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Apple hires BMW veteran in latest sign of electric car push

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This photo, taken in March 2019, shows Apple’s headquarters in Cupertino, California.

felixmizioznikov | iStock Editorial | Getty Images

Apple has hired Ulrich Kranz, a former senior executive at BMW who focused on electric cars, Apple confirmed to CNBC’s Phil LeBeau on Thursday.

The hire is the latest sign that Apple is serious about building an electric car to compete with automakers such as Tesla.

Hyundai said earlier this year it was in talks with Apple to manufacture its car before walking its comments back and confirming it was no longer in discussions.

Apple has never confirmed it is building a car but has hired talent from the automotive industry and tested self-driving software in California. In 2018, Apple hired Doug Field from Tesla, who worked on Tesla’s Model 3. With its expertise in supply chains, battery technology, and user experience, Apple would represent a major competitor to existing automakers if it ever releases a car. Apple’s car project has been restructured several times, most recently in early 2019.

Apple did not say whether Kranz will work on Apple’s car project, which is called Special Projects Group or SPG. But Kranz has extensive experience building teams focused on electric cars.

Before joining Apple, Kranz was a co-founder of Canoo, which is working on a self-driving electric car. At BMW, he led the company’s electric car development program, which resulted in the electric i3 vehicle and a hybrid sports car called the i8, according to Bloomberg, which first reported the hire.

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Didi Chuxing files for IPO, booked $6.4 billion revenue in Q1

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A logo of ride-hailing giant Didi Chuxing displayed on a building in Hangzhou in China’s eastern Zhejiang province.

STR | AFP | Getty Images

Chinese ride-hailing giant Didi Chuxing on Thursday filed to go public in what could be one of the largest tech IPOs of this year.

The company reported $21.6 billion in revenue last year. It also posted a profit this past quarter on $6.4 billion in revenue. Specifically, the company reported net income of $837 million before certain payouts to shareholders, and comprehensive net income of $95 million for the quarter.

Between 2019 and 2020, revenue shrunk almost 10% as the Covid pandemic struck China hard last year. However, prior to the pandemic, revenue grew 11% between 2018 and 2019. Additionally, revenue has bounced back in the first quarter as the pandemic recovery is in full swing, with 107% growth in Q1 from the previous year’s quarter.

Some of the company’s profitability in Q1 can be credited to gains on investments of $1.9 billion related to spin-offs and divestments.

Didi was most recently valued at $62 billion following an August fundraising round, according to PitchBook data. Bloomberg reported the company could have a $100 billion valuation at the time of its IPO.

Founded in 2012, Didi said it has 493 million annual active riders, and 15 million annual active drivers. Didi has been named to the CNBC Disruptor 50 list four times.

(The precise name of the company as registered on the F-1 is Xiaoju Kuaizhi.)

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Inflation hotter than expected, but temporary, won’t affect Fed policy

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Alex Tovstanovsky, owner of used-car dealer Prestige Motor Works, checks on inventory with his general manager Ryan Caton in Naperville, Illinois, May 28, 2020.

Nick Carey | Reuters

Consumer prices jumped more than expected in May, but the surge in inflation looks to be temporary and should not push the Federal Reserve to tighten policy for now.

The consumer price index rose 5% in May on a year-over-year basis, the highest since the summer of 2008, when oil prices were skyrocketing. Excluding food and energy, core CPI rose 3.8% year over year, the highest pace since 1992. A third of the increase was attributed to a sharp 7.3% increase in used car and truck prices.

Fed officials have described the current period of high inflation as transitory, meaning it should be brief or short-lived. They have expected several months of elevated price increases because of pent-up demand and supply chain lags. The comparison to last year’s weak levels — at a time when the economy was mostly shut down — is also a factor.

“The pick-up in inflation is stronger than expected, but it still looks like it is in transitory categories,” said John Briggs of NatWest Markets. “[Fed officials] can probably get away with talking about transitory.”

The Federal Reserve meets June 15 and 16. There was some market speculation that if inflation looked very hot, the central bank might move up the time frame in which it would discuss moving away from its easy policies.

Economists expect the first step toward easing would be when the Fed publicly discusses its decision to cut back on the $120 billion in Treasury and mortgage securities it buys each month.

The bond buying, or so-called “quantitative easing” program, was designed to create liquidity and keep interest rates low.

After starting the discussion about its bond program, the central bank is then expected to wait several months before beginning a gradual whittling away of purchases until it gets to zero. The Fed would then consider raising its target federal fund rate from zero, but that is not expected until 2023.

Many economists have been expecting the Fed to first talk about tapering bond buying at its Jackson Hole Economic Symposium in late August, before actually cutting the size of purchases in late 2021 or next year.

Mark Zandi, chief economist at Moody’s Analytics, said there’s evidence the price pressures could be fleeting, as the Fed expects.

“A lot of the surge in prices are for things that are just normalizing. … Hotels and rental cars and used vehicles, sporting events, restaurants. Everyone is just getting back to normal, so pricing is just returning to what it was pre-pandemic,” Zandi said.

However, he added that it’s too soon to say inflation won’t be more persistent than the Fed expects. “It’s premature to conclude all of this is transitory and where underlying inflation is ultimately going to land when we get through the price normalizations,” Zandi said. He expects when the surge is over, inflation will be at a higher level than it was pre-pandemic.

The Fed has said it would tolerate inflation running above its 2% target, and it would consider an average range for those price increases. That means it has committed to hold off on raising interest rates as soon as it sees inflation risks rising, as it has done in the past.

Financial markets took the surge in CPI in stride, and stocks jumped after the 8:30 a.m. ET report. The Dow gained more than 200 points but gave up its best gains. The 10-year Treasury was slightly higher at 1.49%, after initially rising as high as 1.53%. Yields move opposite price. Fears the inflation number would push the Fed to shift policy sooner would have driven yields much higher.

The components of higher prices

Economists said some of the price increases were surprising, but the price gains in the bigger contributors to CPI remained relatively subdued.

“The used car component is just stunning,” said Grant Thornton chief economist Diane Swonk. “What’s kind of surprising is how low the shelter component has remained. It’s coming up from where it decelerated. There’s now the question of it picking up. We have to watch that, but I would have expected more of a hotel room increase in shelter.”

Shelter accounts for more than 30% of CPI. The shelter index rose 0.3% in May, and 2.2% over the last 12 months. The rent portion rose 0.2%, and the index for owners’ equivalent rent — or the hypothetical amount a homeowner would charge someone to rent their dwelling — rose 0.3%. Lodging away from home rose just 0.4%, after jumping 7.6% in April.

Another big component, medical care, fell 0.1% after rising in the four previous months. Medical care prices rose just 0.9% over the past 12 months, the smallest increase since the period ending March 1941.

“Medical care and housing are two very large components of inflation. They’re both very sticky and a reason to think inflation will settle at a higher level but not at a level that is uncomfortable,” said Zandi. “The reason for being so sanguine is around medical care and housing.” He said the expansion of the Affordable Care Act has helped hold down medical costs.

The pick-up in inflation is stronger than expected, but it still looks like it is in transitory categories.

John Briggs

NatWest Markets

Grant Thornton’s Swonk said she does not expect much from the Fed next week and the inflation report does not change that.

“The remarkable resilience of the long bond — it gives the Fed the opportunity to think about tapering, because financial markets are buying it as a transitory surge in inflation,” Swonk said, referring to the 30-year Treasury.

Investors have been buying the 10-year and 30-year Treasury bonds since last week’s weaker-than-expected May jobs report. The 30-year yield has fallen to 2.16%. Bond yields move opposite prices.

For now, investors are not fearful the Fed will move sooner, but Swonk says there could still be a few more hot inflation reports.

“It’s higher than [Fed officials] would like. It surprised to the upside. My guess is it lasts longer than they expect. I expect it to last longer and be hotter but still go away,” she said.

But she still expects the Fed to wait until the end of the summer to talk about changing its bond purchases.

“I always expected tapering talk to begin more openly at the Jackson Hole meeting. It hasn’t changed my view. Some people thought the Fed would get closer to full employment before they did liftoff on tapering,” Swonk said.

She said some data in the CPI report dovetails with the jobs data. The economy created 559,000 jobs in May, about 100,000 less than expected.

“If you look at the combination of events — used car prices, insurance costs on vehicles, all of these things accelerated and now they’re rebounding. Prices at the pump, they’re up over 50% from a year ago,” Swonk said. “All of this is making it harder for workers to get to low-wage jobs.”

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Meme stocks hit a wall on Thursday with GameStop, AMC and Clover down big

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The WallStreetBets forum on the Reddit Inc. website on a laptop computer and the logo on a smartphone arranged in Hastings-On-Hudson, New York, U.S., on Friday, Jan. 29, 2021.

Tiffany Hagler-Geard | Bloomberg | Getty Images

The meme-stock mania created by the day-trading Reddit crowd fizzled a bit on Thursday.

It’s easy come, easy go for many speculative names favored by retail investors including AMC Entertainment and GameStop as they suffered double-digit losses on Thursday, pulling back from their recent explosive rallies. The video game retailer shed more than 20% even after announcing two high-profile executive hires from Amazon. The movie theater chain dropped 10% Thursday, turning negative on the week.

Another red-hot meme stock Clover Health, which at one point occupied the WallStreetBets’ message board this week, pulled back 10% Thursday. Clean Energy Fuels, which rallied over 31% just Wednesday, tumbled 15%.

If the January trading mania is any guide, it’s not surprising that these latest rallies are turning out to be short-lived. A CNBC PRO analysis available exclusively to subscribers found that on average, Reddit stocks’ runs lasted nine trading days from the start to their first big drop during the initial frenzy at the beginning of 2021.

CNBC identified the starting point for five stocks popular on message boards earlier this year — GameStop, AMC, Bed Bath & Beyond, BlackBerry, and Koss Corp. — by finding the first time each stocks’ single-day trading volume at least doubled its 30-day moving average of shares traded. That typically represents the point at which a flurry of new investors took interest in a stock that was not being heavily traded.

On Thursday, GameStop investors seemed to be running for the exits after the company said it appointed former Amazon executive Matt Furlong as its new CEO. It also picked another former Amazon executive, Mike Recupero, as chief financial officer. Meanwhile the company’s fiscal first-quarter results showed sales up 25% and a narrower loss than it reported a year ago.

The decline in shares came as GameStop also said it may sell as many as 5 million shares. Additional shares dilute the value of existing shareholders’ stakes. The stock is still up more than 1,100% on the year, however.

AMC is down for a second straight day after soaring 83% last week. The movie theater, which was on the brink of bankruptcy not long ago, managed to sell 20 million shares in two separate deals last week amid the rally, generating around $800 million in capital.

— CNBC’s Nate Rattner contributed reporting.

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