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Today in the Market (1/18/2024)

Good Morning! On Thursday, the market driven higher by prominent technology stocks after a positive revenue forecast from TSMC, a significant supplier to Apple and Nvidia, which was influenced by artificial intelligence. With that, the Nasdaq increased the most by 1.35%, followed by the S&P 500, which rose by 0.88%, and the Dow Jones, which went up by 0.54%

NOT THE BEST TIMING...

Shares of Plug Power (PLUG) have been experiencing a significant decline. The stock reached a new three-year low today as investors reacted to Plug Power’s intention to raise $1 billion by selling shares.

But why is this bad? Public firms often use the issuance of new shares as a method to generate more capital. The issue is that Plug Power is making an announcement when the share price is now at its lowest point in over three years, which is characterized by a negative trend where there is a lack of market interest in Plug shares, which is unlikely to change.

That’s not all, however… The decision would have a detrimental impact on existing stockholders. The current market capitalization of Plug Power is around $1.4 billion. Issuing an additional $1 billion worth of shares will significantly reduce the ownership percentage of current shareholders by increasing the number of outstanding shares.  We call this dilution, and it’s generally not great for investors. 

ONLY $3!

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The White House has proposed reducing the price for overdrawing a bank account to as low as $3. This is part of the Biden administration’s ongoing efforts to address costs that it believes impose an unneeded burden on American consumers, especially those who rely on each paycheck to make ends meet.

What would this mean for banks? The Consumer Financial Protection Bureau’s (CFPB) planned modification has the potential to eradicate billions of dollars in fee income for the largest banks in the country. However, these institutions were already preparing for a conflict even prior to the statement

So what could these changes look like? According to the suggested regulation, banks would be limited to charging consumers just the amount necessary to cover the costs of offering overdraft services without making a profit. This would force banks to disclose to the CFPB the expenses associated with operating their overdraft services, a responsibility that few banks would be willing to undertake.

Alternatively, banks have the option to use a standardized charge that would be implemented uniformly across all financial institutions impacted. Regulators have put out a range of costs, including $3, $6, $7, and $14, and will seek opinions from both the sector and the public to determine the most suitable sum.

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