Romeo boosts the stock market, but that bank’s hedge fund suffers on Tuesday
Shares were generally higher on Tuesday morning, with most of the major market benchmarks continuing to climb and add to Monday’s gains. The general enthusiasm for the outlook for the stock market has made investors cheerful about the prospects of further increases in the most popular indices, both in the United States and abroad. Just before noon EDT, the Dow Jones Industrial Average (DJINDICES: ^ DJI) had dropped slightly by 17 points to 33,510. However, the S&P 500 (SNPINDEX: ^ GSPC) had advanced into record territory, gaining 7 points to 4,085. Nasdaq Composite (NASDAQINDEX: ^ IXIC) had even bigger gains of 65 points to 13,771.
There has been a lot of interest lately in stocks that offer alternative energy sources to standard internal combustion engines, especially given the increase in fuel costs. stocks of electric vehicles and suppliers. The last beneficiary of this trend on Tuesday was Romeo Power (NYSE: RMO), whose shares have skyrocketed on news of a new collaboration. During this time, Swiss credit (NYSE: CS) revealed how badly he suffered in his loans to a highly leveraged hedge fund that has taken a heavy hit in recent weeks.
No tragedy for Romeo Power
Romeo Power stock was up 28% on Tuesday at noon. The manufacturer of electrification solutions for commercial customers has secured a valuable supply contract that could generate significant revenue for years to come.
Romeo’s new partnership is with PACCAR (NASDAQ: PCAR), a leading manufacturer of commercial trucks under the Kenworth, Peterbilt and DAF brands. Under the terms of the agreement, Romeo will supply batteries for the battery-powered electric versions of PACCAR’s Peterbilt 579 and 520 trucks. Although production is not expected to start until the end of this year, Romeo expects the supply agreement to run until 2025.
PACCAR’s support is a vote of confidence for Romeo. The truck maker said it sees the commercial electric vehicle supplier as a key player in making the electrification of commercial vehicles not only possible, but also convenient and cost effective.
Many investors have focused on the consumer electric vehicle market, but integrating electric transmissions into commercial vehicles could be much more important for the transition from traditional gasoline and diesel engines. Romeo recently disappointed investors, but it could have a lot of growth ahead if it can meet PACCAR’s supply needs.
A shrug from Credit Suisse shareholders
Elsewhere, Credit Suisse shares were little changed on Tuesday. Shareholders did not appear fazed despite the release of details regarding the financial impact of the bank’s role in the Archegos Capital Management debacle.
Credit Suisse will support 4.4 billion Swiss francs, or about $ 4.7 billion, related to the collapse of the hedge fund. The charge will eat away at all the bank’s expected profits for the first quarter and result in a loss of 900 million Swiss francs. Additionally, the hit will mean Credit Suisse will suspend its share buyback program, as well as cut its dividend payments by nearly two-thirds.
A pair of executives will take the fall for the failure of risk management. Among them are Lara Warner, the bank’s chief risk and compliance officer, and Brian Chin, head of Credit Suisse’s investment banking unit.
Even with relative calm today, Credit Suisse shares have fallen almost 20% in the past two weeks alone. The news shows how dangerous Wall Street can be these days, and it highlights the persistence of systemic risk in the global banking industry despite the painful lessons learned from the financial crisis of 2008 and 2009.
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