Good Evening. As international central bankers gathered for the highly anticipated Jackson Hole economic symposium of the U.S. Federal Reserve, stocks surged significantly on Thursday.
The Nasdaq Composite rose 1.67%, while the S&P 500 gained 1.41% after ending a three-day losing skid in the previous session, while 0.98% was added to the Dow Jones.
CAN PELOTON WORK OUT THESE BAD EARNINGS?
Peloton Interactive (PTON) reported an operating loss of $1.2 billion in its fiscal fourth quarter as revenue came in below Wall Street expectations.
Revenue: $678.7 million vs. $685.9 million expected
Earnings Per Share: ($2.27) vs. ($0.83) expected
CEO Barry McCarthy wrote in a letter to shareholders that the loss “reflects the substantial progress we made this last quarter re-architecting the business to reduce the current and future inventory overhang, converting fixed to variable costs, and addressing numerous supply chain issues.”
Going forward…. Due to “broader macroeconomic concerns” and the “speed and volume of changes”, the firm will modify how it reports operating metrics and forward guidance in its 2023 fiscal year.
For at least the remainder of the upcoming fiscal year, Peloton will limit its official revenue, gross margin, adjusted EBITDA, and net subscriber addition expectations to the current quarter. The manufacturer of workout equipment will also stop releasing quarterly engagement numbers, but it will keep releasing subscriber turnover data.
STUDENT DEBT
President Biden declared yesterday that the federal government would forgive up to $20,000 in student loan debt for recipients of Pell Grants and up to $10,000 in student loan debt for borrowers earning less than $125,000 annually. Additionally, Biden extended the debt repayment ban until the end of 2022. The freeze will be extended for the eighth (and, according to Biden, final) time since it was first introduced in March 2020.
According to the NYT, 45 million Americans must pay back $1.6 trillion in student loans, which is a larger sum than any other consumer debt except mortgages. One of Biden’s campaign promises was to ease some of that burden, but in order to follow through on it, he had to consider many opposing viewpoints.
- Progressive Democrats and civil rights organizations pushed for a debt cancellation of at least $50,000 on one side. According to NAACP President Derrick Johnson, “$10,000 alone is insufficient, to say the least—it won’t address the gravity of the problem.”
- Centrist Democrats and Republicans cautioned that eliminating debt is not the best use of public funds and could spark inflation. Former Democratic Treasury Secretary Larry Summers tweeted, “Every dollar spent on student loan relief is a dollar that could have gone to support those who don’t get the opportunity to go to college.”
By implementing the income ceiling, according to Biden, the people who would need it the most will receive the benefit. According to his administration, households earning $75k or less would be affected by 90% of the forgiveness.
Looking forward… Expect some legal challenges to Biden’s plan to wipe off student loan debt. So don’t expect your balance to disappear overnight.