Bezos Stepping Down as Amazon CEO: Dwell Updates
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GameStop plunged on Tuesday, a second day of sharp declines in the stock, as a social media-fueled buying frenzy quickly lost its momentum, erasing billions of potential profits for investors who had been caught up in the enthusiasm.
The selling hit shares of other companies that had also surged in the past few weeks, bid up by a group of small investors who had egged each on each other on Reddit and other forums. As GameStop fell 60 percent on Tuesday, AMC Entertainment was down 41 percent and BlackBerry was down 21 percent.
The small traders had bid up these shares partly in an effort to hammer large hedge funds that had placed big bets against the stocks. As the stock rose, those hedge funds were forced to buy shares in order to exit their positions, pushing the stock higher and triggering a cycle of share price gains called a short squeeze.
It worked: As GameStop shares surged 400 percent last week, the volume of bets against the stock fell by more than half. But that also means the ability for investors to pressure remaining short sellers has decreased.
The drop has also come as Robinhood, the trading platform that was popular among the investors buying GameStop, has restricted its customers ability to buy the shares, although, Robinhood had loosened its limits somewhat.
The retreat in GameStop, AMC and other stocks allayed a concern among investors in the broader market. They’d been worried that the big hedge funds who were on the losing end of GameStop’s surge would have to sell shares of other, larger companies to make up for the losses.
But for the traders gathering on Reddit’s WallStreetBet’s forum, this week’s decline isn’t the end of their investment. Many have said they’re not interested in making a quick profit. Instead they celebrate their ability to hold onto the stock despite the volatility, with an aim to use their collective power against the big Wall Street institutions.
On Tuesday, one user repeated that call, posting: “Guys. This only works of we work together. Buy the dip and hold. For all of us. The movement isn’t over.”
The S&P 500 rose 1.4 percent, adding to a gain of 1.6 percent from the day before, ahead of earnings reports from Amazon and Alphabet. Travel and tourism stocks like Las Vegas Sands and Expedia, which are bellwethers of investor sentiment about the pandemic, were among the best performing in the index.
The index has nearly recouped all of its losses from last week, which was its worst in three months.
The Stoxx Europe 600 rose 1 percent, the biggest single-day increase in nearly four weeks.
The eurozone economy contracted 0.7 percent in the fourth quarter, data published Tuesday showed, putting the region on track for a double-dip recession as it struggles to ramp up its vaccination program. That said, the economic decline at the end of last year was slightly smaller than economists forecast.
Credit…Karsten Moran for The New York Times
Amazon agreed on Tuesday to pay $62 million to the Federal Trade Commission to settle charges that it withheld tips to delivery drivers over a two-and-a-half year period, in a case that highlights the federal government’s increased interest in gig-economy workers.
The F.T.C. said in an announcement that Amazon had promised its Flex delivery drivers that they would receive 100 percent of all customers’ tips. But starting in 2016, the F.T.C. said, Amazon secretly lowered the hourly delivery wages, which were advertised at $18 to $25, and tried to mask the smaller wages by using customer tips to cover for the smaller hourly pay. The net effect was that the contract workers received smaller overall take-home pay, the agency said.
The practice wasn’t disclosed to drivers but the Flex drivers noticed the compensation reductions and began to complain. Amazon stopped the practice in 2019, after it became aware of the F.T.C.’s investigation, the agency said. The company settled without admitting wrongdoing.
“Rather than passing along 100 percent of customers’ tips to drivers, as it had promised to do, Amazon used the money itself,” said Daniel Kaufman, the acting head of consumer protection at the F.T.C. “Our action today returns to drivers the tens of millions of dollars in tips that Amazon misappropriated, and requires Amazon to get drivers’ permission before changing its treatment of tips in the future.”
Flex workers are classified by Amazon as independent contractors and often use personal vehicles for deliveries of the company’s Prime Now and AmazonFresh items. Customers can give a tip to delivery drivers on the checkout page.
Amazon is facing greater regulatory scrutiny overall. The Seattle company is under investigation for antitrust violations amid growing concerns from lawmakers and regulators about the power of the big tech companies.
The case also illustrates greater bipartisan scrutiny over Big Tech’s treatment of contract workers, who are a growing portion of Amazon, Google and Facebook’s workforces.
“Amazon is one of the largest and most feared corporate empires on the planet, and it is critical that global regulators carefully scrutinize whether the company is amassing and abusing its market power through unlawful practices,” Rohit Chopra, a Democrat and a commissioner, said in a tweet about the settlement.
Amazon said in a statement that its pay for contract workers was among the “best in the industry.”
“While we disagree that the historical way we reported pay to drivers was unclear, we added additional clarity in 2019 and are pleased to put this matter behind us,” it said.
In 2009, an investigation by the Education Department’s inspector general concluded that Sallie Mae, a federal loan provider, overcharged the government by tens of millions of dollars for student loan subsidies. More than a decade later, the department’s acting secretary has ordered the company to give the money back.
The overpayments — which amounted to $22.3 million — were brought to light when an Education Department whistle-blower raised alarms during President George W. Bush’s administration about a tactic multiple student loan financiers had adopted to manipulate a subsidy program intended to incentivize lending.
Sallie Mae was one of the recipients of the subsidies. In 2014, it spun off its federal loan servicing operation into a publicly traded entity called Navient, which retained the company’s liabilities.
The unpaid debt has long been a sore point for progressive lawmakers like Senator Elizabeth Warren, Democrat of Massachusetts, who frequently have blasted the department for leaving the money uncollected.
Mitchell Zais, who became the department’s leader last month after Betsy DeVos resigned, issued an order on Jan. 15 telling Navient — one of the nation’s largest student loan companies — to refund the overcharged amount.
In the 1980s, the government guaranteed lenders a 9.5 percent interest rate on student loans financed by tax-exempt bonds. As interest rates plunged, that return became extremely attractive. Congress ended the subsidy in 1993 but grandfathered in existing bonds, assuming they would soon be paid off.
Instead, lenders found ways to keep recycling and repackaging the existing loans, allowing them to reap hundreds of millions of dollars in additional subsidies. A 2009 audit by the Education Department’s inspector general found that Navient, then operating as Sallie Mae, had overcharged the government millions of dollars.
Navient has aggressively fought efforts to collect the cash. In 2019, an administrative law judge ordered the company to repay the overcharge; Navient appealed that ruling, asking Ms. DeVos to overturn it.
Mr. Zais, her successor, declined to do so. The judge’s ruling was “well-reasoned and correct in scope,” he wrote in his order telling Navient to pay up.
“We are disappointed with this ruling because we believe these practices were consistent with Department of Education guidance,” a Navient spokesman said in response. “We are assessing our options.”
The department’s enforcement action comes as consumer advocates are pushing for major changes in student lending, including the outright cancellation of hundreds of billions in government-held student debt. They are also pressing the department to crack down on student loan servicers like Navient, who have rarely been penalized for what government auditors have repeatedly found are extensive failures and mistakes.
Credit…Hiroko Masuike/The New York Times
President Biden has pushed for the Federal Reserve to focus on racial outcomes when setting interest rates, and central bank officials are paying growing attention to the issue. But a new analysis from the Federal Reserve Bank of New York suggests that the relationship between monetary policy and racial economic outcomes is complicated.
Low interest rates push down Black unemployment rates more than white jobless rates, so they boost Black earnings by more, the authors wrote. But cheap borrowing costs also gooses risky assets — stocks, for instance — and white people typically own far bigger investment portfolios.
The end result? Even as growth-stoking monetary policy leads to better labor outcomes for Black workers, it leaves them with a smaller share of America’s wealth, based on the analysis, which models the aftereffects of a surprise rate cut.
The upshot is, “don’t look to monetary policy as a panacea,” Paul Wachtel, an economist at New York University and a co-author on the research, said in an interview. It “is not distributional policy.”
The finding is unlikely to be the final word. Even if they agree with the methodology, policymakers might see getting people into jobs as a crucial focus. Work allows families to build an income base to begin saving up wealth in the first place.
Racial outcomes are increasingly a topic of conferences and research at America’s central bank. A separate study out this week, written by Mary C. Daly, the president of the Federal Reserve Bank of San Francisco, and co-authors, found that underrepresentation of women and minorities in the labor market comes at a stark cost to the economy. America would have had $2.6 trillion more output in 2019 if gaps between white men and everyone else were closed in areas including education, hours and employment, they estimated.
The attention to equity comes even as the central bank itself struggles to achieve Black representation within its own ranks, as The New York Times reported Tuesday.
Credit…Daniel Rosenbaum for The New York Times
Patrick Steel, the chief executive of Politico since 2017, said on Tuesday that he will leave the company this summer.
In an email to the staff, Mr. Steel, a former investment banker who was a special assistant to President Bill Clinton, said he had decided it was “the right time to start the next chapter of my career.”
“As a new administration settles in, it is time to pass the baton to another leader who can guide Politico to greater heights,” he wrote in the memo, which was obtained by The New York Times.
Mr. Steel 52, added that, under his leadership, Politico had doubled in size, expanded into new regions and completed its largest acquisition, the energy and environment website E&E News.
Mr. Steel’s decision to leave is the latest in a series of high-profile moves at Politico. The reporters behind its Playbook newsletter, Jake Sherman and Anna Palmer, as well as the congressional reporter John Bresnahan, left in December to start a competing site, Punchbowl News. Politico replaced them with a team that includes Rachael Bade, Eugene Daniels, Ryan Lizza and Tara Palmeri.
Robert Allbritton, the owner of Politico, said an executive search firm would help the company find its next chief executive.
Credit…Kevin Hagen for The New York Times
Uber has acquired Drizly, the alcohol delivery service, in a $1.1 billion deal, the ride-hailing company said on Tuesday. The acquisition is part of Uber’s aggressive push to expand its booming delivery business during the pandemic.
The deal, a mix of stock and cash, follows Uber’s recent acquisitions of Postmates, a food delivery service, and Cornershop, a grocery delivery company. Uber has also joined with Nimble to deliver prescriptions in some markets.
Uber will incorporate alcohol delivery into its Uber Eats service and continue to operate Drizly as a stand-alone app, the company said. Lantern, a cannabis delivery service owned by Drizly, is not included in the deal, Uber said.
“We are thrilled to join a world-class Uber team whose platform will accelerate Drizly on its mission to be there when it matters — committed to life’s moments and the people who create them,” said Cory Rellas, Drizly’s co-founder and chief executive, said in a statement.
Delivery has been a lifeline for Uber during the pandemic, which has caused a decline in ride hailing. In the third quarter of 2020, Uber said revenue from rides was down 53 percent while food delivery revenue was up 125 percent. Uber will report fourth quarter earnings on Feb. 10.
Kroger, one of the largest grocery retailers in the nation, said on Monday that it planned to close two stores in Long Beach, Calif., after city officials passed an ordinance last month requiring large grocery chains to provide workers hazard pay during the pandemic.
“We are truly saddened that our associates and customers will ultimately be the real victims of the City Council’s actions,” Kroger said in a statement.
The ordinance requires grocery stores with at least 300 workers nationally to provide them $4 an hour extra in hazard pay to compensate for the risks they have been taking during the virus outbreaks.
Other local governments, including those in Los Angeles County and Seattle, have passed similar mandates in recent weeks.
The measures come after companies, including Kroger, stopped providing hazard pay over the summer even as outbreaks worsened, though the grocery chain has provided employees with other forms of financial assistance.
Unions and political leaders, like Senator Elizabeth Warren, Democrat of Massachusetts, have criticized the grocery companies for ending hazard pay, while their profits soared during the pandemic.
But the California measures have faced pushback from typically sympathetic allies of low-wage workers. The Los Angeles Times editorial board wrote last month that the proposals unfairly reward grocery store workers at large companies, while excluding other frontline workers who are also facing risks, such as Amazon warehouse employees and meatpacking workers.
The ordinances also exclude workers at nongrocery chains such as Home Depot that have stayed open throughout the pandemic, the newspaper’s editorial noted.
Kroger echoed that sentiment in its statement.
“This misguided action by the Long Beach City Council oversteps the traditional bargaining process and only applies to some, but not all, grocery workers in the city,” the statement said.
Kroger said the two Long Beach stores — a Ralphs and Food 4 Less — were slated for closure on April 17.
Credit…Kendrick Brinson for The New York Times
WASHINGTON — Toyota, Fiat Chrysler and several other major automakers said Tuesday that they have dropped their support for a Trump-era lawsuit that sought to block California from setting its own strict fuel-economy standards, signaling that the auto industry is ready to work with President Biden to reduce climate-warming emissions.
The decision by the companies was widely expected, coming after General Motors dropped its support for the effort just weeks after the presidential election. But the shift may help the Biden administration move quickly to reinstate national fuel-efficiency standards that would control planet-warming auto pollution, this time with support from industry giants that fought such regulations for years.
The auto giants’ announcements come on top of a 2020 commitment by five other companies — Ford, Honda, BMW, Volkswagen and Volvo — that they would abide by California’s tough standards.
In a statement, the auto companies, represented by the industry group Coalition for Sustainable Automotive Regulation, wrote, “We are aligned with the Biden Administration’s goals to achieve year-over-year improvements in fuel economy standards that provide meaningful climate and national energy security benefits.”
They added, “In a gesture of good faith and to find a constructive path forward, the C.S.A.R. has decided to withdraw from this lawsuit in order to unify the auto industry behind a single national program with ambitious, achievable standards.”
President Trump had made the rollback of Obama-era fuel economy standards as the centerpiece of his deregulatory agenda. The Obama-era standards, which were modeled on California’s tough state-level standards, would have required auto companies to make and sell vehicles that reached an average fuel economy of about 54.5 miles per gallon by 2025. The standards, which would have eliminated about six billion tons of planet-warming carbon dioxide pollution over the lifetime of the vehicles, stood as the single largest federal policy ever enacted to reduce climate change.
The Trump administration last year rolled back that standard to about 40 miles per gallon by 2026 — a move which would have effectively allowed most of that carbon dioxide back in the atmosphere. California, however, reached a separate deal with the five automakers, in which they agreed to reach a standard of 51 miles per gallon by 2026. The Trump administration, backed by G.M. and other automakers, blocked California’s legal authority to set those standards.
Now that G.M., Toyota and Fiat Chrysler have dropped out of that lawsuit, Biden administration officials are expected to try to make that California deal the basis of a new federal standard.
But if other automakers follow G.M.’s pledge to phase out internal combustion engines by 2035, the whole concept of miles per gallon of gasoline or diesel fuel could soon be moot.
Several large corporations reported earnings on Tuesday, providing a glimpse into the winners and losers of 2020 as the pandemic shut down economic activity around the world and as consumers came to depend on online shopping. But improved sales in the fourth quarter offered hope that the global economy was beginning to shake off the depths of the downturn.
In the worst year for the company in four decades, Exxon Mobil said it lost $22.4 billion in 2020, compared with a profit of $14.3 billion in 2019, as the pandemic continued to weigh on energy demand and oil and natural gas prices. “The past year presented the most challenging market conditions Exxon Mobil has ever experienced,” said Darren W. Woods, the company’s chairman and chief executive.
BP reported its first loss in at least a decade, losing $5.7 billion for the year compared with a $10 billion profit for 2019. The company said it eked out a $115 million profit for the fourth quarter of 2020, representing a year-on-year decline of about 95 percent. BP blamed the decline on a host of factors, including low demand for its refined products because of the economic slowdown brought on by the pandemic and low prices for oil and natural gas.
China’s resilient economy helped drive a 37 percent increase in Alibaba’s sales in the latest quarter, the company said on Tuesday. Profits for the quarter were $12.2 billion and revenue was $33.9 billion, beating analysts’ forecasts. Cloud computing revenue grew 50 percent from a year ago, to $2.5 billion. Alibaba said that part of its business was profitable for the first time in the December quarter.
United Parcel Service reported a 21 percent increase in sales, to nearly $24.9 billion, in the final three months of last year, driven in part by a supercharged online holiday shopping season. Despite causing early disruptions, the pandemic accelerated a shift to online shopping, helping to raise the company’s average daily package volume for the year to 24.6 million, a 13 percent increase from 2019.
Google’s parent company, Alphabet, said on Tuesday that its quarterly revenue and profit surged in the fourth quarter, lifted by strong demand for advertising on search results and YouTube videos and a sharp increase in sales at its cloud computing unit.
Sales in the quarter rose 23 percent from a year earlier to $56.9 billion, a record high for a quarter, and net profit rose 43 percent to $15.2 billion, Alphabet said. The strong results across its entire business line far surpassed analysts’ expectations.
Shares of Alphabet rose nearly 7 percent in after-hours trading.
Alphabet benefited from a continued rebound in its core business, advertisements on search results. In the early months of 2020, businesses pulled back on digital advertising, but spending has regained momentum as the pandemic has dragged on. Revenue from search advertising rose 17 percent to $31.9 billion in the fourth quarter, Alphabet said.
The company also highlighted its progress in diversifying its business. Quarterly revenue from YouTube ads rose 46 percent, and the cloud computing business posted a 47 percent gain from a year earlier, Alphabet said. Like the other major cloud computing providers, Amazon and Microsoft, Google has enjoyed a surge of demand during the pandemic.
For the first time in the company’s history, Alphabet also disclosed the profitability of its cloud business: It lost $5.6 billion in 2020, while revenue was $13.1 billion, the company said. Alphabet has invested heavily in the business, hoping to capitalize as many industries embrace the shift to the cloud.