SEC Pokes Nasdaq; Dow to 28,000?; Chinese M&A Sizzle
Recapping the day's news and newsmakers through the lens of CNBC.
Nasdaq Tagged With Record Facebook Fine
The Nasdaq was fined $10 million by the Securities and Exchange Commission for violations resulting from its "poor systems and decision-making" during the Facebook IPO—the largest-ever such fine for an exchange.
Facebook's IPO on May 18, 2012, was marred by technical glitches that left the market makers in the dark for hours as to which trades had been executed. Nasdaq said it "tested extensively" its systems before the IPO but the testing did not reveal the "design flaw" that caused the glitches, which cost investors about $500 million. Soon thereafter, Nasdaq OMX Group CEO Robert Greifeld apologized.
"[D]espite widespread anticipation that the Facebook IPO would be among the largest in history with huge numbers of investors participating, a design limitation in Nasdaq's system to match IPO buy and sell orders caused disruptions to the Facebook IPO. Nasdaq then made a series of ill-fated decisions that led to the rules violations."—SEC statement
"In the last year, we have carefully reviewed these events. As market leaders, we view our experiences as opportunities to learn and improve. As part of our commitment to continually improve, we have met with many market participants, engaged leading consultants, and closely examined the way we execute initial public offerings."—Robert Greifeld, in a statement
Market's Goin' Down but Fink's Thinkin' Big
Tuesday's good news wore off fast, as the collective weight of worries about rising interest rates, Syria, Cyprus and continued speculation over when the Fed would slow its bond buying sent the major equities indexes down. The consensus is that the market was overbought and that Wednesday's losses are most likely a short-term pullback.
In the long view, Larry Fink, chairman and CEO of BlackRock, has plenty of confidence, predicting on CNBC that the Dow will reach 28,000 in six years. The bull market in stocks has another five to six years left with the possibility of 8 to 10 percent annual growth, Fink said.
So where should you place your bets? Fink likes large, multinational companies with stable returns and higher dividends, not those with higher upside and greater volatility.
"The Federal Reserve may still take its foot off the pedal and we can debate when that will be—whether it's in September. I actually believe it will be later."—Larry Fink
Bringing Home the Bacon
To China, that is, in a $4.7 billion cash deal that saw Shanghui International buy U.S. pork producer Smithfield Foods at $34 a share. It'll surely catch the attention of the Committee on Foreign Investment in the U.S. in light of Tuesday's news about Chinese hackers gaining access to plans for top-shelf U.S. weapons systems, but shouldn't be too problematic, as they're primarily focused on matters pertaining to national security rather than matters of the national breakfast.
So on top of access to U.S. missile programs, the Chinese may now have easier access to American pork products, though there is a chance that the deal will be used as a bargaining chip when President Barack Obama visits Chinese President Xi Jinping in June.
"Tactically, for the U.S. government, this could be seen as the kind of sweetener that you offer the Chinese and say 'Hey, we're not going to raise any questions about this deal but we've got to deal with some of these other problems, so we'll give you one and we're going to need one from you.'"—CNBC's Eamon Javers
Not Far From the Tree
Apple CEO Tim Cook dropped a few hints as to what products might be in the pipeline Tuesday night in his keynote speech at the All Things Digital D11 Conference. As to the question of whether there'll be multiple versions of the iPhone meant for different regions, such as emerging markets, Cook said that historically, managing the hardware, the software and the services around it has been a lot of work. And regarding wearable technology, such as glasses or a watch, he said that the first step is getting people to believe that the product is so incredible, they'll wear it. That's a tall order, he said. His scant words were interpreted favorably by traders; Apple shares were up about 1 percent by the afternoon.
"If we had a room full of 10- to 20-year-olds and we said 'everybody stand up that has a watch on,' I'm not sure anybody would stand up. I don't see it."—Tim Cook
"Reading between the lines, a possible wider range of iPhones. Maybe a larger screen. Maybe cheaper ones. Of course, he didn't come out and say that. And also in the wearable technology front, not interested in glasses, more interested in the wrist—a device that does multiple things. He said nobody has done that well yet."—CNBC tech reporter Jon Fortt