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Today in the Market (2/8/2023)

Good Evening! U.S. equities finished Wednesday down after another round of corporate data hit traders’ desks and Wall Street assessed the outlook for interest rates after Federal Reserve Chair Jerome Powell hinted more raises may be required than markets are pricing in.

The S&P 500 fell by 1.11%, but the Dow Jones decreased by 0.61%. The Nasdaq Composite sank 1.68%.

USERS JUST KEEP LEAVING

The online trading platform Robinhood (HOOD) announced a drop in monthly active users for the sixth consecutive quarter, as the retail investing bubble fades.

  • Revenue: $380 Million vs. $389.7 Million Expected
  • Earnings Per Share: ($0.11) vs. ($0.11) Expected
  • Monthly Active Users: 11.4 Million vs. 12.2 Million Expected

What happened? During the pandemic, Robinhood rode the retail trading boom as a younger generation of investors rushed to the stock and crypto bull markets. By early 2021, the company’s monthly active users had grown to more than 21 million. Unfortunately… when the Federal Reserve started boosting interest rates last year, Robinhood’s market share declined. The firm has subsequently laid off an estimated 1,000 employees, including 9% in April and 23% in August.

Any plans? Vlad Tenev, co-founder and CEO of Robinhood, said that he and co-founder Baiju Bhattcanceled nearly $500 million of our share-based compensation to ensure the company has the resources to provide value to customers and shareholders.” This will reduce Robinhood’s quarterly operational expenses by up to $50 million beginning in Q2. In 2022, share-based compensation accounted for 27% of the company’s total $2.37 billion in operating expenses.

ANOTHER ACQUISITION

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CVS Health Corporation (CVS) will acquire Oak Street Health Inc for around $9.5 billion in cash, joining its competitors in adding primary care to its portfolio as pressure rises on its health insurance business.

Why now? Since last year, CVS Health, one of the nation’s major drugstore chains, pharmacy benefit managers (PBMs), and health insurers via its Aetna unit, has been searching for a medical services acquisition.

That is where Oak Street comes in. Oak Street Health’s acquisition will result in the addition of approximately 160 primary care facilities that provide regular health screening and diagnosis for elders.

However with every acquisition… CVS will have its “work cut outwith antitrust regulators, said Evercore analyst Elizabeth Anderson. As it seeks regulatory permission for both the Oak Street purchase and the $8 billion acquisition of home health company Signify Health.

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