Goldman Sachs raises its S&P 500 price target to highest on Wall Street as the bank sees earnings growth driving stocks to new highs

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Traders work on the floor of the New York Stock Exchange.

  • Goldman Sachs increased its 2021 target on the S&P 500 to 4,700 from 4,300, implying further upside for the benchmark that’s already climbed 17% this year.
  • Strategists raised their per-share earnings view and see earnings growth as the primary driver for further S&P 500 gains.
  • Goldman also raised its price target and per-share earnings projection for 2022.
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Goldman Sachs pushed up its target for the S&P 500 index on Thursday, saying growth in corporate earnings should in part drive the broad-equity market measure up by 7% by the end of 2021.

The investment bank now sees the index reaching 4,700, higher than its previous projection of 4,300. The call implies a 7% upside from current levels and full-year price returns of 25%, equity strategists led by David Kostin wrote in a note published Thursday.

The projection is the highest among Wall Street strategists, according to Bloomberg, citing its monthly survey. Goldman also increased its outlook for 2022.

The benchmark index closed at 4,402.66 on Wednesday, leaving its year-to-date gain at more than 17%.

“The combination of higher-than-expected S&P 500 earnings and lower-than-expected interest rates drive our upgraded price targets,” said Goldman.

The S&P 500 has risen for six straight months and has hit multiple record highs, bolstered by expectations for robust profit growth. Goldman said earnings growth — as it has been so far this year — will be the primary driver of US equity returns in the second half of this year and in 2022. It boosted its 2021 per-share earnings estimate to $207 from $193, which would represent a 45% surge in annual growth.

“Relative to consensus, we expect stronger revenue growth and more pre-tax profit margin expansion as firms successfully manage costs and as high-margin tech companies become a larger share of the index,” wrote Kostin.

Goldman said its price targets for the benchmark are highly sensitive to assumptions about interest rates and corporate tax reform, which have uncertain outlooks. Its baseline equity forecast assumes Congressional passage of tax reform and the 10-year Treasury yield rising modestly to 1.6% at year-end.

For 2022, the strategists expect the S&P 500 to reach 4,900, up from its previous outlook of 4,600, implying a full-year return of 4%. They also foresee 2% annual earnings growth in raising its per-share earnings estimate to $212 from $202. The earnings estimate for next year assumes the implementation of a narrower version of President Joe Biden’s tax plan.

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Bitcoin’s recent crash below $30,000 was ‘way more orderly’ than past crypto meltdowns, says Sam Bankman-Fried

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Sam Bankman-Fried, co-founder and CEO of crypto exchange FTX.

  • Bitcoin’s sub-$30,000 plunge in July was “way more orderly” than past crypto price tumbles, FTX CEO Sam Bankman-Fried told Bloomberg’s “Odd Lots” podcast.
  • The 29-year-old billionaire told Bloomberg that many in crypto fret about leverage in the system.
  • FTX recently slashed the maximum leverage it offers from 100x to 20x.
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The way Bitcoin’s sub-$30,000 plunge in July unfolded was “way more orderly” than past crypto price tumbles, FTX CEO Sam Bankman-Fried told Bloomberg’s “Odd Lots” podcast.

“There were $20 billion of long positions that probably got liquidated over a weeklong period,” he said. “But the industry was able to absorb that. … The infrastructure and the liquidity in this space held up much better under the liquidations than they did a year ago.”

Some crypto exchanges have come under fire for service outages during big price crashes. In May, Binance experienced an hourlong freeze that locked out some users, forcing them to watch helplessly as their leveraged bets were forced into liquidation. Such episodes, while they still occur, were once strikingly common, even for big exchanges like Coinbase and Binance.

The 29-year-old crypto billionaire told Bloomberg that many in crypto fret about leverage in the system when prices collapse and levered positions are forced into liquidation. But fewer people are also willing to acknowledge the role leverage has in crypto’s boom times when prices climb.

“I think often people want to live in a fantasy land where leverage can make markets go up but not down. That’s not really how it works. For better or for worse, I strongly believe that the crypto ecosystem is in a stronger, healthier position today because of leverage,” compared to a world with no leverage, he said.

Bankman-Fried, whose exchange recently slashed the maximum leverage it offers from 100x to 20x, explained the move as trimming some of crypto’s excesses, noting that few FTX users were using 50x or 100x leverage anyway.

“It wasn’t super relevant to us or most of our users or their experience. It’s also not super economically useful, frankly. [Taking on 100x or 50x leverage,] you can’t really use that to hedge something, because you could get liquidated in a print, in like 15 seconds,” he said.

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Russia plans to build a bitcoin tracking tool to monitor crypto wallets linked to crime and terrorism

A view of the Kizelovskaya State District Power Plant at the Gubakhinsky Coke and Chemical Works.
  • Russia plans to build a bitcoin monitoring tool to track crypto wallets possibly linked to criminal activities, CoinDesk reported.
  • The government has selected a contractor to develop the proprietary tool for roughly $200,000.
  • The tool must maintain a database of crypto wallets and monitor the behavior of market participants.
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Russia plans to build a bitcoin monitoring tool to track cryptocurrency wallets possibly linked to criminal activities as well as terrorism financing, CoinDesk first reported Wednesday.

The nation’s financial monitoring service, Rosfinmonitoring, has selected tapped a firm called RCO for a contract to develop the proprietary tool for roughly $200,000, reduced from the initial price of around $270,000.

RCO is owned by one of Russia’s major information technology companies.

Apart from tracking, the tool must maintain a database of cryptocurrency wallets and monitor the behavior of market participants, CoinDesk reported, citing the auction page.

Aas early as 2018, Russia had been looking into cryptocurrency tracking, according to CoinDesk.

Meanwhile, the UK, is considering banning anonymous cryptocurrency transactions for the same reasons – to tighten its crackdown on money laundering and terrorism financing.

Cryptocurrencies have been at the center of recent high-profile cyberattacks, demanded as ransom by criminals because transactions are either anonymous or very difficult to trace.

In the US, the Biden administration is said to be ramping up efforts to trace cryptocurrencies used in cyberattacks and is planning to offer bounties of up to $10 million for information that will help catch criminals.

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Robinhood’s 126% post-IPO rally puts its founders within reach of a $1.4 billion stock payout

Robinhood co-founders  Baiju Bhatt (left) and Vlad Tenev.
Robinhood co-founders Baiju Bhatt (left) and Vlad Tenev.

  • Robinhood’s post IPO rally of as much as 126% put its founders within reach of a $1.4 billion payout.
  • Co-founders Vlad Tenev and Baiju Bhatt stand to receive 13.8 million shares if Robinhood’s stock price closes above $101.50 by 2025.
  • Shares of Robinhood hit an intra-day high of $85 on Wednesday, just 19% below the award price.
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A wild post-IPO rally in shares of Robinhood this week put its co-founders within reach of a $1.4 billion stock payout, according to the company’s S-1 filing.

Vlad Tenev and Baiju Bhatt stand to each receive 13.8 million shares if Robinhood’s stock price closes above $101.50 by 2025 for an extended period of time. Shares of Robinhood hit an intra-day high of $85 on Wednesday, just 19% below the price needed for Tenev and Bhatt to unlock their stock award.

The $101.50 price hurdle is based on the average of the daily volume weighted average of Robinhood’s stock price for each day over a consecutive 60-day trading period.

Robinhood stumbled in its IPO debut last week, with shares falling as much as 12%, but the stock has since staged an impressive rebound and recovered all of its losses and then some. The online trading app staged a two-day rally of as much as 126% on Tuesday and Wednesday.

The 13.8 million restrictive stock units were granted to both founders in 2013, but the award terms were revised in May to extend the deadline of the award to 2025. Under the original plan, Tenev and Bhatt would have only received 20% of the stock award if at the time of IPO shares were priced between $30.45 and $50.75, according to the filing.

The company priced its IPO at $38 per share, meaning Tenev and Bhatt would have only received 20% of their stock award if the terms weren’t revised.

Tenev and Bhatt also stand to receive millions of more Robinhood shares if their stock price eventually trades up to $300 per share by the end of this decade. The co-founders were granted an additional RSU equity award, 22 million shares for Tenev and 13 million shares of Bhatt, if the stock price hit a number of price hurdles, starting at $120 and moving up in increments of $30 until topping out at $300.

All in all, if successful, the equity awards for Tenev and Bhatt could be worth up to $10.8 billion and $8.1 billion, respectively, assuming both co-founders don’t sell a single share of their accumulated equity awards after the last tranche is granted at the $300 per share level.

Read more: Top 12 meme stocks this week on Reddit: AMD and Tesla steal the show after blowout earnings reports while Square shakes up the fintech space with a bold acquisition

“The 2021 Market-Based RSUs are designed to incentivize the Co-Founders toward further growing our share price over and above the price hurdles applicable to the 2019 Market-Based RSUs,” Robinhood said in the filing.

In April, Robinhood reduced the annual salary of Tenev and Bhatt to $34,248, which is the 2019 median wage of US workers. Both were previously paid a base salary of $400,000.

Tenev and Bhatt founded Robinhood in 2013. The company has seen its business explode as millions of Americans began investing in the stock market amid the COVID-19 pandemic and government stimulus checks. Epic rallies in dogecoin and meme-stocks like GameStop and AMC Entertainment have also boosted its business in recent months.

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SEC chief Gary Gensler says many crypto tokens are securities and fall under the agency’s jurisdiction

WASHINGTON, DC - JULY 30: Commodity Futures Trading Commission Chairman Gary Gensler testifies before the Senate Banking, Housing and Urban Affairs Committee in the Dirksen Senate Office Building on Capitol Hill July 30, 2013 in Washington, DC. Gensler and Securities and Exchange Commission Chairman Mary Jo White testified and took questions from Senators during the hearing titled, "Mitigating Systemic Risk in Financial Markets through Wall Street Reforms." (Photo by Chip Somodevilla/Getty Images)
Gary Gensler is working on Biden’s financial regulatory plans.

  • SEC Chair Gary Gensler told CNBC Wednesday that many crypto assets are considered securities.
  • “If somebody is raising money selling a token and the buyer is anticipating profits based on the efforts of that group to sponsor the seller, that fits into something that’s a security,” said Gensler.
  • His comments add to a discussion over what kinds of digital assets are considered securities.
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SEC Chair Gary Gensler told CNBC Wednesday that many crypto assets are considered securities, a definition that would place hundreds of coins within the $1.6 million cryptocurrency market under the agency’s jurisdiction.

“If somebody is raising money selling a token and the buyer is anticipating profits based on the efforts of that group to sponsor the seller, that fits into something that’s a security,” said Gensler. “I’m not going to go token by token, you can imagine why I wouldn’t do that. But my predecessor, Jay Clayton…said it best about three years ago that he really hadn’t seen many tokens that didn’t meet that securities test.”

There has been much discussion over the years about which kind of digital assets are considered securities and would therefore fall under the SEC’s purview. Bitcoin, for example, is considered a commodity under the Commodity Exchange Act. But there are thousands of other coins in the ecosystem, and Gensler said many of them should be considered securities for the purposes of regulatory oversight.

The issue is at the heart of the SEC’s lawsuit against Ripple. Ripple claims its XRP token is a commodity and out of the regulator’s reach, while the SEC says Ripple ran an unregistered securities offering. Gensler declined to comment on Ripple when asked by CNBC’s Andrew Ross Sorkin about the status of the company.

Gensler was formerly the chairman of the Commodity Futures Trading Commission, and he said it’s critical both government agencies work together to deal with crypto platforms that trade both securities and commodities.

The SEC chief also encouraged crypto trading platforms to have a “frank discussion” with the securities regulator. He noted that many have avoided confronting the SEC so far.

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GM plunges 8% as $1.3 billion in recall costs lead to 2nd-quarter earnings miss

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Work being done at GM’s plant in Arlington, Texas.

  • GM shares sank 8% on Wednesday following a second-quarter earnings miss by the automaker.
  • GM had $1.3 billion in warranty and recall costs, part of which stemmed from Chevy Bolt recalls to address fire risk.
  • GM raised its 2021 adjusted earnings projection to a range of $5.40-$6.40 a share.
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General Motors stock tumbled Wednesday, trading among the worst price performers on the S&P 500, after the auto maker’s second-quarter earnings fell short of expectations even as the company raised its full-year outlook.

The company’s earnings report released early Wednesday included $1.3 billion in warranty and recall expenses, with $800 million related to recalls of thousands of Chevy Bolt electric vehicles to address fire risk. GM posted adjusted earnings of $1.97 a share, less than the $2.23 a share expected in a Refinitiv poll of analysts.

GM shares dropped 8.4% to $53.01, the lowest price since early March. The stock this year had gained about 27% and has more than doubled since the year-earlier period.

Revenue of $34.17 billion was higher than the estimated $30.9 billion and more than doubled from $16.78 billion a year ago.

The company raised its 2021 guidance based on its performance during the first half of the year, during which it said it gained significant retail market share in the full-size pickup segment in the US. It also said high prices for used vehicle prices because of low inventories of new vehicles drove continued record results at GM Financial, its auto financing arm.

GM now expects 2021 adjusted earnings of $5.40 to $6.40 a share, up from its previous outlook of $4.50 to $5.25 a share.

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JPMorgan’s Jamie Dimon says he disagrees with the Fed on inflation being transitory – and once unemployment hits 4.5%, the central bank will start tapering

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  • JPMorgan CEO Jamie Dimon said he doesn’t see current high US inflation as temporary, speaking to Fox Business on Wednesday.
  • The bank chief also believes the Federal Reserve will start tapering will begin once unemployment reaches 4.5%.
  • Dimon’s comments put him at odds with the Fed, which reiterated its view on inflation last week.
  • Dimon also believes that tapering will begin once unemployment reaches 4.5%.
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JPMorgan CEO Jamie Dimon said that unlike the Federal Reserve, he doesn’t believe the current higher-than-usual US inflation rate is transitory, speaking in a Fox Business interview Wednesday.

He said the central bank will start tapering once it sees the “white of the eyes” – when the unemployment rate hits 4.5%, wages go up, and there are more than enough jobs.

The Wall Street bank chief sees rising inflation as almost inevitable, given the current fiscal environment in the US, he said on “Mornings with Maria”. Lawmakers passed a $19 trillion COVID relief bill in March, covering direct payments to individuals among other stimulus measures.

“You still have a lot of stimulus that hasn’t been spent, and a lot more stimulus coming. You know, having fiscal deficit that big is unprecedented, and that by itself almost has to be inflationary,” Dimon said.

“I think there’s a portion that’s just temporary, and a portion that’s probably not.”

The comments set Dimon at odds with the Fed, which has pushed the narrative that inflation is only transitory and will stop rising sooner rather than later.

In recent months, the rate at which prices climb has been going up at a historically fast rate. Annual headline inflation stood at 5.4% for June, with consumer prices up 0.9% between May and June.

Inflation has been a concern for investors in assessing the strength of the US economy’s recovery from the COVID-linked slowdown. Fed policymakers may decide to raise interest rates if they believe inflation is too high.

The US central bank’s chairman, Jerome Powell, last week reiterated its stance on inflation and said the US economy still had a way to go before the Fed would hike rates or begin pulling back on its pandemic-era support.

Dimon said he believes the economy will need to make further progress, especially on employment and wages, before the Fed begins tapering. He argued the central bank will not base its decisions on forecasts as it usually does.

“They’re going to wait until they see the actual white of the eyes. I think they haven’t been this explicit. I think the white of the eyes is 4.5% unemployment, wages going up, jobs plentiful, and they are less concerned about inflation, they want to see growth,” Dimon said.

The US unemployment rate was 5.9% in June, according to the Bureau of Labor Statistics. compared with 3.5% in February 2020, before the COVID-19 outbreak.

In Dimon’s view, growth will continue, given that credit and debit card spending is topping pre-pandemic levels, there are enough jobs, and wages are rising. As schools reopen in the fall, unemployment levels will decline, he said.

At the same time, he expects interest rates to rise as central banks reduce their bond buying.

“One outcome is that rates go up. I think they belong much more at 3%, 3.5% and 2% on the short end, and then we still have healthy growth going for a couple of years,” he said, adding that the other, more negative, outcome is an uptick in inflation.

“But in the meantime, celebrate the growth, and you know, we’ll deal with the next problem when we get there,” he said.

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Robinhood extends 2-day gain to 126% as it becomes the most talked-about stock on Reddit’s Wall Street Bets forum

Reddit Wall Street Bets Retail Trading GameStop
  • Shares of Robinhood soared as much as 82% on Wednesday, extending its two-day gain to 126%.
  • The move higher comes as Robinhood takes the spot as the most mentioned stock on Reddit’s Wall Street Bets forum.
  • Robinhood went public at $38 per share last week, and hit a high of $85 on Wednesday.
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Shares of Robinhood surged as much as 82% in Wednesday trades, extending its two-day gain to 126%.

The move higher in Robinhood came after the online trading app stumbled in its post-IPO trades last week, with the stock falling as much as 12% on its first day of trading. Robinhood priced its IPO at $38 per share on Thursday. The stock hit a high of $85 on Wednesday amid numerous trading halts for volatility.

The move higher in Robinhood comes as retail investors talk more about the stock on Reddit’s Wall Street Bets forum. According to data from SwaggyStocks, Robinhood was by far the most mentioned stock on the forum over the past 24 hours, with more than 1,700 mentions. The next most talked about stock was AMD with only 388 mentions on the forum.

A majority of Robinhood’s mentions on the Wall Street Bets forum were positive, according to SwaggyStocks. “Unpopular opinion: Robinhood still has the best mobile interface,” one Reddit user said.

Others were less positive on Robinhood, with one user speculating that the stock “will eventually tank” if payment for order flow is banned by the SEC. Robinhood derives a bulk of its revenue from PFOF practices.

But some investors are not concerned about Robinhood’s source of revenues, including Cathie Wood’s ARK Invest, which has built a more than $250 million stake in the online trading app across three of its ETFs.

Read more: Top 12 meme stocks this week on Reddit: AMD and Tesla steal the show after blowout earnings reports while Square shakes up the fintech space with a bold acquisition

Robinhood stock chart
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Lumber prices look cheap after 65% plunge given Americans still want new houses, says Aberdeen Standard strategist

Housing market
US house prices have soared in 2021, increasing demand for lumber.

  • Lumber prices currently look cheap, following a 65% plunge, Aberdeen Standard’s Robert Minter said.
  • The investment strategist said prices should be supported, given that Americans still want to move home.
  • However, there are some signs that the US housing market is cooling, with family home sales falling in June.
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Lumber prices currently look cheap following their 65% drop from May’s all-time high, given that Americans still want to buy new houses, according to Aberdeen Standard Investments strategist Robert Minter.

Prices for lumber futures soared in the early part of the year to a record high of above $1,700 per thousand board feet amid strong demand for new houses and a home-improvement craze. But they have since tumbled round 65%, as suppliers have ramped up output and demand has cooled.

However, Minter, who is a director of investment strategy at Aberdeen, told Insider earlier this week that lumber currently “looks a little cheap.” He said the COVID-19 story is far from over, and many Americans are still keen to move houses if their companies allow them to keep working from home.

“People are moving from where they had to live to work to where they want to live,” he said. “All the people that want to move out of the city center and the near suburbs to someplace cheaper, those people have not all moved.”

Read more: Hakan Kaya’s fund is one of the top performers in the world in the last year. He told us 4 commodities he’s still betting on for the best long-term returns, and why he doesn’t bother investing in stocks.

Minter pointed to the fact that some housing companies have simply stopped taking orders as construction costs climb and labor shortages hit. He said this means that there is “demand yet to show up in the market.”

The US housing market remains red-hot. The closely watched S&P Case-Shiller house price index rose a record 16.6% year-on-year in May, up from 14.8% in April. New housing starts rose 6.3% month-on-month in June to an annualized rate of 1.64 million, according to the US Census Bureau.

Lumber prices have picked up slightly over the last two weeks, with the futures contract rising from below $540 per thousand board feet in the middle of July to above $600 in August.

However, there are signs that the housing boom is slowing, with sales of new single family homes falling 6.6% month-on-month in June, according to the Census Bureau. Applications to build also fell in June, hinting at a slower pace of construction in the coming months.

Some analysts expect lumber to keep falling until it gets back to pre-pandemic levels, as supply and demand balance out. “If it is mean reversion, you can’t stop at these levels,” fund manager Michael Gayed of Toroso Investments told Insider in July.

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Retail purchases of Moderna and Pfizer stock hit an 8-month high as Delta infections accelerate

Moderna vaccine
A person in Boston receives the Moderna COVID-19 vaccine.

  • Retail investors have bought the highest amounts of stock in Moderna and Pfizer in 8 months, Vanda Research said Wednesday.
  • Individuals have purchased a combined $180 million in shares as COVID-19 vaccine cases continue to rise.
  • Moderna’s stock has jumped in value since mid-July with its inclusion into the S&P 500 index.
  • See more stories on Insider’s business page.

Individual investors have bought more stock in Moderna and Pfizer in recent sessions than they have since late last year, spurred in part by the increasing spread of the Delta strain of coronavirus, figures released by Vanda Research on Wednesday showed.

Combined net inflows into the stocks reached $180 million over the last 10 days, the largest amount since each company unveiled positive COVID-19 vaccine trial results in November, led by Pfizer’s announcement on November 9.

Moderna shares have jumped by 20% through Tuesday from July 21, when the biotech firm joined the benchmark S&P 500 index in acknowledgment of the stock’s growth since its vaccine announcement. Meanwhile, Pfizer shares since last week have climbed by more than 9%, trading around all-time highs above $45, after the company increased its 2021 guidance for COVID vaccine sales.

“The rise in global cases of the delta variant, the imminent FDA approval and the rise in vaccine prices have all coalesced to turbocharge the rally,” said Vanda.

The Financial Times this week reported that Pfizer and Moderna have raised the prices of their COVID vaccines in their latest supply contracts with the European Union. Higher prices would come at a time of increasing coronavirus infections worldwide led by the highly transmissible Delta variant. Delta is the dominant strain in the US and the country is reporting more than 75,000 COVID cases a day, higher than a low point of roughly 11,000 cases a day six weeks ago, according to the Washington Post.

Meanwhile, the Food and Drug Administration has accelerated its timetable to fully approve the coronavirus vaccine from Pfizer and its partner, BioNTech, with the aim of finishing the process by the start of next month, The New York Times reported Tuesday. Moderna, whose vaccine is the second most widely used in the US, is still submitting data following its June filing for final approval, the report said.

Stock in Moderna and Pfizer were standouts during a summer lull in US equity purchases by retail investors which have dropped to their lowest level since May, said Vanda.

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