Another day, another round of attention-grabbing stock market news. Investors just learned that Apple (NASDAQ:AAPL) had a stellar quarter, with sales growth of 54% and a plan for $90 billion in share buybacks. So beyond that, what did the stock market do today?
- The S&P 500 closed lower by 0.08%
- The Dow Jones Industrial Average closed lower by 0.48%
- The Nasdaq Composite closed lower by 0.28%
So what did the stock market do today? Here are the top three stories.
The Fed, Froth and Stock Market Fallout
Federal Reserve Chair Jerome Powell has an odd relationship with the stock market. Prior to his address and an announcement of the latest monetary policy moves, the stock market was on edge. We have seen this play out time and time again in recent months, with fears of inflation and higher Treasury yields pressuring high-growth equities.
Nothing the Fed did today was particularly surprising. In fact, the central bank kept interest rates at near-zero levels and maintained that inflation is just a symptom of a strengthening economy.
Still, the major indices dipped, all ending the day in the red.
So what should investors take away? Perhaps one of the biggest takeaways is Powell’s stance on frothiness. Asked about the meme stock craze of the first quarter and the recent Dogecoin (CCC:DOGE-USD) mania, Powell maintained that there is nothing to worry about. In fact, he said that while Fed policies may contribute to the huge price moves, investors are likely just acting on post-pandemic optimism. Given the nature of his commentary, we could very well see the stock market settle down tomorrow.
The SEC and SPACs: Two Acronyms That Do Not Mix
Chamath Palihapitiya better buckle up, because the U.S. Securities and Exchange Commission continues to crack down on special purpose acquisition companies.
Last week, we wrote that the SEC was pushing forward with regulatory changes that would cost blank-check companies quite a bit of money and headache. Essentially, blank-check companies issue warrants during their initial public offerings as a way to incentivize pre-merger investors. As a result of the latest guidance, blank-check companies will have to report these warrants as liabilities on their balance sheets. This will force them to re-value their warrants, adopt more complex accounting and ultimately pay more.
Now, the latest moves by the SEC are looking to further reduce pre-merger hype. As Axios wrote this morning, the regulatory agency is considering when safe harbor applies to forward-looking statements. For those unfamiliar, safe harbor is the idea that companies are not liable for forward-looking statements and forecasts that are made in good faith. In the SPAC world, this has been a huge appeal for early stage, innovative companies. Startups focusing on red-hot industries can focus on the thematic appeal — they know that areas like electric vehicles and robotics have huge growth potential. Safe harbor statements can protect these sometimes bold forward-looking statements. But now, it seems the SEC wants to change that, and potentially limit what protection from liability blank-check companies receive.
What does this mean? In practice, it means that things are about to get much trickier for blank-check companies and the market influencers that back them. For investors, it means that new SPAC offerings may become fewer in number. For companies benefitting from the appeal of warrants and bold statements, the removal of those perks may make the SPAC route less logical. It seems this may already be at play, with the number of new offerings rapidly dropping each week.
One Upcoming IPO Promises to Shoot Higher
Earlier this morning, we wrote about the emerging Covid-19 vaccine story lifting Novavax (NASDAQ:NVAX) higher. The need for countries like the United States to shore up their own vaccine supplies and then ensure an equitable global rollout could give smaller vaccine makers (who are also behind in the process) a chance at success.
Friday morning will deliver another vaccine story to Wall Street, and there is also profit potential. Vaccitech, a company spun out from the University of Oxford and its Jenner Institute, is coming public. It will start trading on the Nasdaq as VACC stock.
Importantly, Vaccitech itself is not a household name, but one of its products is very familiar. That is because the company co-invented the vaccine now being produced and distributed by AstraZeneca (NASDAQ:AZN). The Oxford-based company says it focuses on vaccines and treatments for a variety of immune diseases and cancer. Its work with AstraZeneca, which it received $2.5 million for, is proof that its technology works. For those unaware, Vaccitech spearheaded a delivery mechanism that relies on a chimpanzee adenovirus vector.
So what else do you need to know? Vaccitech could generate proceeds of more than $115 million as a result of its IPO, and could hit a valuation as high as $600 million. Although it is not yet profitable, this is a biotech debut worth watching.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is the Editor of Today’s Market with InvestorPlace.com.