The Week in Business: Robinhood Fizzled as Silicon Valley Sizzled
Credit…Giacomo BagnaraWhat’s Up? (July 25-31) Robinhood Goes Public Without a Bang Robinhood’s highly anticipated public offering fizzled on …
What’s Up? (July 25-31)
Robinhood Goes Public Without a Bang
Robinhood’s highly anticipated public offering fizzled on Thursday. Shares in the stock-trading start-up opened at $38, but ended the day down 8.4 percent. The decline reflected investors’ skepticism of Robinhood’s grand mission of upending Wall Street. As part of that mission to democratize investing, Robinhood offered as many as a third of its initial shares to its customers through its app. That could have reduced a first-day trading “pop,” which is typically driven by retail investors who were shut out of an initial public offering. Robinhood ended Thursday with a value of around $29 billion — still not bad for an eight-year-old company.
Silicon Valley Surges
The pandemic has been terrible for the world, but it’s been great for Silicon Valley companies. Alphabet and Microsoft both announced record profits last week. Alphabet, Google’s parent company, reported a profit of $18.5 billion in the latest quarter, which is more than it earned in all of 2015. Its chief executive, Sundar Pichai, credited a “rising tide of online activity.” Microsoft made $16.5 billion, and its top executive, Satya Nadella, said use of its collaboration products “has never been higher.” Apple, Facebook and Amazon also reported sizable jumps in profit. Tesla said it sold more than twice as many cars in the three months ended in June as it did during the same period last year.
Economy Recovers, With an Asterisk
The U.S. economy revived in the second quarter, reaching its prepandemic level, adjusted for inflation. Exactly a year earlier, it had its worst quarterly contraction on record. The good news in the latest report is that the economy seems to be recovering more quickly than it did after the financial crisis. The bad news is that America’s output remains below its prepandemic growth path, and is still hampered by supply constraints and a shift in spending from services to goods, among other factors. The economy’s trajectory is also uncertain, as the highly contagious Delta variant of the coronavirus could threaten gains.
What’s Next? (Aug. 1-7)
Global Chip Shortage Eats Into Profits
General Motors reports its earnings on Wednesday, and analysts will be watching for how the global chip shortage is affecting its business. Like other automakers, the company has been forced to halt or slow production for some of its vehicles, and that has hampered its ability to take advantage of booming demand for cars and trucks. Ford reported last week that its profits had dropped 50 percent in large part because of the chip shortage. And automakers aren’t the only companies running into problems: Apple said on Tuesday that the shortage would affect its smartphone business during the three-month period ending in September.
New Wrinkle in Back-to-Office Plans
The Centers for Disease Control and Prevention reversed its mask guidance for vaccinated individuals on Tuesday, saying that they should now wear masks inside if they’re in a Covid-19 hot spot. That news, along with rising concerns about the highly contagious Delta variant, has thrown a new wrench into companies’ office reopening plans. Google, Adobe, Uber and Facebook joined a growing list of companies requiring workers be vaccinated to return to the office, and several companies said they would delay their plans. Unions have reflected the sometimes conflicting anxieties of their members, with some pushing for more safety measures and others questioning vaccination requirements.
New Job Numbers
On Friday, the Labor Department will release data that show whether a hiring burst in June continued in July. Economists will also learn whether the reopening of the economy is drawing back the millions of workers who left the labor force during the pandemic, and whether employers are increasing pay as they try to rehire.
The Federal Reserve said it would not raise interest rates and would continue buying government bonds, but the economy was progressing. Peacock, Comcast’s streaming service, got a much-needed boost from the Olympics. You might need a “sad day.” And on Monday, a U.S. ban on investing in 59 Chinese firms with ties to China’s military takes effect.