Stock Market Live January 12: Justice Investigates Fed Chair Jerome Powell, S&P 500 (VOO) Drops
Quick Read
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The Department of Justice begins investigating Fed Chairman Powell for criminal misuse of Fed renovation funds.
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Powell argues the investigation is political, and an attempt to influence Fed interest rate policy.
Live Updates
Albemarle Soars on Lithium Upgrade
Scotiabank analyst Ben Isaacson upgraded shares of S&P 500 component company and lithium producer Albemarle (NYSE: ALB | ALB Price Prediction) to sector outperform with a $200 price target this morning.
“If you’ve missed the lithium rally, don’t worry too much,” says Isaacson, because “we think it’s only the first leg, in what should be a multi-year tightening cycle” that will drive lithium prices higher.
“Even if EV demand growth slightly misses expectations, or, even if BESS [referring to battery energy storage systems] doesn’t soar by leaps and bounds, a market inflection appears well-supported, in our view. We have raised our price deck to $20,000/mt LCE [referring to lithium carbonate equivalent] by ‘28, with SC6 [referring to 6% lithium oxide spodumene concentrate] at $2,150/mt.”
What’s more, if Isaacson is wrong, he says he’s probably erring on the conservative side, and tells investors to “watch for fly-up pricing to well-exceed our price deck.”
Albemarle stock is flying, too, up more than 4% today.
Initiating Coverage of Hims & Hers
Evercore ISI analyst Mark Mahaney initiated coverage on Hims and Hers (NYSE: HIMS) stock with an “in line” (i.e., neutral) rating and a $33 price target on the $31 stock.
“We view [Hims’] valuation as reasonable,” says the analyst, albeit there is “some multiple risk given our near-term outlook for material revenue & subscriber growth deceleration and flattish EBITDA Margins.” Mahaney sees opportunities for Hims to grow “beyond weight loss (hair loss, sexual health, dermatology, mental health, labs testing, longevity, etc…)” Mahaney cites the “rule-of-40” as central to its valuation of the stock, meaning Hims will need to maintain a combination of 40% as the sum of its revenue growth rate and profit margin to remain buyable. If the stock can do that, and trades below “20X EV/EBITDA,” Hims stock might be a buy.In the most recent quarter, Hims’ revenue growth rate was 49% and its profit margin 6%.The stock is down 3% this morning.
Bank Stocks Waver
This article will be updated throughout the day, so check back often for more daily updates.
Federal prosecutors from the Department of Justice appear to be seeking a grand jury indictment of the Federal Reserve and its Chairman Jerome Powell. The Vanguard S&P 500 ETF (NYSEMKT: VOO) opened 0.5% lower on the news.
On Sunday, the DOJ announced an investigation into the Fed’s $2.5 billion project to renovate its office buildings in Washington, D.C., implying the funds may have been misused. CNN notes that the renovations include “removing asbestos and upgrading electrical and ventilation systems.”
Powell quickly responded with a press release asserting the investigation is less about financial misconduct and more about political influence of Fed policy-making: “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President,” accusing the Administration of attempting to influence Fed interest rate policy (i.e., demanding the Fed lower interest rates more, and more often).
Lending credence to his argument is the fact that President Trump has on more than one occasion threatened to fire Powell for… not lowering interest rates enough.
More interest rates news
And speaking of interest rates, President Trump is also calling for banks to cap interest rates on credit card debt at 10% for one year.
On the surface, this sounds reasonable. But banks set interest rates to cover their risk of loss. If they cannot charge enough to cover their risk, they’re likely to risk less — which is to say, they’ll lend less. That could turn into a drag on the economy — yet another reason for investors to feel pessimistic today.
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Joel South covers large-cap stocks, dividend investing, and major market trends, with a focus on earnings analysis, valuation, and turning complex data into actionable insights for investors.
He brings more than 15 years of experience as an investor and financial journalist, including 12 years at The Motley Fool, where he served as an investment analyst, Bureau Chief, and later led the Fool.com investing news desk. He has also co-hosted an investing podcast and appeared across TV and radio discussing market trends.
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