked on Wall Street to get their forecasts and single-stock picks.

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FedEx skyrockets 17% on surprise revenue beat and a slew of Wall Street upgrades (FDX)

Wed, 07/01/2020 - 12:55pm

Shares of FedEx surged as much as 17% to $163 Wednesday after the company's fiscal fourth quarter earnings release Tuesday exceeded Wall Street's expectations. 

The courier service still reported a loss, but had a better-than-expected quarter ending May 31 as the coronavirus pandemic fueled a jump in home deliveries that drove a 20% increase in revenue for FedEx's ground-delivery business. 

Here are the key numbers: 

  • Adjusted earnings per share: $2.53 reported, versus $1.52 (expected)
  • Revenue: $17.4 billion reported, $16.4 billion (expected) 

Following the results, more than a dozen Wall Street analysts upgraded their price targets for FedEx, according to Bloomberg data, seeing further growth ahead for the company even as the economy recovers from coronavirus pandemic-induced lockdowns. 

"Revenue growth was above our forecast by almost 3%, with Ground the star of the show as volumes rose by roughly 25% YOY," said Goldman Sachs analysts led by Jordan Alliger in a Tuesday note. "This far outstripped our high-single digit forecast and is directly related to surge in E-Commerce shipments — demonstrating perhaps that there is significant eCommerce potential outside of Amazon." 

Goldman increased its price target to $169 from $153 and reaffirmed its "buy" rating on FedEx shares. 

Read more: JPMorgan breaks down how COVID-19 nearly destroyed one of the market's safest trades — and lays out 3 lessons to help investors tackle future crises

JPMorgan also boosted its FedEx price target to $188 from $145, and upgraded the company to "overweight," the equivalent of a "buy" rating. 

"FedEx set a more constructive tone on raising the price of capacity in the 'new normal' than we expected with holiday peak season surcharges applying to large customers for the first time in three years," wrote analysts led by Brian Ossenbeck in a Wednesday note. 

UPS, which jumped as much as 8% Wednesday, could also benefit if it can follow FedEx's lead on yields, according to the firm. 

FedEx price targets were also upgraded at Morgan Stanley, Deutsche Bank, Credit Suisse, and more. Analysts have an average price target of $165.40 on shares of the company, and 15 "buy" ratings, 14 "hold" ratings, and one "sell" rating, according to Bloomberg data. 

FedEx has gained roughly 4% year-to-date.

 

 

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THE MILLENNIAL FINANCIAL HEALTH REPORT: How the largest generation is saving and managing their money, and how banks can target products and messaging to reach them

Wed, 07/01/2020 - 12:00pm

As the largest living generation by population, and soon income, millennials are a prime target for banks — butovergeneralizations of their financial health make it hard to attract the group.

Millennials have been the subject of misinformation with regard to financial literacy, spending habits, and brand loyalty. In reality, they're encountering diverse financial milestones, and tailoring products directly to their varied needs can help banks take full advantage of the opportunity presented by serving millennials.

Business Insider Intelligence conducted an exclusive survey to better understand US millennials' financial health. The Master Your Money: Learn & Plan Survey was designed by Business Insider Intelligence and fielded online from November 23 to 27, 2019, to a third-party sample of 2,007 US millennials aged 19-37.

The sample was selected to closely resemble the overall US population (based on census data) on the criteria of age and gender. The results of the survey reveal fresh insights about millennials that banks and other financial services providers can use to build targeted products and tailored messaging for the group. 

Our data highlights three areas that are impeding this generation's financial health: debt, trouble growing savings, and lack of financial education. Millennials' debt is heavily concentrated in credit card debt, student loan debt, and auto debt. Meanwhile, low-income growth and high debt burdens have made it more challenging for them to save. These findings, and our analysis, are supported by interviews with executives from major banks, like JPMorgan Chase and Bank of America. 

But millennials aren't a homogenous group — rather, they behave like three "sub-generations," with distinct lifestyle habits, financial needs, and behaviors. These factors impact the sub-generations differently, making it important for banks to understand the characteristics of millennial consumers in each segment, which can sharpen acquisition and servicing strategies for banking providers. 

In The Millennial Financial Health Report, Business Insider Intelligence identifies strategies for banks and financial services providers to reach millennials. We identify three millennial sub-generations, the unique financial needs and challenges of each, and the ways providers can tap into them. We offer recommendations for acquiring millennial customers, encouraging them to save more, and deepening the customer relationship to become a trusted advisor.

The companies mentioned in this report include: Acorns, American Express, Apple, Bank of America, BuzzFeed, Capital One, Citi, Citizens Bank, Credit Karma, Digit, Disney, Goldman Sachs, Hulu, JPMorgan Chase, Mint, Navy Federal Credit Union, Netflix, Robinhood, Santander, Sprint, Stash, US Bank, Verizon, Wells Fargo.

Here are some key takeaways from the report:  

  • Millennials are estimated to be the largest living generation in the US — but the disparate financial needs of consumers at different stages of this age group can make it challenging for banks to take full advantage of the opportunity presented by serving them.
  • They're often treated like a homogenous group, but millennials can be divided by age into sub-segments that boast different financial realities, which banks need to understand in order to effectively cater to all customers in this generation.
  • Supporting millennials through their unique financial milestones can allow banks to form lifetime relationships with these consumers early on. Banks should take a behavioral approach where they meet consumers' specific needs based on their actions rather than try to broadly serve the generation. 

In full, the report:

  • Uses primary data to identify the unique needs and challenges of each millennial sub-generation.
  • Explores strategies banks should consider to tailor their offerings to millennials' needs in order to improve their financial health via savings tools and, in turn, cement their loyalty as customers.
  • Supports analysis using interviews with executives from incumbent providers like JPMorgan Chase and Bank of America. 
  • Gives recommendations for banks regarding how to acquire, service, and encourage millennials to grow savings. 
  • Highlights noteworthy strategies taken by banks and third-party financial apps to reach this generation. 

Interested in getting the full report? Here's how to get access:

  1. Business Insider Intelligence analyzes the banking industry and provides in-depth analyst reports, proprietary forecasts, customizable charts, and more. >> Check if your company has BII Enterprise membership access to the full report
  2. Sign up for the Banking Briefing, Business Insider Intelligence's expert email newsletter tailored for today's (and tomorrow's) decision-makers in the financial services industry, delivered to your inbox 6x a week. >> Get Started
  3. Purchase & download the full report from our research store. >> Purchase & Download Now

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Top US manufacturing index jumped the most since 1980 in June as reopenings spurred growth

Wed, 07/01/2020 - 11:44am

  • The Institute for Supply Management's manufacturing index climbed back to growth territory in June as states reopened their economies.
  • The key industry gauge leaped 9.5 points to 52.6 last month, notching its biggest single-month increase since 1980. Economists surveyed by Bloomberg expected a reading of 49.8.
  • New orders and production both breached the key threshold of 50, while industry employment landed at 42.1 after a 10 percentage point improvement.
  • Despite the strong improvement, US manufacturing is positioned to "face major challenges" from weak demand, lasting supply chain disruptions, and rebounding virus cases, Gregory Daco, chief US economist at Oxford Economics, said.
  • Visit Business Insider's homepage for more stories.

A key measure of US manufacturing leaped back into growth territory in June as factories reopened and state economies turned back online.

The Institute for Supply Management's manufacturing index surged 9.5 points to 52.6 last month, its biggest increase since 1980. June's increase brings the metric to a 14-month high and pushes it above the key threshold of 50 for the first time since February.

Economists surveyed by Bloomberg expected the gauge to reach 49.8 last month. Readings above 50 indicate the industry is expanding, while a reading below the level indicates broad shrinkage.

Read more: Cathie Wood's firm built 3 of the world's best ETFs, which all doubled in value within 3 years. She told us her 3-part process for spotting underappreciated technologies before they explode.

ISM's measure for new orders improved 24.6 percentage points to 56.4, and its production gauge climbed 24.1 percentage points to 57.3. Employment remained in contractionary territory, landing at 42.1 in June after reading 32.1 the month prior.

In all, 13 of the 18 manufacturing sectors reported growth in June. The four industries declining through the month were transportation equipment, primary metals, fabricated metal products, and machinery.

Yet the report doesn't place the manufacturing industry in the clear. The return to growth follows three months of deep contraction and arrives as the US faces new risks. Spiking coronavirus case counts threaten to shut down factories all over again, and lasting pandemic fallout will likely drag on the industry's rebound. 

"Activity likely bottomed in Q2, however manufacturing will face major challenges that will drag on its recovery," Gregory Daco, chief US economist at Oxford Economics, said. "Looking ahead, weak demand, lingering supply chain disruptions, somewhat tighter financial conditions, historically low oil prices, and highly elevated uncertainty are poised to make for a lackluster recovery."

Read more: Stock analysts are having a moment in the sun as the market gets flipped upside down. We spoke to 11 of the top-ranked on Wall Street to get their forecasts and single-stock picks.

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What is a high-yield checking account? Here's what you need to know.

Wed, 07/01/2020 - 11:40am

 
  • High-yield checking accounts that offer more than 1% APY are becoming more common.
  • But many come with balance or deposit minimums, or require a customer use the bank's bill-pay service or have paychecks deposited directly in order to get the APY.
  • High-yield checking accounts can be a great way to earn more interest on your spending money.
  • Just be sure to read the fine print and research carefully to ensure the account you want fits your lifestyle.
  • See Business Insider's picks for the best rewards checking accounts »

Life is hard without a checking account. Without it, where would you deposit your paychecks? How would you pay your rent, your bills, your credit-card balances? Your checking account is the nexus of your entire financial life. The convenience makes them easy sells, so banks don't feel the need to load them with any extra perks.

Till now. Interest rates for checking accounts have been abysmal for decades, but recently many banks are starting to offer high-yield checking account products — banking options that can net a substantial return to those who use them.

#div-gpt-ad-1579713650634-0 > div > iframe { width: 100% !important; min-width: 300px; max-width: 595px; } window.googletag = window.googletag || { cmd: [] }; googletag.cmd.push(function () { googletag.defineSlot('/1035677/Business_Insider_', [[1, 1], [300, 139], [595, 139], [300, 250], [595, 250], [300, 360], [595, 360], [300, 475], [595, 475]], 'div-gpt-ad-1579713650634-0') .addService(googletag.pubads()); googletag.pubads().enableSingleRequest(); googletag.pubads().setTargeting('category', ["Banking"]).setTargeting('subcat', ["Savings Accounts"]).setTargeting('post_id', []) .setTargeting('post_url', []) .setTargeting('keyword', []) .setTargeting('company-product', []) .setTargeting('post_title', []); googletag.enableServices(); }); googletag.cmd.push(function () { googletag.display('div-gpt-ad-1579713650634-0'); }); What is a high-yield checking account?

A high-yield checking account is exactly what it sounds like: It's a checking account that has an annual percentage yield (APY) that's much higher than those offered by standard checking accounts, which usually offer no interest at all. That means the APY is at least 1%, but you can find accounts that pay around 4%.

(Note that a high-yield savings account is a different product. A high-yield savings account can pay 1% or more in interest, but is intended to be used to save money so it doesn't come with a debit card, you can't take the money out at ATMs, and you're allowed only a minimum number of withdrawals each month.)

Being a special financial product, high-yield checking accounts can come with a lot of strings.

Some high-yield checking accounts may have requirements to qualify for the APY

Just because your high-yield checking account will provide somewhat of a return on your investment doesn't mean you can treat it like a savings account.

The bank may require you to engage in some specific qualifying activities with your account, such as making a minimum number of debit-card or check transactions per month, having at least one recurring direct deposit, or making a minimum number of ATM withdrawals monthly. If you're treating your high-yield checking account like a checking account, none of this should be a problem.

It's standard to see deposit minimums when opening savings accounts, but with high-yield checking accounts, because of the greater operating costs for the institutions offering them, balance and deposit minimums are just as common. Not keeping the minimum balance in your high APY checking account could incur fees or lead to the loss of the high APY. Be sure to read the fine print from your bank before you open your account to understand what some of these terms might be.

Another common practice is for banks to offer a high APY for a checking account, but only up to a certain amount. You may be diligent about keeping $5,000 in your checking account at all times, but the bank may only be paying a high APY on the first $1,000, while the remaining amount draws interest at a standard — and much lower — rate.

Does the account come with fees?

"A major benefit of high-yield checking accounts are that they often come with low to zero monthly fees," says Kimberly Hamilton, founder of Beworth Finance LLC. "That said, you'll want to check for any other charges that may come up — for example, ATM fees. If one financial institution offers a higher interest rate, but tacks on fees, you may want to reconsider the lower interest rate option after all."

While more and more traditional brick-and-mortar banks are offering high-yield checking accounts, the majority of them can be found in online banks. Because they don't have any physical locations, there also aren't any in-network ATMs to visit when you need to make cash withdrawals. With ATM fees averaging $2 to $4, this kind of use could add up pretty quick. Carefully look at the terms and conditions of your checking account to see if it waives or refund ATM fees.

Some banks and credit unions may try to attract new customers by offering high APYs for a limited time, similar to the marketing tactics of 0% intro APR credit card offers. Pay attention to the fine print and don't assume that your high interest rate will last the entire time you hold an account.

Where is high-yield checking available?

Some of the checking accounts with the best APYs are offered only by small credit unions and banks that have a decidedly small reach in terms of geography. Before you open up an account with one of these banks, carefully consider where you might be in a few years. If there's any chance you might move across country, you'll be forced to change banks, and that's a major hassle. If you live a more nomadic life or tend to travel a lot, a major bank with national reach, or an online bank that operates across the US, might be your best bet.

Yet this might not be a problem for long, even with the small, local banks and credit unions.

"Many banks have begun shifting their banking operations online as a means to reduce costs of maintaining a physical network of branches," says Riley Adams, a CPA and founder of The Young & The Invested. "This change has resulted in lower efficiency ratios for banks (percentage of revenue represented by costs, lower is better for measuring bank profitability). In fact, online-only banks are best suited to offer high-interest checking accounts because they face lower costs and must offer higher interest rates to attract customers to use their services."

Editor's note: An earlier version of this post included quotes from a source whose identity and credibility has recently been discredited. The post has been updated to remove her quotes.

Related Content Module: More Savings Coverage

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Pfizer leaps 6% after releasing positive trial results for coronavirus vaccine

Wed, 07/01/2020 - 11:17am

  • Pfizer shares soared as much as 6% on Wednesday after the company announced positive early-stage trial results for its coronavirus vaccine.
  • The BNT162b1 drug successfully created antibodies in all participants receiving 10, 30, or 100 microgram doses.
  • Those taking two of the 10 or 30 microgram doses created between 1.8 and 2.8 times the antibodies seen in recovered COVID-19 patients, Pfizer said in a statement.
  • The pharmaceutical giant is one of several firms racing to introduce the first effective coronavirus vaccine, with Moderna, Gilead, and Novavax also conducting drug trials.
  • Watch Pfizer trade live here.

Pfizer shares leaped as much as 6% on Wednesday after the company revealed positive early-stage trial results for its coronavirus vaccine.

Pfizer's human trial involved 45 participants aged 18 to 55 receiving either 10, 30, or 100 microgram doses of the BNT162b1 vaccine or a placebo over a 21 day period. The compound successfully created antibodies for combatting the coronavirus in all participants receiving two of the 10 or 30 microgram doses, according to a Wednesday release.

Pfizer said patients created between 1.8 and 2.8 times the antibodies seen in those who have recovered from COVID-19. Those who received a single 100 microgram dosage created fewer antibodies, Pfizer said.

Read more: GOLDMAN SACHS: Buy these 15 super-cheap stocks now before their prices catch up to their strong growth and earnings prospects

"We are encouraged by the clinical data of BNT162b1, one of four mRNA constructs we are evaluating clinically, and for which we have positive, preliminary, topline findings," Kathrin Jansen, head of vaccine research and development at Pfizer, said in a statement. "We are dedicated to develop potentially groundbreaking vaccines and medicines, and in the face of this global health crisis, we approach this goal with the utmost urgency."

The pharmaceutical giant's potential vaccine is one of the most closely watched candidates in the sector. Several other firms including Moderna, Gilead, and Novavax are locked in the race to introduce the first effective compound for combating the coronavirus pandemic. Markets have repeatedly swung higher on positive trial news as investors grow more hopeful for a near-term cure.

Read more: Stock analysts are having a moment in the sun as the market gets flipped upside down. We spoke to 11 of the top-ranked on Wall Street to get their forecasts and single-stock picks.

Pfizer is working alongside German firm BioNTech to develop its coronavirus vaccine. The treatment remains under development and is not yet approved for distribution. Should it be approved, Pfizer aims to produce up to 100 million doses by the end of the year and potentially more than 1.2 billion doses through 2021.

Pfizer stock traded at $33.88 as of 10 a.m. ET, down 13% year-to-date.

Now read more markets coverage from Markets Insider and Business Insider:

Real-estate investor Joe Fairless breaks down how he went from 4 single-family rentals to overseeing 7,000 units worth $900 million — and outlines the epiphany that turbocharged his career

BlackRock says European stocks will beat their US peers going forward due to superior virus response

The Dow can hit 30,000 by 2021 if Republicans keep the Senate and the coronavirus is contained, Wharton professor Jeremy Siegel says

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Tesla overtakes Toyota to become most valuable automaker in the world (TSLA, TM)

Wed, 07/01/2020 - 11:09am

  • Tesla has surpassed Toyota to become the most valuable auto manufacturer in the world on Wednesday.
  • Tesla jumped as much as 4% to a market capitalization of $206 billion, while Toyota fell as much as 1% to a market capitalization of $203 billion.
  • The Tesla takeover of the car industry highlights investors' shift to rewarding technology-focused auto manufacturers that develop electric-powered vehicles and focus on software development.
  • Visit Business Insider's homepage for more stories

Tesla has soared past Toyota in market capitalization to become the most valuable auto manufacturer in the world on Wednesday.

Tesla jumped as much as 4% to a market capitalization of $206 billion, while Toyota fell as much as 1% to a market capitalization of $203 billion.

Investors have bid up shares of Tesla as much as 12% over the past two trading sessions in anticipation of the company's second quarter delivery results. On Monday, Elon Musk sent an email to employees, cheering them on to finish the quarter strong in hopes of breaking even for the period.

Read more: GOLDMAN SACHS: Buy these 15 super-cheap stocks now before their prices catch up to their strong growth and earnings prospects

If Tesla manages to turn a profit in the second quarter, it will become eligible to be added to the S&P 500 index, which would create immense demand for its stock as passive funds and ETFs tied to the index would be forced to buy Tesla shares.

Tesla is up 170% year-to-date. The company's meteoric rise has led investors to pile into smaller electric-vehicle manufacturers like Nikola Motors and Workhorse, which owns a 10% stake in Lordstown Motors.

The Tesla takeover of the car industry highlights investors' shift to rewarding technology-focused auto manufacturers that develop electric-powered vehicles and software.

Read more: Stock analysts are having a moment in the sun as the market gets flipped upside down. We spoke to 11 of the top-ranked on Wall Street to get their forecasts and single-stock picks.

Join the conversation about this story »

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Dow caps off best quarter since 1987 as strong economic data drives gains

Tue, 06/30/2020 - 4:18pm

  • US stocks rose on Tuesday as better-than-expected economic data outweighed mounting concerns about surging COVID-19 cases.
  • The Dow Jones industrial average's 18% gain in the three-month period from April to June marked the index's best quarterly return since 1987.
  • US consumer confidence jumped in June by the most since 2011, exceeding economists' forecasts.
  • Coronavirus cases continue to climb in multiple US states, leading to new restrictions and rollbacks of reopening phases.
  • Read more on Business Insider.

US stocks rose on Tuesday as better-than-expected economic data outweighed mounting concerns about a surge in COVID-19 cases.

The Dow Jones industrial average's 18% gain in the three-month period from April to June marked the index's best quarterly return since 1987. Meanwhile, the S&P 500 saw its best gain since 1998 during the period, while the Nasdaq capped off its best quarter since 2001.

Equities got a lift from data showing that US consumer confidence jumped in June by the most since 2011, exceeding economists' forecasts.

Here's where US indexes stood at the 4 p.m. ET market close on Tuesday:

Read more: BANK OF AMERICA: Buy these 8 retail stocks as they rake in revenues from an unprecedented surge in home-improvement spending

Still, investors are keeping an eye on increases in COVID-19 cases that could slow the economic recovery. Texas, California, Florida, and Arizona have rolled back reopening plans and imposed new restrictions.

Shares of Uber rose on reports that it was considering purchasing Postmates for about $2.6 billion. Tesla surged to an all-time high after CEO Elon Musk said in an email to employees on Monday night that "breaking even is looking super tight" for the second quarter.

Read more: Goldman Sachs has formulated a strategy that could triple the market's return within a year as volatility remains higher than normal — including 11 new stock picks for the months ahead

Wells Fargo declined after saying it would likely slash its dividend in the third quarter to comply with the Federal Reserve's stress test. Bank of America, Citigroup, Goldman Sachs, and JPMorgan said their dividends would remain the same.

Shares of Boeing slumped after Norwegian Air Shuttle canceled a deal for its jets. Inovio Pharmaceuticals slipped more than 12% following a report that the company hadn't provided data needed to determine whether its coronavirus vaccine candidate was working.

Fed Chairman Jerome Powell and Treasury Secretary Steve Mnuchin testified before the House Financial Services Committee on Tuesday afternoon. In prepared remarks released on Monday, Powell warned that failing to contain the virus could be a problem for the economy going forward.

Read more: JPMorgan breaks down how COVID-19 nearly destroyed one of the market's safest trades — and lays out 3 lessons to help investors tackle future crises

In global news, Chinese President Xi Jinping signed a national-security law for Hong Kong that's set to go into effect on Tuesday. The law could spark tensions between the US and China and threaten Hong Kong's standing as a financial hub.

Still, China's economy has shown signs of a rebound from the coronavirus pandemic. The country's purchasing managers' index climbed to a three-month high in June, surpassing economists' estimates.

Oil prices slid. West Texas Intermediate crude as much as 2.1%, to $38.85 per barrel. Brent crude, oil's international benchmark, fell 1.9%, to $40.90 per barrel, at intraday lows.

Read more: Real-estate investor Joe Fairless breaks down how he went from 4 single-family rentals to overseeing 7,000 units worth $900 million — and outlines the epiphany that turbocharged his career

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Meet the non-profit program helping young people from underserved communities land tech jobs at places like Bank of America

Tue, 06/30/2020 - 3:45pm

  • NPower is a non-profit organization that trains military veterans and young adults in underserved communities for careers in technology. 
  • The program is based across eight different regions in the US and Canada and serves 1,400 students annual via a 16-week classroom program and a paid internship. 
  • David Reilly, who leads global banking and markets, enterprise risk and finance technology
    and core technology infrastructure at Bank of America, serves as board chair for NPower. Reilly did not attend college. 
  • Reilly said the program serves as a great way for organizations to fill entry-level technology positions, which continue to grow, from a pool of talent that is diverse.
  • Sign up here for our Wall Street Insider newsletter.

Carolina Ferreira doesn't fit the traditional profile of a Wall Street employee.

Having left high school at 17 and with no college education, Ferreira's initial understanding of white-collar jobs came mostly from television shows like Suits. It wasn't that Ferreira had a tough time believing she'd ever work in finance. It wasn't even a consideration.

"I never had any exposure to the corporate world. Not even like by third-hand by my parents or family members," said Ferreira, who parents immigrated from the Dominican Republic. "It was just nothing I've ever seen. So just nothing I could ever imagine for myself."

And yet, Ferreira did just that. After going back to high school at 20 to get her diploma, Ferreira enrolled in NPower, a non-profit that trains military veterans and young adults from underserved communities for careers in tech. Through NPower, Ferreira landed an internship at Bank of America in 2017 working as a technical support analyst for the bank's FICC trading floor.

See more: Bank of America just hired a Citi exec to oversee how it deploys AI, as Wall Street works to understand the regulatory and legal implications of using the tech 

It was quite the introduction to finance for Ferreira, who was tasked with ensuring the information flow between salespeople and traders on complex transactions was seamless.

"It was insanely overwhelming," said Ferreira of her first day on the job. "I had nervous sweats for half the day."

Nerves aside, Ferreira excelled, and enjoyed, her new role. She was offered work as a contractor after her internship ended, and then eventually a full-time position working with the commodity trading floor.

Ferreira's experience is just one of the many success stories to come out of NPower.

Founded in 1999, NPower runs programs out of eight regions in the US and Canada, serving roughly 1,400 students annually, Bertina Ceccarelli, CEO of NPower, told Business Insider. Students receive 16 weeks of classroom instruction across a variety of tech topics and also participate in a paid internship that runs a minimum of seven weeks. The majority of students have no formal training in technology beforehand, and most either have little or no college education. 

NPower says after completion of the program, which is free, about 80% of graduates either continue their education or get jobs. 

"Our mission, I like to say at the highest level, really is to move people from poverty to the middle class," Ceccarelli said. 

Read more: Bank of America's summer internship will be entirely virtual. A talent exec runs through how the bank's 2,000 global interns will learn, network, and volunteer without stepping into an office.

A Bank of America executive has ties to NPower 

While NPower works with a variety of industries — placing grads at consulting, pharmaceutical, and consumer packaged goods companies — financial services remains one of its biggest participants, Ceccarelli said. 

Bank of America, in particular, has been a strong supporter of the organization, hiring 63 students out of NPower's New York program, with employees also volunteering over 4,600 hours of their time through activities such as guest lectures. 

The executive leading those efforts is David Reilly, who leads global banking and markets, enterprise risk and finance technology and core technology infrastructure at Bank of America and serves as board chair for NPower.

Reilly has a non-traditional background himself, having not attended college. As a result, he told Business Insider, he always looks to give back to those who find themselves in similar situations as he did all those years ago.

And that work has paid off, Reilly said, who estimated some of the best people he's hired have been those with the right attitude and curiosity, as opposed to a laundry list of degrees from prestigious universities.

"What I've found you get back in return is an incredible amount of loyalty and drive and that these people will run through walls for you. And then they will go on to have astonishing careers," Reilly said. 

"They need someone to give them a chance, to give them an opportunity. And my experience has been if you do that, the balance of trade is way in the corporations favor. And what you get back in return, it's just astonishing," he added. 

NPower can also serve to fill gaps around data science and diversity

To be sure, there are commercial benefits to the program as well. Reilly said as companies rely more heavily on tech, there is a greater need to fill entry-level roles that require IT skills. He cited one estimate that suggests there will be 3.5 million unfilled technology jobs by 2021. 

In particular, Reilly said data science will be the biggest need. While things like cyber and basic coding skills are all important, experience handling data will be in the highest demand. 

"The resource that everybody is now grappling with is that of data. You speak to anybody at any large corporation they'll tell you, 'I don't lack for data. I lack for insight. If only I could draw more insight from the data that I've got, I could serve my clients better," Reilly said. 

However, that's not to say graduates from prestigious universities will no longer be sought after by Wall Street firms. While tech, compared to investment banking or trading, has more flexibility to recruit outside of so-called target schools, those who attend the most exclusive colleges being offered the best opportunities in finance is a trend that's not likely to end anytime soon.

NPower also provides an opportunity for companies to tap into a more diverse talent pool from underserved backgrounds, a consideration nearly all of corporate America has reevaluated more seriously in recent weeks. 

Reilly said Bank of America will continue to work hard to provide entry-level opportunities via the program. As for NPower, he said the organization will look to be more public about how it can help companies in need technical talent from more diverse backgrounds. 

"You win whichever way you cut it. You get access to terrific talent. You get to help kids that really need it. You get to do right by a community in which you operate and which you serve. And you get talent in your organization with a level of drive, commitment, loyalty, energy and determination that you just can't teach," he said. 

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SEE ALSO: Bank of America's summer internship will be entirely virtual. A talent exec runs through how the bank's 2,000 global interns will learn, network, and volunteer without stepping into an office.

SEE ALSO: Goldman Sachs' top tech exec explains how a fresh slew of senior hires are transforming the bank's approach to building products

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NOW WATCH: Pathologists debunk 13 coronavirus myths

US companies tumble into bankruptcy at fastest pace since 2013 under coronavirus stress

Tue, 06/30/2020 - 3:30pm

  • US companies are filing for Chapter 11 bankruptcy at the fastest pace since 2013, the Financial Times reported Tuesday.
  • Year-to-date filings reached 3,427 on June 24, bringing the metric close to the 3,491 filings made in the first half of 2008.
  • The wave of bankruptcies was largely driven by the coronavirus pandemic and its disruption to global supply chains, consumer spending, and manufacturing activity.
  • Firms across a range of industries have entered insolvency, from car-rental chain Hertz to circus company Cirque du Soleil.
  • Visit the Business Insider homepage for more stories.

The coronavirus' economic fallout is fueling Chapter 11 bankruptcy filings at the fastest pace since 2013, the Financial Times reported Tuesday.

US filings totaled 3,427 on June 24, according to data from Epiq seen by the Times. The reading also closes in on the financial-crisis reading of 3,491 companies entering bankruptcy in the first half of 2008.

Chapter 11 bankruptcy is among the most popular options for businesses to restructure in the midst of insolvency. Some of the biggest names to file in 2020 include Hertz, JC Penney, J Crew, and Chesapeake Energy. Circus company Cirque du Soleil is one of the latest to join the pack after filing for bankruptcy on Monday.

Read more: JPMorgan breaks down how COVID-19 nearly destroyed one of the market's safest trades — and lays out 3 lessons to help investors tackle future crises

The coronavirus pandemic attacked corporate income on all fronts through the start of the year. The outbreak initially tore into global supply chains and firms with exposure to China as the country issued strict lockdowns. As the virus spread across the rest of the world, quarantine orders stifled consumer spending and manufacturing activity. Companies were forced into months of frozen revenue streams.

Companies are still a ways away from repeating the bankruptcy trend seen during the last US recession. A total of 8,614 firms filed for bankruptcy protection in 2008 before an additional 12,644 companies filed the following year, according to the Times. Still, rising coronavirus case counts could prolong shutdowns and boost insolvency across industries.

The wave of bankruptcies isn't deterring companies from issuing debt to ride out the pandemic. Investment-grade bond sales surged past the $1 trillion threshold at the fastest pace in history in late May as companies rushed to take advantage of strong risk-on activity. The Federal Reserve's move into corporate debt markets prompted an influx of investors looking to buy companies' bonds. The same threshold wasn't breached until November in 2019.

Now read more markets coverage from Markets Insider and Business Insider:

The Dow can hit 30,000 by 2021 if Republicans keep the Senate and the coronavirus is contained, Wharton professor Jeremy Siegel says

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Tesla jumps 8% to record high after Elon Musk email shows optimism around a profitable 2nd quarter (TSLA)

Tue, 06/30/2020 - 3:11pm

Shares of Tesla jumped as much as 8% to an all-time intraday high of $1,087.50 Tuesday after a leaked email from CEO Elon Musk showed optimism that the company could break even in the second quarter. 

"Breaking even is looking super tight. Really makes a difference for every car you build and deliver. Please go all out to ensure victory!" Musk wrote in a Monday email to employees. The email was first reported by Electrek.

Tesla is expected to report its second quarter vehicle deliveries sometime this week, ahead of the Fourth of July weekend. 

Read more: We spoke with 3 financial experts, who said to make 4 these trades right now to get ahead of surprising gains when earnings season starts next month

Tesla's stock price has been on a searing rally this year, hitting multiple all-time highs. On Tuesday, its market capitalization reached roughly $201 billion, putting it closer than ever to the $214 billion market value of Toyota, the highest-valued automaker in the world.

In the first quarter of the year, Tesla reported stronger-than-expected vehicle deliveries and a surprise profit even though it dealt with factory closures in China due to the coronavirus pandemic. Since, its US factory was also shuttered in April due to a local shelter-in-place order.

Tesla resumed production at the US factory in May, defying the local shelter-in-place orders. 

Tesla has gained roughly 157% year-to-date

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NOW WATCH: Why thoroughbred horse semen is the world's most expensive liquid

Workhorse extends June rally to 706% after securing $70 million in new financing (WKHS)

Tue, 06/30/2020 - 2:17pm

  • Workhorse surged as much as 38% on Tuesday after the company secured $70 million in new financing. 
  • The jump extended the electric vehicle maker's June rally to as much as 706%. 
  • Workhorse was added to the Russell 3000 index on Monday and is part of a group of publicly traded electric vehicle companies that have seen a surge in trader interest as investors try to find the next Tesla.
  • The number of Robinhood account owners that own Workhorse surged 436% in June to 116,000.
  • Visit the Business Insider homepage for more stories.

Workhorse extended its June rally to 706% and surged as much as 38% on Tuesday after the electric vehicle developer said it secured $70 million in new financing. 

This follows Monday's 56% surge after the company announced it would be added to the Russell 3000 index.

Workhorse said it entered into a financing agreement for a $70 million senior secured convertible note with a single institutional investor. According to the company, the proceeds will strengthen its balance sheet and enable it to accelerate production of its vehicles.

CEO Duane Hughes said, "Heading into the second half of the year, we'll be looking to meet our previously stated annual delivery target, which should have us in a strong position to accelerate our production ramp into 2021."

Workhorse develops electric delivery vans that are targeting delivery companies like UPSFedEx, and DHL. The company also operates an aviation unit that makes delivery drones. Previously, the company developed an electric pickup truck but abandoned that project after it proved too costly for the company to develop.

In 2019, Workhorse licensed its electric pickup truck technology to its former CEO, Steve Burns. Burns formed Lordstown Motors and acquired an auto manufacturing facility from General Motors in Lordstown, Ohio.

Workhorse retains a 10% equity stake in Lordstown Motors and is set to receive a royalty fee for every Lordstown Endurance pickup truck that is sold. 

The investor hype surrounding electric vehicles has been inspired by Tesla's meteoric rise past $1,000, and spilled over to Nikola Motors, which began accepting a $5,000 reservation for its Badger electric pickup truck today. Investor hype was so strong that Nikola shares doubled in a single day after it went public via a reverse merger earlier this month.

Workhorse has seen its market capitalization skyrocket from $185 million at the start of June to $1.26 billion today, according to data from YCharts.com. 

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SIGN UP NOW: Lessons in pitching investors from Domm Holland, CEO of one-click checkout startup Fast, who raised $20 million from Index Ventures and Stripe to take on Apple Pay

Tue, 06/30/2020 - 1:29pm

In May, one-click checkout startup Fast raised its $20 million Series A from investors including Index Ventures and buzzy fintech Stripe.

The company is trying to take on Apple Pay to solve pain-points around password management and online checkout.

Join Business Insider on Tuesday, July 14 at 1:30 p.m where BI payments reporter Shannen Balogh will speak with Domm Holland, Fast's co-founder and CEO, and Jan Hammer, general partner at Index Ventures.

They'll discuss how Holland came up with the idea for Fast, how to build a pitch deck, and what it takes to win over investors.

If you're a Business Insider subscriber, you can sign up here.

 

 

SEE ALSO: One-click checkout startup Fast used this pitch deck to nab $20 million from investors like fintech giant Stripe. Here's a look at its vision for taking on Apple Pay.

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JPMorgan breaks down how COVID-19 nearly destroyed one of the market's safest trades — and lays out 3 lessons to help investors tackle future crises

Tue, 06/30/2020 - 12:58pm

  • A relatively obscure but cushioned part of the bond market nearly collapsed in March amid the coronavirus-induced crisis. 
  • JPMorgan strategists recently detailed the breakdown in so-called basis trading that spurred a rush to the exits among hedge funds.
  • They explained how the Fed intervened to prevent a wider liquidity crisis, and listed three lessons for investors to hold for future crises. 
  • Click here to sign up for our weekly newsletter Investing Insider.
  • Click here for more BI Prime stories.   

The historic market action that investors endured earlier this year nearly took down an erstwhile safe part of the fixed-income market had the Fed not intervened. 

Interest-rate derivatives strategists at JPMorgan arrived at this conclusion after conducting a postmortem into the crash, and penned their biggest takeaways for investors.

They had no shortage of superlatives to describe what the coronavirus outbreak spurred in the bond market. For one, consider that the move in 10-year swaps — instruments designed to protect from volatility in interest rates — moved by nearly six times more than what had been priced in by the options market. 

But that is not even the most unnerving development that caught JPMorgan's eye. The team, led by Joshua Younger flagged strategies that traditionally help traders reconcile the differences between bond futures and spot prices, otherwise known as basis trading. 

Here's an example of how it works: if a bond becomes much cheaper than its relative futures contract, a trader can buy it through a repurchase agreement and then use a futures contract betting on its decline as collateral. If the bond's price comes in line with the futures contract, the trader profits. If not, the futures contract on other end of the trade wins. 

If this all sounds niche and somewhat wonky, you're not alone. Even Younger, JPMorgan's head of US interest rate derivatives strategy, said as much in a recent note.

The market's relative obscurity is a key reason why it came under dire strain. Its low-risk nature meant that traders made ample use of leverage that in turn gave them access to more attractive opportunities in other parts of the market.

Additionally, the belief that basis trading was safe led to a massive build-up in net-short positions against Treasuries. This meant that during the crisis, traders became saddled with huge bets against Treasuries that were never intended as bets against the asset class itself. 

"These non-economic cash/futures basis positions were, in our view, the epicenter of the historic breakdown in market functioning in March — one which threatened to transform an economic event into a financial crisis which was likely only avoided with an equally historic Fed intervention," Younger said in a recent note. 

As is often the case in markets, there was widespread fear of a rush to the exit signs. For one, the transition to remote work stoked concerns that the repo market would lose some functionality just like it did after the 9/11 attacks.

In the waiting game to see what happened at an operational level, there were also risk-management concerns. If you acted too late, you would have been among the last out the door with far worse prices than if you de-levered early. 

Treasury data compiled by JPMorgan show that there was roughly $450 billion in net selling of Treasuries in the year through April. Nearly half of it originated in the Cayman Islands, a tax haven that has become the domicile of many hedge funds.

This was far from the first liquidity crunch in the fixed income market. But what made it even more threatening was that several other parts of the market were under strain at the same time.  

Thankfully, the Fed intervened decisively by expanding its asset purchases and increasing the size of its repo operations. And therein lies one of three lessons Younger deduced from the recent episode: the Fed is willing to do whatever it takes to solve liquidity crises in the bond market. 

The second lesson is that the post-2008 regulations that were put in place substituted liquidity crises for credit crises. While neither is desirable, at least the Fed has shown that it can and will decisively combat liquidity crunches in the future. The 2008 credit crisis, on the other hand, nearly collapsed the entire financial system.

And finally, Younger says this episode should spur a more flexible way of thinking about the Fed's regulation of banks in the future.   

SEE ALSO: Goldman Sachs has formulated a strategy that could triple the market's return within a year as volatility remains higher than normal — including 11 new stock picks for the months ahead

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NOW WATCH: Pathologists debunk 13 coronavirus myths

The Dow can hit 30,000 by 2021 if Republicans keep the Senate and the coronavirus is contained, Wharton professor Jeremy Siegel says

Tue, 06/30/2020 - 12:53pm

  • The Dow Jones industrial average could surge to a record high of 30,000 if Republicans keep their hold on the Senate in November and the coronavirus pandemic is contained, the Wharton finance professor Jeremy Siegel said on Tuesday.
  • The market's rally from March has slowed, and the easiest stock gains have already been made, he said on CNBC's "Squawk Box."
  • "Great uncertainties" from elections and spiking coronavirus cases stand to either boost stocks through the second half of the year or pull them from their lofty valuations, the professor said.
  • The political unknowns are "a big one," Siegel said, as a reversal of President Donald Trump's corporate tax cuts would create "a strong headwind" for companies and their stock prices.
  • Visit the Business Insider homepage for more stories.

The Wharton finance professor Jeremy Siegel detailed on Tuesday the critical conditions needed for the Dow Jones industrial average to reach a record high of 30,000 before the year is out.

The stock market's rally from March lows has slowed as investors weigh reopening optimism with fears about a surge in coronavirus cases. The latest spike in infections and election outcomes represent the "great uncertainties" plaguing valuations, Siegel said on CNBC's "Squawk Box."

"If we get continued progress and lower virus figures for the US, a resolution of the political uncertainty in November ... I think the market would welcome a Republican-maintained Senate even if there is a Biden presidency," the professor said. "I think that would be favorable for the market, but that is in question."

The market's easiest gains have already been made, and November poses a key deadline for investors waiting on the sideline, he added.

Read more: BANK OF AMERICA: Buy these 8 retail stocks as they rake in revenues from an unprecedented surge in home-improvement spending

The Dow opened at 25,499.85 on Tuesday, down 10% year-to-date.

A Democratic sweep on Election Day would endanger one of the bull market's biggest drivers. Vice President Joe Biden recently pledged to reverse most of President Donald Trump's 2017 tax cuts. The lower corporate rates helped push the stock market to fresh highs for years, and removing them would place significant pressure on already lofty valuations, Siegel said.

"That uncertainty is a big one, because taxes — the tax cut, the corporate tax cuts are a major reason for a lot of the bull market since Trump was elected," he said. "If they're going to be reversed, that's a strong headwind."

Even if Democrats take the Senate and the White House, investors aren't without hope. Massive monetary and fiscal relief measures have flooded capital markets with liquidity in recent months and helped drive major indexes higher. In the event of a blue wave, "there's probably going to be more liquidity" to lift the economy from the coronavirus recession, the professor said.

Read more: Goldman Sachs has formulated a strategy that could triple the market's return within a year as volatility remains higher than normal — including 11 new stock picks for the months ahead

A final X factor for the stock market's second-half performance hinges on bringing a reliable COVID-19 treatment to market. Economists, investors, and Federal Reserve officials have said that consumer confidence cannot fully recover until Americans believe they can safely leave their homes and participate in the economy.

Whether it comes from virus containment or a miracle drug, lifted sentiment is crucial to reviving the economy and the US's largest companies, Siegel said.

"If the virus subsides, get some more therapeutics, get some more confidence in the economy, and if the Republicans can hold the Senate, we will see, I believe, Dow 30,000 by the end of the year," he said.

Now read more markets coverage from Markets Insider and Business Insider:

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Uber paid cash to some laid-off employees for their unvested stock, but some of them are unhappy about the price it paid (UBER)

Tue, 06/30/2020 - 12:50pm

  • When Uber laid off 7,000 people in May, it included an extra payment to some employees who were about to qualify for a tranche of stock to vest.
  • Employees who would have gotten the stock within three months had they not been laid off were paid about $27 a share for the stock instead, multiple sources tell us.
  • Some employees are not happy about this extra payment because the stock was worth more than that at the point of the layoff. 
  • They thought Uber should have paid a more current price for the stock, or given them the option to keep the shares.
  • An attorney who specializes in employee stock compensation says it doesn't work that way. If the stock hasn't vested, in most cases, employees likely aren't entitled to anything.
  • Visit Business Insider's homepage for more stories.

By nearly all accounts, when Uber laid off 7,000 people in May, the severance package it gave employees was a generous one: at least 10 weeks of pay, health care until year's end and other benefits.

For instance, Uber paid employees an extra lump sum if they were about to have a tranche of restricted-stock units vest within three months had they not been terminated, as long they signed waivers and non-disparagement agreements.

Tech companies like Uber include stock compensation as part of an employee's total pay package. Often the amount of stock is negotiated when an employee first joins the company. An employee may even take less cash salary and more stock, which then vests over a number of years, typically four. So as employees contribute to the company's overall success and the stock price rises, employees can earn more on the stock than on their other pay. 

Dozens of employees qualified for this extra payment, according to an analysis of the public list of laid-off employees, and possibly more people qualified than we could find on the list, because participation on that list is voluntary, and doesn't include all the people who were laid off.

Uber paid these employees about $27 for each share of stock. 

Yet some employees were not happy about this payment because of the method Uber used to come up with the $27/share price. 

Uber calculated the average price across the month of April, a point in time when COVID-19 had ransacking the travel industry and the stock was down but starting to inch back up. Uber conducted the layoffs in May and left everyone on the formal payroll for a month, until June 17, source say, aka four weeks of garden pay.

If it had used May's average share price, or even the days before employees were formally off the payroll, those employees would have be paid about $32 a share.

For some people who were due to have a large tranche vest, those couple of bucks per share added up to thousands of dollars, one person told us.

"Due to pandemic, the entire stock market sold off in March and April, so that was an artificially deflated value. They are choosing a value to pay least amount," one former employee told us. 

Uber did not offer the option of early vesting, allowing employees to keep the stock instead of a cash payment. This person feels that it was like forcing employees to sell shares at a loss or get nothing, on top of losing their jobs during a pandemic.

Uber confirmed the RSU payout was based on the average closing stock price for the month of April and says using the prior month has been its standard for layoffs for practical reasons, so the company can determine the total payout amount in advance when it issues the severance agreement papers. 

The interesting thing is that companies typically have no obligation to do anything about unvested stock during a layoff, says Mary Russell, attorney and founder of Stock Option Counsel, an employee stock-option specialist in Palo Alto, California. 

Employee stock compensation tends to be "survivor-style." If a person's employment ends prior to the vesting date for any reason including a layoff, the employee typically has no rights to the shares unless those rights were negotiated in advance, she says.

So Uber offering any payment on unvested stock could be seen as another way Uber was being generous to its employees, an effort to enrich its reputation as a good employer, another former employee believes.

So, why are some people upset about it? Russell believes it's because equity compensation is complicated and based on an idea of  "fairness," she says. "I mean, it's in the name: equity. It's about building something that makes people feel a part of."

On top of that, a lot of tech companies really play up the stock compensation part of the pay package.

"There's so much room for misunderstanding. You have a recruiter making promises and a hiring manager and HR talking about equity. When there are layoffs, you have that [layoff] team talking about equity. Yes, there's money involved, but also a sense of fairness," she says.

SEE ALSO: These are the 19 Airbnb execs rebuilding the company for growth and an IPO amid the biggest travel industry crisis in decades

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NOW WATCH: Pathologists debunk 13 coronavirus myths

Zynerba plummets 51% after its CBD gel fails trial for rare disease (ZYNE)

Tue, 06/30/2020 - 12:39pm

  • Zynerba, a small biotechnology company, plummeted 51% on Tuesday after its CBD gel failed a pivotal trial for a rare disorder called Fragile X syndrome.
  • The company said its experimental cannabis-based gel, called Zygel, did not meet its primary endpoint in improving aberrant behavior when compared to a placebo.
  • Additionally, Zygel failed to meet any of its three secondary endpoints.
  • Visit the Business Insider homepage for more stories.

Zynerba plummeted as much as 51% on Tuesday after the company said its experimental cannabis-based gel failed to meet its primary endpoint in a pivotal trial for a rare disorder called Fragile X syndrome.

Fragile X syndrome is a rare genetic disorder that is characterized by mild to moderate intellectual disability.

Zynerba had developed a CBD gel, called Zygel, to test its ability to treat patients of Fragile X syndrome.

In addition to failing to meet its primary endpoint in improving aberrant behavior when compared to a placebo, it also failed to meet its three secondary endpoints.

Read more: BANK OF AMERICA: Buy these 8 retail stocks as they rake in revenues from an unprecedented surge in home-improvement spending

Zynerba said it would meet with the FDA to discuss the trial results as soon as possible, as well as continue to run ad hoc analysis on the trial data. The company also delayed top-line Phase 2 data from its INSPIRE trial to the end of 2020 due to COVID-19 travel restrictions.

Shares of Zynerba fell from a close of $6.54 on Monday to a low of $3.20 on Tuesday, representing a decline of 51%. The company's cash per share is $2.43, according to data from Yahoo Finance. 

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Goldman Sachs says national mask mandate could save US from a 5% hit to GDP

Tue, 06/30/2020 - 12:37pm

  • A national mask mandate could potentially substitute for lockdowns to curb the spread of coronavirus, Goldman Sachs Chief Economist Jan Hatzius wrote in a Monday note. 
  • Goldman's baseline estimate is that a national mandate could raise the percentage of people who wear masks by 15 percentage points and cut the daily growth rate of confirmed cases by 1 percentage point to 0.6%. 
  • That could save the US from a 5% hit to gross domestic product that could result from renewed lockdowns, according to Goldman Sachs. 
  • Visit Business Insider's homepage for more stories.

A national mask mandate could potentially slash coronavirus infections in the US and save the country from a 5% hit to its gross domestic product, according to Goldman Sachs. 

In a Monday note, chief economist Jan Hatzius and his team investigated the link between wearing a mask and certain economic and health outcomes of COVID-19. 

"We find that face masks are associated with significantly better coronavirus outcomes," Hatzius wrote. Face mask use lowered infection growth rates and death rates, the team found. The causal relationship was not weakened when controlling for avoiding large gatherings or avoiding public interactions.

A national mandate would also "likely increase face mask usage meaningfully," Goldman said. Goldman's baseline estimate is that a national mandate could increase the percentage of people who wear masks by 15 percentage points, and cut the daily growth rate of confirmed cases by 1 percentage point to 0.6%. 

Read more: Goldman Sachs has formulated a strategy that could triple the market's return within a year as volatility remains higher than normal — including 11 new stock picks for the months ahead

"These calculations imply that a face mask mandate could potentially substitute for lockdowns that would otherwise subtract nearly 5% from GDP," said Hatzius. 

The US currently does not mandate mask wearing — instead, it issued a national recommendation in April. While some states adopted stricter measures, some such as Texas and Florida opposed a state-wide mask mandate. 

By analyzing state-level mask usage, Goldman found that mandates gradually raise the percentage of people who "always" or "frequently" wear masks by 25 percentage points in the 30 days after signing.

In addition, the percent of people who say they "always" wear a mask jumped by nearly 40 percentage points more than 30 days after signing, "reflecting some people switching from 'frequently' and other categories to 'always'," according to the note. 

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The US fell into a recession in February due to the impact of coronavirus, which has had a huge negative impact on gross domestic product. US GDP fell nearly 5% in the first quarter of 2020, and is estimated to slump more than 30% in the second quarter due to the pandemic. 

To determine how a mask mandate would impact US GDP, Goldman considered how severe government lockdowns would have to be to have the same outcome — lowering infections by 1 percentage point. 

They found that their effective lockdown index would have to increase 16 percentage points to lower infections 1 point. This jump might reduce US GDP by nearly 5%, according to the note. 

And, even taking into account any uncertainty in Goldman's analysis, it "suggests that the economic benefit from a face mask mandate and increased face mask usage could be sizable," he said. 

Read more: Real-estate investor Joe Fairless breaks down how he went from 4 single-family rentals to overseeing 7,000 units worth $900 million — and outlines the epiphany that turbocharged his career

Join the conversation about this story »

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Goldman Sachs has formulated a strategy that could triple the market's return within a year as volatility remains higher than normal — including 11 new stock picks for the months ahead

Tue, 06/30/2020 - 11:45am

  • Goldman Sachs strategists anticipate that stock-market volatility — which is already higher than normal — will remain elevated in the months ahead. 
  • The implication is that returns adjusted for the risk and volatility investors tolerate will be lower.
  • Goldman preemptively rebalanced its basket of stocks with the highest expected risk-adjusted returns and flagged the 11 names atop the list. 
  • Click here to sign up for our weekly newsletter Investing Insider.
  • Click here for more BI Prime stories.

Don't expect the stock market's whipsawing to subside anytime soon. 

That's the message from Goldman Sachs' top equity strategists to clients as coronavirus-related headlines continue to fling the market around. 

While the strategists do not expect a return of the ugly days in March, when the economy first shut down, they foresee stocks being more fickle than normal in the months ahead.

Two key gauges show that volatility remains historically high in the wake of the historic crash in March. First, the S&P 500's price variation on a one-month basis — so-called realized volatility — is near 28, which is above its long-term average of 13.

Similarly, the CBOE Volatility Index, or VIX, that tracks options-market activity is near 33, higher than its long-run average of 19.   

The investing implication of these trends is that equity investors are poised to get less bang for their buck after returns are adjusted for the risks taken. 

"Consensus expects 9% upside to the typical stock over the next 12 months and volatility should remain elevated through the rest of the year, suggesting low risk-adjusted returns in the coming months," David Kostin, Goldman Sachs' chief US equity strategist, said in a recent note.

Goldman Sachs has preemptively updated its strategy that targets stocks with the highest risk-adjusted returns based on a gauge known as the Sharpe ratio. The strategists led by Kostin calculated it by dividing the consensus 12-month price target among analysts with the six-month volatility implied by options traders. A higher ratio indicates a more attractive return relative to risk-taking and the prevailing level of volatility.

What makes this strategy even more attractive is that marketwide Sharpe ratios are near their lowest levels in history. Before the steep sell-off in stocks on Friday, the S&P had returned -5% year to date with annualized realized volatility of 46% for a risk-adjusted return of -0.1 — in the 27th percentile since 1950. 

Kostin said the high Sharpe ratio basket has underperformed the S&P 500 this year by 6 percentage points largely because it held a large number of value stocks.

But since May, the basket has beaten the benchmark index by 441 basis points because of the improvement in economic data and value-stock performance. Its longer-term track record is also promising: The basket has beaten the S&P 500 in 66% of semiannual periods since 1999 by 271 basis points on average, Kostin said. 

The freshly rebalanced basket includes 31 new stocks that are mostly in the healthcare, media, IT services, aerospace, and defense industries.

"The median constituent in the basket is expected to generate roughly 3x the absolute return of the median S&P 500 stock during the next 12- months (+24% vs. +9%)," Kostin said. 

Listed below are the 11 new additions Kostin flagged because they have the highest Sharpe ratios:

  1. Edwards Lifesciences (EW
  2. Northrop Grumman (NOC)
  3. Western Digital (WDC
  4. Merck (MRK)
  5. Cigna (CI)
  6. Ulta Beauty (ULTA)
  7. Concho Resources (CXO)
  8. Hartford Financial Services (HIG)
  9. Allstate (ALL)
  10. Universal Health Services (UHS)
  11. Boston Scientific (BSX)

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Read the pitch deck that helped Divvy raise $30 million to provide alternate financing for prospective homebuyers

Sun, 06/28/2020 - 8:01pm

Buying a home, particularly for Millennials, is a complicated and expensive process – at times it can be complicated and expensive enough to discourage potential buyers from even trying.

Enter Divvy, one of the many Silicon Valley startups working to change the way people buy homes. The company is specifically interested in providing alternative financing options for prospective homebuyers who don't qualify for traditional mortgages.

Divvy accomplishes this by purchasing homes outright and allowing customers to pay the company back through monthly installments — 25% of the total goes toward building equity and 75% goes toward paying "rent."

And some top venture capitalists have bought into Divvy's mission as well. In October 2018, Divvy raised a $30 million series A round led by Andreessen Horowitz, with participation from Caffeinated Capital, DFJ, and Affirm CEO Max Levchin.

Divvy helped purchase homes for more than 100 buyers in its first year, but it has much higher hopes. The startup's official mission is to put 100,000 families into their first homes within five years.

To really understand Divvy's strategy, Business Insider Prime has published the investor deck the company used to acquire that $30 million in funding. Simply enter your email address to receive a FREE download of the full deck!

BI Prime is publishing dozens of stories like this each and every day, chock full of exclusive content and industry analysis. Get started by reading the full investor deck.

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