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Today in the Market (5/3/2022)

Good Evening. On Tuesday, U.S. equities climbed for the second day in a row as investors assessed the Federal Reserve’s next actions and a new batch of quarterly earnings results.

After fighting for direction intraday, the S&P 500, Dow, and Nasdaq all closed higher. The S&P 500 increased 0.48%, while the Dow gained 0.20%. The Nasdaq also increased by 0.22%.

EARNINGS

Shares of online education startup Chegg (CHGG) fell intraday after the business lowered its full-year sales and earnings outlook. In light of the current economic climate, many people prefer to stay in or enter the workforce rather than enroll in higher education, according to the company.

The most important figures from the report, as contrasted to what Wall Street expected, are listed below, as compiled by Bloomberg.

  • Revenue: $740 million and $770 million versus $830 million to $850 million expected

  • Adjusted EBITDA: $235 million versus $270 million

  • Diluted EPS: $0.32 vs. $0.24

“The issues of enrollment, the economy, and now inflation have all impacted our industry. Students continue to take fewer classes and those they do take are often less rigorous, with fewer or more limited assignments,” Chegg CEO Dan Rosensweig told analysts during the company’s earnings call Monday afternoon. “With higher wages and increased cost of living, more people are shifting their priorities towards earning over learning, resulting in a lower course load, or delaying enrollment in school at this time.”

He goes on to say, “In the U.S. alone, we have seen approximately 1 million students forgo or postpone higher education over the last two years. The impact of these factors is evident in the reduced traffic to higher education support services. This has made forecasting at this time challenging, and while we expect many of these trends to be temporary, we are reducing our guidance to better reflect the current market conditions.”

After closing, CHGG ended 30.26% lower at $17.42 per share.

INTERNATIONAL

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Since Russia’s invasion of Ukraine in April, a group representing IT companies in Russia estimated that 50k–70k IT workers have fled the country, with another 100k expected to leave by the end of the month. In three months, around 10% of Russia’s tech workforce would be laid off.

Last week, Biden announced a $33 billion financing request for Ukraine, which included a proposal to make it simpler for Russian STEM workers to travel to the US and code.

How it would work: Russian residents with a master’s or Ph.D. in a STEM subject would no longer need a US-based employer sponsor to apply for an employment-based visa (which is currently necessary).

The big picture: Russia has been frantically trying to keep its dissatisfied computer workers pleased. In addition to tax benefits and easier regulations for IT firms, Russia has a host of other incentives planned.  Russia would exempt IT professionals from the military draft for the next three years and will allow them to avoid paying income tax for the following three years.

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