Tuesday,
July 20, 2021

Market recap

Dow Jones

33,962.04

-725.81 (-2.09%)

S&P 500

4,258.49

-68.67 (-1.59%)

Nasdaq

14,274.98

-152.25 (-1.06%)

American Airlines

$18.97

-$0.82 (-4.14%)

ExxonMobil

$55.35

-$1.97 (-3.44%)

Zoom

$353.83

-$8.14 (-2.25%)

Amid evolving news surrounding COVID-19 and the economic reopening, your financial needs are our top priority. For more information,click here.

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Top Story

Rising COVID-19 Cases Cause Concern for Investors

Dow Jones Industrial Average Declines

Stocks in the US plummeted Monday amid concerns that an increase in the number of new COVID-19 cases could hurt economic recovery and slow global growth. As of midday trading the Dow Jones Industrial Average was heading toward its largest decline in 2021.

The Dow finished Monday’s trading session down 726 points or 2%. Meanwhile the Nasdaq lost 1% for the day and the S&P 500 was down 1.6%. Adding to concerns about a slowing economy, the 10-year Treasury yield fell to a new five-month low.

Travel, Recovery Stocks Selloff

Since the start of July, the number of COVID-19 cases has been rising among people who are not vaccinated as the Delta variant of the virus spreads. The US is averaging close to 30,000 new cases per day as of Friday. That is up from a seven-day average of about 11,000 cases per day last month.

Some investors are worried that more shutdowns and restrictions could be coming. Airline stocks including Delta Air Lines (DAL), United Airlines (UAL), and American Airlines (AAL) were under pressure as were cruise lines and other travel companies. Boeing (BA), General Motors (GM), and Caterpillar (CAT), all considered recovery plays, were also lower as a result of the rising case numbers.

Still Reasons to be Optimistic

Oil stocks took a significant hit in Monday’s selloff as prices for oil fell amid fears about a slowing economy. It did not help that OPEC+ agreed to start phasing out cuts to production. ConocoPhillips (COP) and ExxonMobil (XOM) were among the oil stocks to take a hit. Bank and tech stocks also suffered from the broad-based selloff.

Despite the declines Monday, many investors, including billionaire Bill Ackman, are not concerned about the impact of rising COVID-19 cases on economic growth. They argue the Delta variant could motivate more people to get vaccinated. It will be interesting to see if bulls or bears win out during what will likely be a volatile week on Wall Street.

Paying for College: Federal vs. Private Loans

If you aren’t awarded a scholarship or grant, there are a variety of student loans you can apply for to help pay for college, including federal and private loans.

The Federal Direct Loan Program offers both subsidized and unsubsidized loans. Subsidized loans are awarded based on financial need. The interest accrued on a subsidized loan is covered by the Department of Education while the borrower is enrolled at least half-time, during the grace period, and during periods of deferment. Unsubsidized loans don’t have a financial need requirement, and borrowers are responsible for paying the interest on an unsubsidized loan once it’s disbursed.

If you’ve already exhausted your federal aid options, you may also want to consider a private student loan, which is not subsidized or need-based and may require a cosigner. Banks and financial institutions, private organizations, and even some colleges offer student loans with varying interest rates and loan terms.

In the spirit of transparency, SoFi strongly believes you should exhaust all of your Federal grant and loan options before you consider SoFi as your private loan lender. But if you need a little extra help paying for college, consider a private student loan with SoFi. Plus, cosigners get a $200 signing bonus into a SoFi Money® account once the loan funds.


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Zoom Uses Rising Stock Price for Big Purchase

Zoom Buys Five9 for $14.7 Billion

Zoom (ZM), the video communication platform which became a household name during the pandemic, is buying Five9 (FIVN), a customer service software company, for $14.7 billion in an all-stock deal.

Zoom’s popularity surged during the pandemic as people turned to the platform as a way to work and socialize while social distancing. Zoom’s value has more than tripled since March of 2020,gaining more than 46% this year alone. Zoom is now using some of its fortune to make what is its biggest purchase to date.

The acquisition of Five9 will help Zoom expand the services it offers its enterprise customers. With Five9, which makes customer service software, Zoom can expand into the $24 billion call center market.

Zoom Chases New Growth

Zoom was focused on managing an onslaught of new users in the early days of the pandemic, but more recently it has been making moves to ensure it can continue to grow once life returns to normal. Zoom recently acquired Keybase, to add end-to-end encryption to its offering, and Kites, which makes translation software.

Five9 will support Zoom Phone—an offering to replace companies’ traditional telephone networks with cloud-based systems.

This market has been growing in popularity in recent years. The pace of adoption for the technology picked up during the pandemic when call center employees were forced to work from home. Other competitors in the market include Amazon’s (AMZN) cloud unit, Genesys Telecommunications Laboratories (GCTI), and NICE inContact (SAAS).

Tech Companies Make Transformative Buys

Zoom, which has a market capitalization of around $106 billion, has been seeing record growth even as people begin returning to pre-pandemic habits. For the three months which ended April 30, the company’s revenue was up 191%.

Zoom is among a growing number of technology companies which are using their high share prices to bankroll acquisitions. Salesforce.com (CRM) spent $27.7 billion to acquire Slack Technologies, and Advanced Micro Devices (AMD) paid $35 billion for the chipmaker Xilinx in 2020. These companies are diversifying and expanding to protect the growth they saw during the pandemic.

Fast Radius Goes Public Via SPAC Transaction

Digital Manufacturing Company Inks SPAC Deal

Fast Radius, a digital manufacturing company, is going public via a SPAC deal with ECP Environmental Growth Opportunities (ENNV). The deal values the company, which counts United Parcel Services (UPS) as a backer, at $1.4 billion. Fast Radius uses a cloud software platform, 3D printing, and other manufacturing technologies to accelerate the time it takes to make products for customers. Some of Fast Radius's customers include Rawlings, a baseball glove maker, and Colgate-Palmolive (CL).

Fast Radius is the latest company transforming manufacturing with advanced technologies to go public through a SPAC deal. These types of companies are attracting the attention of investors who see potential in the space as large corporations look for ways to improve supply chains and ramp up the pace of innovation.

Investors Turn to Manufacturing

Just last week, Fathom Digital Manufacturing went public via a $1.4 billion SPAC deal. Desktop Metal, Velo3D, Bright Machines, Markforged, and Shapeways all agreed to SPAC deals earlier this year.

3D Systems (DDD) and ExOne (XONE) are popular stocks, both appreciating during the past year. The excitement on the part of Wall Street for these companies is enabling many to garner high valuations and raise a lot of money which can be invested in their operations. Fast Radius is expected to have $25 million in sales this year and to generate $445 million from the SPAC transaction. Of that money, $100 million is coming from a private investment in public equity.

SPACs Gain Popularity Among Manufacturers

The PIPE agreement includes a forward purchase agreement with Goldman Sachs Asset Management (GS), and investments from UPS (UPS) and Palantir Technologies (PLTR). The ECP Environmental Growth Opportunities SPAC raised $345 million in February and is backed by Energy Capital Partners, a private equity firm.

SPACs have become a popular way to raise money for digital manufacturing companies, partly because the companies can make future projections, something that is not permitted with an IPO. It will be interesting to see if this trend continues, and which startups may be next to go public via a SPAC deal.

Not-So-Breaking News

  • Dish Network (DISH) and AT&T (T) inked a 10-year deal worth at least $5 billion in which AT&T will become Dish’s main wireless partner. AT&T will provide voice, data, and messaging to Boost Mobile, Ting, and Republic Wireless, the mobile virtual network operators which Dish owns.
  • Italian luxury company Zegna is going public in the US via a $3.2 billion SPAC deal. Proceeds will be used to expand in Asia and the US. This is the latest example of a family-owned fashion house tapping outside investors to fund expansion.
  • Pershing Square Tontine, the SPAC backed by Bill Ackman, announced it is no longer buying a 10% stake in Universal Music Group (VIVHY). The billionaire investor’s Pershing Square hedge fund is buying the stake instead.
  • Tencent (TCEHY) is buying UK-based game developer Sumo for $1.27 billion. The deal will expand China-based Tencent’s global reach. Tencent is paying a 43% premium from Sumo’s last closing stock price.
  • Home insurance tech startup Kia Insurance is going public via a reverse merger with Omnichannel Acquisition Corp. The deal values Kin Insurance at about $1.03 billion.
  • There are a few different options when it comes to financing a college education, and it’s important to understand the pros and cons of each. We’re getting into the nitty gritty of private vs. federal student loans—to help you determine what makes sense for you.

Financial Planner Tip of the Day

"Saving money in college can feel like an impossible task, but having an effective budget in place can help. Starting the college experience with a budget in place can help curb impulse purchases, and can actually relieve some of the pressure around spending. If a student knows how much money they can allocate for, say, going out, it could be easier to say no to the pressure of a spendy night out with friends."

Brian Walsh, CFP® at SoFi

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