WASHINGTON—Robinhood Financial LLC has agreed to pay nearly $70 million to resolve sweeping regulatory allegations that the brokerage misled customers, approved ineligible traders for risky strategies and didn’t supervise technology that failed and locked millions out of trading.
The enforcement action is a blow to the fast-growing online brokerage, which was launched in 2014 and has won over users with commission-free trades and its sleek mobile app. The company took on millions of new customers and attracted more scrutiny this year as many investors accessed Robinhood to speculate on so-called meme stocks such as GameStop Corp. and AMC Entertainment Holdings Inc. Its forthcoming initial public offering is one of the most anticipated of the year.
Robinhood’s growth has continued, with its biggest source of revenue, stemming from customer trading, more than tripling in the first quarter, even as many customers complained about its technology snafus and limited customer service. It enraged clients earlier this year when it restricted trading in some popular stocks that had become so volatile that Robinhood’s clearinghouse told the brokerage to post billions of dollars in additional collateral.
The Financial Industry Regulatory Authority, the front-line inspector of broker-dealers, unveiled the settlement Wednesday. Robinhood neither admitted nor denied the claims.
Hilton Worldwide Holdings Inc. Chief Executive Chris Nassetta worked from home in Arlington, Va., with his wife, six daughters and two dogs for two weeks before returning to the hotel chain’s nearly empty headquarters for the rest of the past year. Sharmistha Dubey has been leading Match Group Inc. from her dining room table near Dallas. Herman Miller ’s Andi Owen has her dog Finn to keep her company while working from her home office in Grand Rapids, Mich. Moderna Inc. CEO Stéphane Bancel relishes twice-daily 30-minute walks between his home in Boston and the vaccine maker’s Cambridge offices, where he resumed working in August, so he can crystallize his priorities and reflect on the day. The Wall Street Journal photographed them and 11 other business leaders in their pandemic office spaces as they discussed the past year and what’s to come.
More than a year after the coronavirus upended the way we work, the business leaders said they have found that more communication, flexibility and transparency have been crucial in staying connected to their employees.
Heads of companies across sectors including finance, hospitality and technology spoke from their current workspaces about what they’ve learned from the largely remote year, what challenges they faced and what changes they plan to leave in place during the next phase of work.
Brad Karp, chairman of the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, predicted his schedule will remain less hectic after the pandemic is over: “Personally, I can’t see myself reflexively flying cross-country for an hour-long presentation or meeting.”
Big U.S. companies are discovering that “hybrid” work comes with plenty of complications.
As employers firm up plans to bring white-collar workers back into offices while still allowing them to do some work at home, many are encountering obstacles. Companies are grappling with what new schedules employees should follow, where people should sit in redesigned offices and how best to prevent employees at home from feeling left out of impromptu office discussions or being passed over for opportunities, say chief executives, board directors and others.
The insurer
Prudential Financial Inc.,
PRU -0.08%
which expects most of its roughly 42,000 employees to work in the office half the time starting after Labor Day, wants to make certain not all staffers choose to stay home Mondays and Fridays and then work in the office midweek. At the travel company
Expedia Group Inc.,
EXPE -2.41%
executives are trying to figure out how to have in-person meetings that don’t disadvantage those who aren’t in the room. Other employers, including the software company
Twilio Inc.,
predict that the new era of work could lead to shuffling between teams, with staffers gravitating to bosses who embrace their preferred styles of working.
Hybrid work “is going to redefine expectations, rules, permissions,” says Kevin McCarty, chief executive officer of the Chicago-based consulting firm West Monroe, which employs 1,360 people, and is rethinking when its employees should work at home or come into its offices.
The new style of work is bound to be another transition for workers who a year ago had to adjust to life at home. Though executives say it would be easier to manage if every employee returned to an office, or all stayed remote, surveys have repeatedly shown that most workers want a mixed approach as more adults are vaccinated. In a February survey of 1,000 companies commissioned by LaSalle Network, a national staffing and recruiting firm, the majority of companies said they would adopt a hybrid model.
Companies have also polled their organizations to find out how employees feel. At
Prudential,
PRU -0.08%
most employees indicated that they enjoyed working remotely but missed the planning, ideation and collaboration that takes place in person, says
Rob Falzon,
vice chair of the company.
Prudential has been redesigning its office space floor by floor and repurposing most of it for meeting rooms, collaboration and open space so people will be more likely to interact. Mr. Falzon says he insisted on adding video capacity in more small meeting spaces, not just conference rooms, so people working from home won’t feel excluded.
Like many employers, the company is reducing its physical footprint so there won’t be available desks for people who want to go to the office more frequently, with exceptions for some employees including traders. “We don’t have a desk for you every day,” Mr. Falzon says. “We have a desk for you three days a week.”
Hybrid models range by company. The technology company
Adobe Inc.
plans to allow employees to work from home up to two to three days a week, with staffers able to make reservations for office desks, says
Gloria Chen,
the company’s chief people officer. Other companies are hesitant to put out a specific number on days allowed at home. Factors including the length of a commute, type of job and an employee’s seniority could determine how often an employee needs to visit an office, executives say.
“We won’t prescribe” from a company level, says
David Henshall,
CEO at the technology company
Citrix Systems Inc.
“Based on the type of role you have, you’ll find that right balance.”
Prominent tech companies are embracing remote work in the midst of an exodus of skilled labor from Silicon Valley. WSJ looks at what that could mean for innovation and productivity and what companies are doing to manage the impact.
With flexibility can come challenges. If a team comes together in-person, but not all can make it, that potentially creates a subpar experience for those not in the room, says Expedia CEO
Peter Kern.
The travel company opened the first phases of an expansive campus—complete with Wi-Fi-equipped rocks —on the shores of Seattle’s Elliott Bay before the pandemic, and plans to initially permit spaced group team meetings at its headquarters.
Mr. Kern, though, says he has questions about whether those on Zoom will get the same level of learning, encouragement and career growth as those in the room. Then there are the scheduling issues.
Managers may need to “set up group meetings according to some crazy algorithm of: Who’s available when? Who’s got a flexible day, when?” Mr. Kern says. “There’s a lot of friction in all of that. It’s a lot easier to say, ‘Everybody go to work.’ Now someone calls a meeting, and you’re all there.”
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A new way of working will require the company to think differently about performance, Mr. Kern says. Managers must be careful not to have biased judgments against those who may spend less time in the office, requiring the company to be “really thoughtful about how we assess people and give people opportunity so that we don’t end up with skewed outcomes.”
Training and onboarding might be more challenging in a hybrid environment, especially if new employees have a harder time grasping the company’s culture without regular, in-person interaction with colleagues, says Tom Gimbel, CEO of LaSalle Network. With younger employees, “for them to learn anything, they need to be around the more experienced people,” he says.
Other companies have said they would allow for remote work in limited circumstances. In a memo, executives at the
New York Times Co.
said the company planned to reopen its main offices in September and didn’t intend to become fully remote. The company would “approve remote work only in places where the team and nature of the work can accommodate it.”
Some human-resources professionals say companies will have little choice but to accommodate workers’ demands, as an inflexible workplace could drive employees away as the economy rebounds, and because many workers have proven themselves adept at working anywhere.
“The employer before just could say, ‘Our culture is this,’” says
Tara Wolckenhauer,
a human-resources executive at the payroll processor
Automatic Data Processing Inc.
“Employers have to take a step back and think about it very differently.”
—Krithika Varagur contributed to this article.
Write to Emily Glazer at emily.glazer@wsj.com and Chip Cutter at chip.cutter@wsj.com
LONDON—The world’s airlines are betting on vaccinations to restart international travel.
Two of Europe’s biggest airlines, British Airways and budget carrier Ryanair Holdings PLC, have started allowing fliers to provide Covid-19 vaccination and test-result details alongside personal data, like passport numbers and visa information, during bookings. The airlines say the move will eventually help passengers show they have been inoculated when landing at destinations that have started to welcome vaccinated travelers.
Across the U.S., domestic travel is picking up amid stabilizing or falling Covid-19 cases and a relatively quick vaccination drive. That rebound isn’t yet happening with international traffic, where a patchwork of travel bans, quarantine rules and testing requirements have stymied cross-border flights.
U.S. domestic carriers have increased scheduled capacity by more than 50% between September and March, according to aviation analytics firm Cirium. Global capacity across all international routes, meanwhile, has increased just a little over 7%.
British Airways, Ryanair and other airlines dependent on international travel are hoping to boost ticket sales by capitalizing on nascent optimism over vaccinations. Their move isn’t quite the sort of vaccination passport that some governments and international agencies are exploring to help unlock pandemic-stricken economies. Countries have considered documents that would allow vaccinated residents to visit bars and restaurants, or go to the office or a sporting event.
The Utah Jazz have been winning a lot this season, but not as much as their new owner.
Just look back at three days in late January. The Jazz — which Ryan Smith bought for $1.66 billion late last year — beat the Dallas Mavericks for their 10th win in a row on Jan. 27, the same evening that Qualtrics International Inc.
XM,
+2.83%,
the software company Smith co-founded with his father Scott and brother Jared in 2002, set the price for its $1.55 billion IPO. The next day, Qualtrics shares would soar 52% in their trading debut, giving the software company a market valuation of $27.3 billion; a day later, the Jazz would win their 11th straight, putting them solidly at the top of the NBA standings.
So it’s good to be Ryan Smith. At the NBA All-Star break, the Jazz have a league-best record of 27-9. At the same time, Qualtrics is a major mover in a market estimated to be worth $60 billion, and topped Wall Street estimates for earnings and sales in its first quarterly results as a publicly traded company Tuesday.
The combination of a successful basketball team and another large, publicly traded tech company are helping to secure an even loftier goal for Smith: Making the Utah region known for something more than majestic mountains and the Church of Jesus Christ of Latter-day Saints.
“His goals and objectives have never been anything but over the top,” Todd Pedersen, CEO of Vivint Smart Home Inc.
VVNT,
+0.40%,
told MarketWatch.
Qualtrics got its start in the Smith’s basement, which is near Pedersen’s home. And it’s not just Smith and Pedersen who are neighbors — their companies are right next to one another as well. And they can now watch the NBA team that Smith owns play at an arena that bears the name of Pedersen’s company, as they recently did for a nationally-televised Jazz game against the defending champion Los Angeles Lakers.
The Jazz won.
Handling double duties
Smith sits in a position occupied by few in the history of corporate America: head of a publicly traded company, and owner of an unrelated sports franchise. There is no such owner in the National Football League, Major League Baseball nor the National Hockey League, though Wayne Huizenga once owned franchises in all three while leading Blockbuster Video.
The NBA seems more willing to welcome public-company executives to its ranks, even while denying bids from Oracle Corp.’s
ORCL,
-0.10%
co-founder Larry Ellison. Another recent majority owner is Alibaba Group Holding Ltd.’s
BABA,
-1.34%
co-founder and Executive Vice Chairman Joseph Tsai, who snapped up the Brooklyn Nets for a record $2.35 billion in 2020. The reclusive Robert Pera, CEO of Ubiquiti Inc.
UI,
-0.68%,
is also owner of the Memphis Grizzlies.
Vivek Ranidive was still chief executive of Tibco Software Inc. when he led a group that bought the Sacramento Kings in 2013, and Miami Heat owner Micky Arison led Carnival Cruise Inc. for more than a decade while leading his franchise. In Pera’s first attempt to buy into the NBA, a bid for the Philadelphia 76ers, he was topped by a group that included AMC Entertainment Holdings Inc.
AMC,
+1.92%
CEO Adam Aron, who also served as CEO of the Sixers for the first two years the group owned the team.
Read more: 5 things to know as Qualtrics prepares for its IPO this week
Smith has adroitly navigated the corporate and professional sports worlds by delegating day-to-day operations at each organization.
“As executive chairman, my job during the day is running Qualtrics with [Chief Executive] Zig [Serafin]. My job with the Jazz is at night, and I leave it to the coaches, players, and executives in charge of the team,” Smith told MarketWatch. “The product is proof of their abilities.”
At Qualtrics, CEO Zig Serafin and Smith are self-described “co-builders” of a company that has grown in the four-and-a-half years since Serafin joined as chief operating officer. (Serafin, who was named CEO nine months ago, says he and Smith are “joined at the hip” in their vision.) During that time, Qualtrics has expanded employees (from 1,100 to 3,500), customers (3,000-4,000 to 13,500), and revenue (from less than $200 million annually to $763.5 million last year, the company reported Tuesday).
As the NBA’s newest owner, “One of Ryan’s leadership styles is to delegate. He lets people think big, but by doing so through smart decisions,” Jim Olson, president of the Utah Jazz, told MarketWatch.
To that end, the Jazz use Qualtrics’ data analytics technology to improve team performance on the court and off, down to traveling, sleep, and diet for players and coaching staff.
The rise of Silicon Slopes
Illustrated by Terrence Horan
Such partnerships have fueled not just the success of the Jazz and Qualtrics but the larger Salt Lake City-Provo-Orem area.
“The Jazz and Sundance [Film Festival] are the two most identifiable brands in this state, and Ryan is smartly leveraging the Jazz for global reach,” says Domo Inc.
DOMO,
+1.20%
CEO Josh James, who coined the term “Silicon Slopes” for the region and started the non-profit organization of the same name. “Ryan Smith used to be just another successful tech founder,” he said. “Now he is universally known as Ryan Smith, owner of the Jazz. This is a much larger megaphone and platform for the community.”
For example, the Jazz use Qualtrics software to collect and analyze fan data to improve their experience at home games on everything from concessions and apparel to parking and in-game entertainment. The two organizations have also teamed on 5 For The Fight, a nonprofit that invites everyone to give $5 for the fight against cancer. It is the Jazz’s official jersey patch, a rarity in the corporate-skewed NBA.
The winning ways of Smith and Qualtrics, amid a wave of freshly minted unicorns in the Salt Lake City region, underscores the rise of Silicon Slopes as one of a handful of regions in the U.S. to successfully mold itself after Silicon Valley. From the days of computer-networking pioneer Novell Inc. and word-processing maker WordPerfect Corp. in the 1980s, Utah has stood out as a tech outpost, albeit in the shadow of Silicon Valley and Seattle, but its recent string of triumphs has considerably raised its profile.
Indeed, the Provo-Orem area was deemed the best regional economy in America, according to rankings released in February by the Milken Institute.
Even COVID-19 hasn’t dampened the state’s can-do mindset.
Utah has among the most-open vaccination criteria in the nation. Starting in early March, anyone 50 and over is eligible for a jab—as well as those 16 and older with pre-existing conditions. By emphasizing “speed over perfection,” Nomi Health Inc. CEO Mark Newman says, the state has been able to send kids back to school since September, reduce the unemployment rate of 3% to a pre-pandemic level, and attain a budget surplus.
“The states that figure it out will have a long-tale of success over those states that don’t,” said Newman, whose direct healthcare company is partnering with the state of Utah and Qualtrics in bringing mass testing sites and vaccinations.
“Utah as a state has a get-it-done attitude,” says Newman, who moved to the state in 1993. “That goes back to Utah’s pioneer roots.”
James says Utah’s tech history can be divided into three phases: The first in the late 1980s and early ‘90s led by Novell and WordPerfect; a second in the late 1990s and 2000s, with internet plays Overstock Inc.
OSTK,
-2.18%,
Omniture (acquired by Adobe Systems Inc.
ADBE,
+0.69%
), Altris Corp. (bought by then-Symantec Corp.), Iomega (acquired by then-EMC Corp.), and dozens of companies that were sold for millions each; and the current one of big independent enterprise companies like Qualtrics and Domo, and consumer plays like Vivint.
“A giant crop of companies are coming behind us,” James said, mentioning such unicorns as MX Technologies Inc., Lucid Software Inc. and DivvyPay Inc. “This feels like Silicon Valley in the ‘90s. It’s a really exciting time.”
“Silicon Slopes is doing great, building off the great history of [tech pioneers] Novell and WordPerfect in the state,” Steve Case, the co-founder of AOL who now leads venture-capital firm Revolution, told MarketWatch. The latest iteration, he added, is the byproduct of the region’s focus on enterprise technology and “strong collaboration in building a community.”
Overstock CEO Jonathan Johnson credits Utah’s “rich entrepreneurial spirit” to a “business-friendly environment where constant innovation, great employment opportunities, and real technological advancement are present.”
“Utah is a mixing bowl of cultures,” says Serafin, whose previous stop was 17 years in Redmond, Wash., all of them at Microsoft Corp.
MSFT,
-0.10%.
“Utah is close to the coast, and San Francisco and Los Angeles. It’s not much different than Silicon Valley folks who moved to Nevada.”
An ‘interesting journey’
In a state increasingly bustling with unicorns, none arguably have been hotter than Qualtrics, which went public in late January.
The company’s XM tracker stands for experience management, a software category that Qualtrics coined. Qualtrics, whose software lets businesses gauge how customers use their products so those products can be improved, has about 13,000 customers from about 9,000 two years ago. The company’s sales jumped 30% in the first three quarters of 2020 to $550 million, from $413.4 million a year earlier.
Smith’s “rare and unique ability to spot markets before they exist” gave him an vision of the experience economy that has helped evolve the way enterprises think about culture, brand, products, and people,” says ServiceNow Inc.
NOW,
-1.32%
CEO Bill McDermott, who was previously CEO of SAP
SAP,
-0.10%
when it owned Qualtrics.
Read more: 5 things to know as Qualtrics prepares for its IPO this week
Smith co-founded Qualtrics with his father and brother in 2002. On the cusp of going public in 2018, Qualtrics was acquired by SAP for $8 billion, making it the largest private enterprise-software acquisition in tech history when the deal closed in early 2019.
“It’s been an interesting journey,” Smith says. “For one-and-a-half to two years with SAP, they took our name everywhere while keeping our company independent and keeping the management team together, which is rare. It retained our culture, with an option to IPO.”
“To be in this spot as a public company, so many things had to go right,” Smith said. “It’s freakin’ incredible.”
The outlook for a rebound in travel this year has dimmed after the global pandemic ravaged the industry and hurt tourism-dependent economies, with travelers postponing plans amid vaccine delays and border restrictions.
Tourist destinations from Thailand to Iceland had been hoping Covid-19 vaccines would allow countries to reopen their borders and drive a much-needed recovery in 2021. Now, with vaccine rollouts delayed in some places and new virus strains appearing, it is looking more likely that international travel could be stalled for years.
After declaring that 2020 was the worst year for tourism on record, with one billion fewer international arrivals, the United Nations World Tourism Organization says prospects for a 2021 rebound have worsened. In October, 79% of experts polled by the agency believed a 2021 rebound was possible. Only 50% said they believed that in January, and some 41% didn’t think travel would reach pre-pandemic levels until 2024 or beyond.
James Sowane, who owns a transportation company catering to tourists in Fiji, called a staff meeting earlier this month and told employees to start looking for other jobs. He recently took advantage of a government-assistance program and had brought back some laid-off workers, optimistic that vaccines could spark a travel rebound as early as April.
But now Mr. Sowane doesn’t think tourists will return until next year, and he and his wife can’t afford to keep paying wages at their company, Pacific Destinations Fiji. He is borrowing from his bank to keep a few core employees.
When America’s amusement parks and baseball stadiums no longer must serve as COVID-19 mass vaccination sites, some investors believe that households pocketing pandemic financial aid from the government might start to splurge.
While a consumer splurge could initially boost the parts of the economy devastated by the pandemic, a bigger concern for investors is that a sustained spending spree also could cause prices for goods and services to rise dramatically, dent financial asset values, and ultimately raise the cost of living for everyone.
“I don’t think inflation is dead,” said Matt Stucky, equity portfolio manager at Northwestern Mutual Wealth Management Company. “The desire by key policy makers is to have it, and it’s the strongest it’s ever been. You will see rising inflation.”
Wall Street investors and analysts have become fixated in recent weeks on the potential for the Biden Administration’s planned $1.9 trillion fiscal stimulus package that targets relief to hard-hit households to cause inflation to spiral out of control.
Economists at Oxford Economics said on Friday they expect to see the “longest inflation stretch above 2% since before the financial crisis, but it’s unlikely to sustainably breach 3%.”
Severe inflation can hurt businesses by ratcheting up costs, pinching profits and causing stock prices to fall. The value of savings and bonds also can be chipped away by high inflation over time.
Another worry among investors is that runaway inflation, which took hold in the late 1970s and pushed 30-year mortgage rates to near 18%, could force the Federal Reserve to taper its $120 billion per month bond purchase program or to raise its benchmark interest rate above the current 0% to 0.25% target sooner than expected and spook markets.
At the same time, it’s not far-fetched to argue that some financial assets already have been inflated by the Fed’s pedal-to-the-metal policy of low rates and an easy flow of credit, and might be due for some cooling off.
U.S. stocks, including the Dow Jones Industrial Average
DJIA,
+0.09%,
S&P 500 index
SPX,
+0.47%
and Nasdaq Composite
COMP,
+0.50%
closed on Friday at all-time highs, while debt-laden companies can now borrow in the corporate “junk” bond, or speculative-grade, market at record low rates of about 4%.
Read: Stock market stoked by stimulus hopes — what investors are counting on
In addition to rallying stocks and bonds, home prices in the U.S. also have gone through the roof during the pandemic, despite the U.S. still needing to recoup almost as many jobs from the COVID-19 crisis as during the worst of the global financial crisis in 2008.
This chart shows that jobs lost to the pandemic remain near to levels seen in the aftermath of that last crisis.
Job losses need to be tamed
LPL Research, Bureau of Labor Statistics
Fed Chairman Jerome Powell said Wednesday that he doesn’t expect a “large or sustained” outbreak of inflation, while also stressing that the central bank remains focused on recouping lost jobs during the pandemic, as the U.S. looks to makes serious headway in its vaccination program by late July.
Treasury Secretary Janet Yellen on Friday reiterated a call on Friday that the time for more, big fiscal stimulus is now.
“Broadly, the guide is, does it cost me more to live a year from now than a year prior,” Jeff Klingelhofer, co-head of investments at Thornburg Investment Management, said about inflation in an interview with MarketWatch.
“I think what we need to watch is wage inflation,” he said, adding that higher wages for upper income earners were mostly flat for much of the past decade. Also, many lower-wage households hardest hit by the pandemic have been left out of the past decade’s climb in financial asset prices and home values, he said.
“For the folks who haven’t taken that ride, it feels like a perpetuation of inequality that’s played out for some time,” he said, adding that the “only way to get broad inflation is with a broad overheating of the economy. We have the exact opposite. The bottom third are no where near overheating.”
Klingelhofer said it’s probably also a mistake to watch benchmark 10-year Treasury yields for signs that the economy is overheating and for inflation since, “it’s not a proxy for inflation. It’s just a proxy for how the Fed might react,” he said.
The 10-year Treasury yield
TMUBMUSD10Y,
1.209%
has climbed 28.6 basis points in the year to date to 1.199% as of Friday.
But with last year’s sharp price increases, is the U.S. housing market at least at risk of overheating?
“Not at current interest rates,” said John Beacham, the founder and CEO at Toorak Capital, which finances apartment buildings and single family rental properties, including those going through rehabilitation and construction projects.
“Over the course of the year, more people will go back to work,” Beacham said, but he added that it’s important for policy makers in Washington to provide a bridge for households through the pandemic, until spending on socializing, sporting events, concerts and more can again resemble a time before the pandemic.
“Clearly, there likely will be short-term consumption increase,” he said. “But after that it normalizes.”
The U.S. stock and bond markets will be mostly closed on Monday for the Presidents Day holiday.
On Tuesday, the only tidbit of economic data comes from the New York Federal Reserve’s Empire State manufacturing index, followed Wednesday by a slew of updates on U.S. retail sales, industrial production, home builders data and minutes from the Fed’s most recent policy meeting. Thursday and Friday bring more jobs, housing and business activity data, including existing home sales for January.
Shares of AMC Entertainment Holdings Inc. Cl A
AMC,
+53.65%
rocketed 53.65% to $13.26 Friday, on what proved to be an all-around dismal trading session for the stock market, with the NASDAQ Composite Index
COMP,
-2.00%
falling 2.00% to 13,070.69 and Dow Jones Industrial Average
DJIA,
-2.03%
falling 2.03% to 29,982.62. AMC Entertainment Holdings Inc. Cl A closed $7.10 short of its 52-week high ($20.36), which the company achieved on January 27th.
Trading volume (590.8 M) eclipsed its 50-day average volume of 97.8 M.
Editor’s Note: This story was auto-generated by Automated Insights using data from Dow Jones and FactSet. See our market data terms of use.
U.S. stock futures dropped, putting Wall Street on course to extend losses amid investor concerns about a slowing economic rebound and froth in markets, exemplified by the wild trading in retailer
GameStop.
Futures tied to the S&P 500 fell 0.2% after the benchmark stocks gauge posted its biggest two-day decline since October. Contracts for the Nasdaq-100 declined 0.8%, after earnings from several technology giants including
Apple
underwhelmed investors late Wednesday. Futures tied to the Dow Jones Industrial Average, which has fallen for five-consecutive days in its longest losing streak since February, were roughly flat.
The stumble in stocks follows a strong start to the year that some investors say had pushed share prices beyond levels justified by corporate fundamentals. The selloff has taken place amid wild swings in individual stocks including GameStop and
AMC Entertainment,
fueled by a battle between day traders and hedge-fund professionals.
“There is some over-excitement in the market,” said
Olaf van den Heuvel,
chief investment officer for
Aegon
Asset Management in the Netherlands, pointing to the surge in GameStop shares as one example. “It was bubble territory.”
Individual stocks remained volatile ahead of the bell in New York. GameStop shares jumped 28%, having rocketed 135% Wednesday. AMC clawed back earlier losses to climb 6.1%, extending Wednesday’s gains of more than 300%.
The stumble in stocks has taken place amid wild swings in individual shares, including GameStop and AMC Entertainment.
Photo:
Courtney Crow/Associated Press
The slow vaccine rollout and Covid-19 restrictions in major economies have prompted investors to take some money off the table, Mr. van den Heuvel added. He said Aegon would likely view the selloff as a chance to buy risky assets when markets settle down.
Technology stocks dropped ahead of the bell in New York. Shares of Apple fell 2.9% after the iPhone maker reported its most profitable three months on record but didn’t provide specific revenue guidance for the current quarter.
Tesla dropped 6.1% after the electric-vehicle maker—whose shares have soared in recent months—posted its first full-year profit but missed Wall Street’s expectations.
Facebook,
which posted record net income but warned that uncertainty from regulatory probes and ad-targeting limits could create headwinds, fell 0.8% in premarket trading.
In one sign of rising risk aversion, the yield on the benchmark 10-year U.S. Treasury note dropped below 1% for the first time since Jan. 6, before climbing back to 1.008%, according to
Tradeweb.
Bond yields fall as prices rise. Falling yields are often an indicator that investors see the economic outlook weakening.
The dollar strengthened against various currencies including the Australian dollar and the Korean won. The WSJ Dollar Index, which measures the greenback against a basket of other currencies, rose 0.2%.
Comcast,
American Airlines
and
Mastercard
are scheduled to publish results before markets open. Investors will also parse data on jobless claims—due to be published at 8:30 a.m. ET and expected to show that the number of workers seeking benefits declined last week—for fresh clues about how the economy is weathering the pandemic.
The Federal Reserve maintained its easy money policies Wednesday, saying that business activity has softened with the resurgence of Covid-19 cases.
“Any removal of fiscal stimulus any time soon could lead to a falter in the recovery,” said
Mary Nicola,
a portfolio manager for PineBridge Investments.
The selloff in U.S. stocks extended overseas. The pan-continental Stoxx Europe 600 fell 0.7%, led lower by shares of oil-and-gas and financial companies.
Shares in several heavily-shorted European stocks that shot up Wednesday, when the short squeeze spread beyond the U.S., came under pressure. Commercial real-estate firm
Unibail-Rodamco-Westfield
lost 2.4% and German drugmaker
Evotec
fell 4%.
“It is nerve-racking,” said
Remi Olu-Pitan,
a fund manager at Schroders, referring to the big moves in stock prices fueled by day traders swapping tips online. She said the volatility likely induced some professional investors, including those caught with loss-making short positions, to take money off the table, weighing on broader markets.
“You will see more violent pullbacks,” Ms. Olu-Pitan said. “There are parts of the market that are in a bubble.”
Among other individual movers,
Prudential
dropped 7.5% after the insurer said it was weighing an equity offering and would separate off its Jackson National arm in the U.S. Diageo gained 4.8%, as analysts cheered strong first-half sales in North America by the alcohol producer.
Markets broadly retreated in Asia. Hong Kong’s Hang Seng dropped 2.6%, the Shanghai Composite Index fell 1.9% and Japan’s Nikkei 225 declined 1.5%. Container-shipping giant Cosco Shipping led losses in mainland China, sliding 10%.
In a sign of jitters in Chinese markets, money-market rates continued to rise. The one-week Shanghai interbank offered rate rose 0.012 percentage point to 2.981%, its highest since 2015, according to FactSet.
Short-term borrowing costs have risen in recent days as the People’s Bank of China unexpectedly drained funds from the financial system. Earlier this week, a major business newspaper also published remarks by
Ma Jun,
an adviser to the central bank, who warned of asset bubbles emerging due to loose monetary policy.
Tai Hui,
chief Asia market strategist at J.P. Morgan Asset Management, said new pockets of coronavirus outbreaks in China had also dented investor sentiment.
Write to Joe Wallace at Joe.Wallace@wsj.com and Chong Koh Ping at chong.kohping@wsj.com