A version of this story first appeared in CNN Business' Before the Bell newsletter. Not a subscriber? You can sign up right here.
What's happening: Hertz, which filed for bankruptcy four weeks ago, said Thursday afternoon it was pulling the plug on its planned stock sale. It did so after learning Monday that the US Securities and Exchange Commission was looking into the move.
The company wanted to raise cash to help it through the bankruptcy process as retail investors piled into the company's shares. But the move raised eyebrows; even Hertz warned that the stock was likely to be worthless at the end of its bankruptcy reorganization.
The episode is a clear illustration of just how speculative the market has become. The S&P 500 is on track for another week of gains, its fourth in five weeks, even as virus cases spike in large swaths of the United States.
Investors are betting that unprecedented support from policymakers will be enough to keep propping up the market. That's created a new wave of "irrational exuberance," a term popularized by former Federal Reserve chairman Alan Greenspan, my CNN Business colleague Paul R. La Monica reports.
See here: The most-bought stocks on free trading app Robinhood over the last 30 days include a good chunk of what DataTrek Research cofounder Nicholas Colas calls "speculative trades that border on lottery tickets." The list includes Tesla competitor Nikola, the entertainment company Genius Brands (GNUS) and, of course, Hertz.
"Investors are bidding up some of the worst performing companies just because they believe the current [stimulus] policies will keep them afloat," Hussein Sayed, chief market strategist at FXTM, said in a report this week.
It's not a given that markets will continue to rise, Bank of America observed in a note to clients on Friday. The bank observed three main risks that could threaten the rally:
The pandemic gets worse, triggering a reversal in the reopening process.
Monetary or fiscal "fatigue" kicks in as central banks run low on ammunition and further rounds of government stimulus fail to impress.
Business and personal spending doesn't rebound as much as expected, and bankruptcies take a heavy toll.
But that hasn't dissuaded some retail investors, armed with time, access to no-fee trading and US stimulus checks.
Colas thinks the "new retail gold rush" may already be waning, based on Google search data for terms like "buy stocks" and "Robinhood." He doesn't see retail enthusiasm in and of itself as a reason to doubt stocks, noting that small investors are snapping up plenty of blue-chip names like Apple and Amazon, too.
Still, the Hertz episode underscores the warning from many Wall Street strategists: Markets are looking frothy.
Facebook and Twitter take fresh action against Trump content
Twitter (TWTR) and Facebook (FB) have taken new action against content shared by President Donald Trump that the companies said violated their policies, threatening to further escalate the fight between the White House and Silicon Valley.
Remember: Trump signed an executive order late last month targeting social media companies after Twitter called two of his tweets "potentially misleading." The legal authority of the order, which aims to reinterpret a law that shields websites and tech companies from lawsuits, remains in dispute.
The latest: Facebook said it had removed ads run by Trump's re-election campaign for breaching its policies on hate. The ads, which attacked what the Trump campaign described as "Dangerous MOBS of far-left groups," featured an upside-down triangle. The Anti-Defamation League said the triangle "is practically identical to that used by the Nazi regime to classify political prisoners in concentration camps."
And Twitter labeled a video Trump tweeted as "manipulated media," the third time Twitter has taken action against the president in a month.
CEO Mark Zuckerberg was criticized last month for not taking action on a Trump post that said "looting" leads to "shooting" amid racial unrest across the country. Twitter flagged the same Trump post on its platform as glorifying violence.
Investor insight: Shares of both companies were little changed Friday morning. Debate over Facebook's policies has not derailed its stock surge this year, with shares rising 15%, while the S&P 500 has shed nearly 4%. But following the executive order, the threat of fresh retaliation against Big Tech firms looms.
Companies give employees the day off for Juneteenth
This Friday marks Juneteenth, which celebrates the end of slavery in the United States. And this year, more than a dozen companies are, for the first time, giving employees a paid day off from work to observe it.
After weeks of nationwide demonstrations over the death of George Floyd and systemic racism, companies are scrutinizing their own issues with racial inequality and looking to better support black employees.
Last week, Nike (NKE), Twitter and a handful of other companies said they would observe June 19, or Juneteenth, as a paid holiday. Since then, a number of others have followed their lead, my CNN Business colleague Clare Duffy reports.
On the list: JCPenney (JCP) is giving corporate employees paid time off and providing added holiday pay for retail associates scheduled to work. Target (TGT) is also making Juneteenth a paid company holiday and giving hourly workers time-and-a-half pay. Best Buy (BBY) has offered employees a "paid volunteer day," which they can take on Friday or another day this year to engage in "peaceful protests, rallies and community service."
"This Friday, June 19, I ask that you take the day to honor the historic pain caused by — and lives lost to — racial inequity and celebrate racial diversity," JCPenney CEO Jill Soltau said in a message to employees. "This is an opportunity to continue to learn, connect with each other, and reflect on how we can move forward and achieve permanent and lasting change."
European leaders meet by video conference as debate continues over the bloc's coronavirus recovery plan.
Coming next week: Paris reopens as Europe ramps up its bid to restart tourism in the region.
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