The GameStop Frenzy Hasn’t Ended. Here’s What Happens Now.

GameStop rose as high as $500 in the early hours of Thursday—it was just $65 last week—and another favorite of the message board, Naked Brand Group, jumped 150% in premarket trading. In Sydney, a company that shares the same ticker symbol as GameStop but otherwise has no affiliation, GME Resources, rose 13%.

This despite the fact the WallStreetBets Reddit message board went private shortly after communications platform Discord shut down their server. Both the SEC and the White House said they were watching the situation. Still, it’s not obvious what securities regulators can do, as Barron’s has reported. (More on this below.)

If there is to be a brake, it could come from the retail brokers where the Reddit-fueled traders place their bets. Already, TD Ameritrade and Charles Schwab put in place restrictions on trading in GameStop and AMC Entertainment. Restricting the use of margin and limiting options activity could tame the speculative frenzy.

For the broader market, forced selling of other stocks looks to have abated. U.S. stock futures were pointing to a steady start after Wednesday’s market tumble.

—Steve Goldstein

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GameStop Catches the Attention of Lawmakers, Regulators

GameStop stock’s rapid rise is now under the scrutiny of lawmakers and regulators.

• White House press secretary Jen Psaki said Wednesday that the Biden Administration was paying attention to what’s going on with the stock. “Our economic team, including Secretary Yellen and others, are monitoring the situation,” she said. Sen. Elizabeth Warren of Massachusetts, citing the frenzy, called on regulators to “wake up and do their jobs.”
• William Galvin, the Secretary of the Commonwealth of Massachusetts, called on regulators to temporarily suspend the stock’s trading in an interview with Barron’s. “Clearly there is a problem here with the way that options are being used in this case. And it needs some regulatory intervention. And I think the most prudent thing is if it’s suspended trading for 30 days.
• After highly shorted stocks like Bed Bath & Beyond and National Beverage soared along with GameStop on Wednesday, the Securities and Exchange Commission said it’s monitoring options and equity markets following volatility in recent days.
• Discord, a communication platform, removed the WallStreetBets server Wednesday night. A spokesperson said the removal was due to hateful and discriminatory content and was not related to GameStop stock’s recent surge. Shortly after, the community’s Reddit forum went private for about an hour.

What’s Next: In the case of GameStop, regulators may end up looking for market manipulation—though that can be a hard case to make. “There’s nothing harder to prove than manipulation,” Professor John Coffee of Columbia Law School, an expert in securities law, told Barron’s. “You’ve got to sort the needle out of the haystack.”

—Connor Smith and Avi Salzman

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Apple and Facebook Post Record Quarters, But Tesla Has a Miss

Big Tech’s profitability hit new highs after a tough day on Wall Street that sent all three major stock indexes down more than 2% as earnings from other big companies disappointed.

• Apple posted a blowout quarter with $111 billion in revenue and double-digit growth in each of its product categories. CEO Tim Cook said more than 1 billion iPhones are currently in use worldwide, up from 900 million in 2019.
• Facebook posted a record of just over $28 billion in revenue and net income of $11.2 billion, well ahead of analysts’ expectations. But the company said that a change in Apple’s mobile operating system could hurt its ability to deliver targeted ads to iPad and iPhone users.
• Tesla delivered mixed results Wednesday, topping analyst estimates for revenue but coming in beneath earnings, which sent the company’s highflying shares down a few percentage points in after-hours trading.
• AT&T shares fell 2% after the company said it would take a $15.5 billion write-down on its DirecTV unit. Boeing posted its biggest quarterly loss ever of $15.25 per share. It’s recovering from its 737 Max grounding, but the decline in air travel and its delayed 777X program haven’t helped.

What’s Next: The busiest week of earnings season continues Thursday, with results expected from nearly 150 companies including American Airlines, JetBlue, McDonald’s and Visa.

—Ben Walsh

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Fed Holds Rates Near Zero; Powell Says Vaccine Rollout Will Be a “Struggle”

While noting that the winter surge in Covid-19 cases had caused the economy to slow in recent weeks, the Federal Reserve said it will keep interest rates near zero and continue purchasing $120 billion a month in bonds.

• In its policy statement released Wednesday, the Fed repeated that it won’t raise interest rates until the U.S. economy has fully recovered from the pandemic. Most Fed officials have indicated that as a practical matter, that means not raising rates until 2023.
• The Fed remains concerned about the state of the U.S. economy. “We think it’s going to be a struggle,” Federal Reserve Chair Jerome Powell said, referring to the vaccine rollout. “The pandemic still provides considerable downside risks to the economy.”
• Powell denied that the Fed’s monetary policy was contributing to concerns about a bubble. He credited the stock market’s rise to progress on vaccines and fiscal policy and said the hot housing market was due to shortages of supply and growing demand from people working from home.

What’s Next: The Fed remains in wait-and-see mode as the economic impact of vaccinations and Biden’s stimulus plan play out. But as the economy recovers, the sea-change in the Fed’s willingness to tolerate more inflation to boost employment will come into play, likely forestalling rate increases longer than in past economic cycles.

—Ben Walsh

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Holiday Covid-19 Surge Is Waning, But New Worries Cast Doubt on Recovery

The number of daily Covid-19 cases reported in the U.S. and Americans hospitalized with the virus continues to drop as the winter surge in the pandemic appears to have crested despite the stuttering vaccine rollout.

• The daily number of new Covid-19 cases has fallen from about 248,000 to about 166,000 over the past two weeks, the Associated Press noted. The number of Americans hospitalized with the virus, a leading indicator of Covid-19 deaths, peaked at over 132,000 on Jan. 6 and is now below 109,000.
• California cautiously began allowing outdoor dining to resume this week and New York Gov. Andrew Cuomo declared Wednesday that “the holiday surge is over,” lifting restrictions on all but four of the state’s so-called microcluster areas. Michigan will begin allowing indoor dining and bars to reopen at reduced capacity.
• The U.S. remains far from reaching herd immunity through vaccinations, with about 6% of the population receiving at least one vaccine dose so far and an average of about 1.3 million shots being given a day. Israel, by comparison, has given nearly half its population their first vaccine dose.
• Pfizer’s vaccine has been found to work against emerging strains of Covid-19 in the U.K. and South Africa, according to a Pfizer study that has not yet been peer reviewed. Earlier this week Moderna said it would make a booster shot for protection against the South African variant.

What’s Next: The Biden administration says it will increase weekly vaccine shipments to states by around 16%, but supply will remain a bottleneck. “It will be months before everyone who wants a vaccine will be able to get one,” Andy Slavitt, senior advisor on the White House Covid-19 Response Team, said.

—Ben Walsh

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Brexit Starts Taking Toll on British Economy

With disruptions at European borders and supply chains perturbed by new tariffs, the U.K. economy has begun to show the negative economic impact of leaving Europe’s single market and customs union at the beginning of the year, several indicators show.

• Gita Gopinath, the chief economist of the International Monetary Fund, said this week as she was presenting the organization’s new economic forecast that Brexit would shrink the British economy “by about 1%” this quarter.
• Britain was the only economy whose performance in 2020 was downgraded by the IMF, which estimates the country’s GDP fell 10% last year.
• Surveys by data company IHS Markit show that U.K. manufacturers and service providers are reporting the most severe disruptions of their supply chains, which is “almost exclusively linked to both Brexit disruption and a severe lack of international shipping availability.”
• Freight volumes between the U.K. and the rest of Europe were down 38% in the third week of January compared to last year.
• Paperwork, higher costs and compliance delays are severely affecting the traffic of goods on the U.K.-EU routes, but have an even more severe impact on trade between the U.K. and Northern Ireland, which remains in the single market.
• The Office for Budget Responsibility, the official fiscal watchdog, predicted back in November that Brexit would shrink the U.K. economy by 4% in the long run with a free-trade agreement such as the one that was signed between the two sides just before Christmas.

What’s Next: Prime Minister Boris Johnson recently qualified as “teething problems” the many incidents and trade disruptions triggered by the effective start of Brexit. But from British fishermen to City of London finance professionals, many rather expect the government to act to try soften the blow.

—Pierre Briançon

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Cable companies are introducing data caps—what will it cost if you go over?

If you’re surprised by a high cable bill this month, it could be because you spent too much time on the internet.

A growing number of cable companies are once again beginning to impose so-called “data caps” on their home internet service. As of this month, that list includes Comcast, the largest cable provider in the country.

Beginning on Jan. 1, Comcast reintroduced a data cap on its internet service, limiting households to 1.2 terabytes of data per month. (A terabyte is equal to 1,000 gigabytes). The cap is currently enforced in 27 states across the country—Comcast operates in 39 states—though the company told Consumer Reports that it won’t begin charging customers who go over their allowance until March.

When the charges do come into play, they could add up quickly. People who exceed the cap will be charged $10 for every 50 gigabytes of excess data, up to $100 per month. The company does not prorate this amount in cases where a household doesn’t use up the full 50 gigabytes of extra data they were charged. (Comcast did not immediately respond to a request for comment.)

Many companies signed onto a pledge at the start of the pandemic to waive their data caps and boost internet speeds as households were doing more work from home, but as the pandemic has worn on many have returned to their typical operations.

Read more here.

—Jacob Passy

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—Newsletter edited by Matt Bemer, Anita Hamilton, Ben Levisohn, Mary Romano, Stacy Ozol