Wall Street Breakfast: TikTok Goes The Clock
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The U.S. government's moves against TikTok - the runaway-success short-form video social app owned by China's ByteDance (BDNCE) - have entered a new phase after a House hearing about the app's dangers on Thursday. The panel, which put TikTok CEO Shou Zi Chew in the hot seat, described the gathering as a "full committee hearing on TikTok’s consumer privacy and data security practices, how the platform affects children, and its relationship with the Chinese Communist Party." Restrictions could be a boon for American social media rivals, including Instagram Reels (META), YouTube Shorts (GOOG, GOOGL) and Snapchat Spotlight (SNAP), but Netflix (NFLX) was the biggest gainer yesterday as the media-stock rally ripped higher.
How the grilling started: "TikTok collects nearly every data point imaginable - from people's location to what they type and copy, who they talk to, biometric data and more," Committee Chair Cathy McMorris Rodgers said in opening remarks. "We do not trust TikTok will ever embrace American values - values for freedom, human rights and innovation. TikTok has repeatedly chosen a path for more control, more surveillance and more manipulation. Your platform should be banned."
Former President Donald Trump already sought to ban TikTok and force a sale of its U.S. business to an American company, and while a transaction with Oracle (ORCL) almost went through in 2020, the lawsuits piled up and an injunction was granted to prevent the app from being outlawed. The Biden administration later revoked the planned ban, ordering a national security review in its place, but Chinese tensions and data privacy concerns eventually swept both sides of the aisle. Congress has passed a bill to outlaw the app on federal devices, as well as a probe from CFIUS and even proposed legislation to ban the app in the U.S. (note that all American social media networks are blocked in China). Check out Wall Street Breakfast's prior survey on whether TikTok should and will eventually be restricted.
SA commentary: "This ban, if it materializes, is more about tomorrow than today for the likes of Meta Platforms," wrote Tradevestor, in an article entitled, What A TikTok Ban Could Mean. Other SA contributors, like Bluesea Research, explore what competition or a ban would mean for Google (see Global Trends Provide A Massive Tailwind), as well as Julian Lin, Investing Group author of Best Of Breed Growth Stocks, on what effects recent developments are having on Snap (read Risks Are Rising But Stock Is Cheap). (66 comments)
"Looking ahead, the longer that financial conditions remain tight, the greater the risk that stresses spread beyond the banking sector, unleashing greater financial and economic damage than we anticipated," Moody's wrote in its latest credit conditions report, while fresh trouble rocked Deutsche Bank (DB) in premarket action. A day earlier, Treasury Secretary Janet Yellen said regulators were prepared to take additional actions to ensure Americans' deposits are safe, after ruling out coverage of all uninsured deposits at U.S. banks. Meanwhile, emergency borrowing under the Fed's two backstop facilities (Discount Window Lending + Bank Term Funding Program) reached another whopping $163.9B this week, similar to the $164.8B recorded last week (borrowing under the weekly discount window is typically under $10B). (24 comments)
Block Inc. (SQ), formerly known as Square, closed the session off nearly 15% on Thursday after becoming the latest target of Hindenburg Research. The short-seller claimed the company "overstated" its user counts and "understated" customer acquisition costs, but SA contributor Muhammad Umair flagged the stock a week earlier, in a technical analysis piece that assigned a Sell rating to SQ. Block responded to Hindenburg's short report, calling it "factually inaccurate and misleading" and said it intends to work with the SEC to explore legal action. While the stock pared some losses on some analyst commentary, shares fell again in premarket trading, down 4.5% to $59 at the time of writing. (219 comments)
It could take years for the U.S. to refill the Strategic Petroleum Reserve, despite previous plans by the Biden administration to buy oil back at under $72/bbl. Front-month Nymex crude (CL1:COM) for May delivery closed down 1.3% to $69.96/bbl on Thursday as uncertainty caused by the banking crisis weighed on crude prices. "This year it will be difficult for us to take advantage of this low price," Energy Secretary Jennifer Granholm told a congressional panel, pointing to another upcoming sale of 26M barrels from the SPR, as well as storage site maintenance. The SPR currently holds 372M barrels, the lowest since 1983, after last year's historic drawdown of 180M barrels. (64 comments)
Today's Markets
In Asia, Japan -0.1%. Hong Kong -0.7%. China -0.6%. India -0.7%.
In Europe, at midday, London -2%. Paris -2.3%. Frankfurt -2.4%.
Futures at 6:30, Dow -0.8%. S&P -0.7%. Nasdaq -0.3%. Crude -3.2% to $67.71. Gold +0.1% to $1997.10. Bitcoin +1.3% to $28,066.
Ten-year Treasury Yield -1 bps to 3.30%
Today's Economic Calendar
8:30 Durable Goods
9:30 Fed's Bullard: U.S. Economy and Monetary Policy
9:45 PMI Composite Flash
1:00 PM Baker-Hughes Rig Count
Companies reporting earnings today »
What else is happening...
JPMorgan (JPM), Citi (C) warn not to solicit clients from stressed banks.
Robinhood (HOOD) APY now exceeds U.S. average savings rate by 19x.
Charles Schwab (SCHW) says it could endure outsized deposit outflows.
Apple (AAPL) looking to spend $1B a year to release movies in theaters.
Accenture (ACN) to slash 19,000 jobs amid IT spending slowdown.
More cost cuts: Walmart (WMT) axes jobs at five fulfillment centers.
Micron (MU) climbs as anticipation for chipmaker's results grows.
Ford (F) expects electric vehicle business will lose $3B in 2023.
Crypto clampdown: Ex-Terraform Labs CEO Do Kwon is arrested.
SEC warns of 'significant' risk of loss for cryptocurrency investors.
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