By Stephen Culp

NEW YORK (Reuters) – Wall Street closed higher on Thursday as market participants were reassured by U.S. Treasury Secretary Janet Yellen’s reassurances that measures will be taken to keep Americans’ deposits safe.

All three major U.S. stock indexes reversed an earlier rally, turning red before clawing their way back to positive territory in the final hour as Yellen resumed her congressional testimony.

Dropping Treasury yields, particularly an 18 basis point drop in two-year note yields, helped growth shares boost the Nasdaq to the head of the pack. [US/N]

“You watch this market and you watch it change direction in a short period of time and it’s based on some market participants’ interpretation over what someone said and how it affects how their trading,” said Thomas Martin, senior portfolio manager at GLOBALT Investments in Atlanta.

“The market as a whole is telling you is there are a lot of different ways to interpret all the things people are saying.”

The session followed Wednesday’s boom-and-bust moves after the Fed’s rate hike, Fed Chair Jerome Powell’s subsequent Q&A session and Yellen’s testimony before Congress in which she ruled out blanket protection for all deposits.

Interest rate hikes by central banks around the world have stressed the banking sector, which became manifest with the recent failures of SVB Financial Group and Signature Bank.

Jitters among regional banks persist, with the KBW Regional Bank index sliding 3.0%.

The S&P 500 banks index dipped 1.2% to its lowest level since November 2020, and it has now fallen over 40% from its record high in February 2022.

Comments from the Bank of England that inflation will probably quickly fade also helped fuel hopes of light at the end of the central bank tightening tunnel.

“Every central bank that was on path to raise rates raised them,” GLOBALT’s Martin added. “Therefore they’ve all identified that inflation is currently the most important issue and poses the most risk to the system, whereas the effect of higher rates on financial stability isn’t as much of a concern – although it remains highly concerning.”

The Dow Jones Industrial Average rose 75.14 points, or 0.23%, to 32,105.25, the S&P 500 gained 11.75 points, or 0.30%, to 3,948.72 and the Nasdaq Composite added 117.44 points, or 1.01%, to 11,787.40.

Of the 11 major sectors of the S&P 500, only communication services and tech ended the session higher.

First Republic Bank dropped 6.0% in volatile trading in the wake of Yellen’s testimony.

Chipmaker Nvidia Corp advanced 2.7% after Needham raised its price target.

Block Inc shares slid 14.8% after Hindenburg Research disclosed its short positions in the company.

Crypto exchange Coinbase Global Inc dropped 14.1% in the wake of the U.S. Securities and Exchange Commission’s threat to sue the company.

Accenture surged 7.3% after it announced plans to cut about 2.5% of its workforce.

Declining issues outnumbered advancing ones on the NYSE by a 1.59-to-1 ratio; on Nasdaq, a 1.12-to-1 ratio favored decliners.

The S&P 500 posted four new 52-week highs and 32 new lows; the Nasdaq Composite recorded 51 new highs and 296 new lows.

Volume on U.S. exchanges was 12.35 billion shares, compared with the 12.80 billion average over the last 20 trading days.

(Reporting by Stephen Culp; Additional reporting by Amruta Khandekar and Ankika Biswas in Bengaluru; Editing by Marguerita Choy)

(Reuters) – A recent ban of TikTok use on U.S. government-owned devices, coupled with new legislation in Congress seeking to block the app, have fueled expectations the popular Chinese-owned platform could soon be barred nationwide.

Adding to the perception, last week the company said the Biden administration had demanded TikTok’s owners divest their stakes in the popular video app or face a possible ban.

It is unclear how the Biden administration might implement such a ban, if it chose to move forward with a plan, but if history is any guide, a prohibition is unlikely to take effect any time soon. Here is why:

TRUMP

Citing national security concerns, then-President Donald Trump told reporters he planned to ban TikTok in July 2020, threatening to shut it down if it could not be sold by its Chinese owner Bytedance to a U.S. buyer.

In August, he issued two executive orders, one banning the app and another demanding Bytedance sell its U.S. business to U.S. companies.

But Trump’s attempt to block TikTok with an executive order derived its power from the International Emergency Economic Powers Act. That act exempts the import or export of “informational materials,” and “personal communication” through the Berman Amendment, which sought to protect speech.

“Banning the app – or any like it – would likely still be challenged under the First Amendment. It’s important to keep in mind the Berman Amendment under IEEPA is a proxy for the First Amendment. Even if it’s sidestepped, greater legal questions remain,” said John Costello, who oversaw the creation of the office at the Commerce Department to examine certain foreign technology for national security threats.

Meanwhile, the executive order forcing a divestment remains mired in negotiations between TikTok and the Biden administration over a potential national security agreement that could resolve the concerns prompting the ordered sale.

HOW A BILL BECOMES A LAW

Washington lawmakers have also launched two separate bills aimed at allowing the president to ban apps like TikTok on grounds they pose a risk to U.S. national security. But the bills, one in the House of Representatives and the other in the Senate, still need companion bills in the other chamber, as well as enough support to pass both houses and then President Joe Biden’s signature. The White House supports the Senate bill, known as the RESTRICT Act.

Considered the most likely to succeed, the Act would still likely take at least several months before it could garner enough support for a successful vote and the president’s signature. It could also be weakened before it reaches Biden.

Even if the RESTRICT Act is passed this year, the Commerce Department has up to six months to begin reviewing transactions with the new authorities, and up to six additional months to complete the reviews and take action.

TIKTOK’S DAY IN COURT

TikTok is likely to challenge any attempt to ban the app. The company was ultimately successful in quashing Trump’s effort to ban the app in the U.S.

“The First Amendment protects Americans’ right to access social media platforms of their choice,” said Jameel Jaffer, the executive director of the Knight First Amendment Institute at Columbia University. “To justify a TikTok ban, the government would have to demonstrate that privacy and security concerns can’t be addressed in narrower ways. The government hasn’t demonstrated this, and we doubt it could. Restricting access to a speech platform that is used by millions of Americans every day would set a dangerous precedent for regulating our digital public sphere more broadly,”

(Reporting by Chris Sanders in Washington; Editing by Matthew Lewis)

By Sheila Dang and Rami Ayyub

(Reuters) -U.S. lawmakers at a congressional hearing on Thursday accused TikTok of serving harmful content and inflicting “emotional distress” on young users, grilling the Chinese-owned app’s CEO on the company’s outsized influence on teens.

The hearing, which was TikTok Chief Executive Shou Zi Chew’s first appearance before Congress, comes at a critical moment for the wildly popular video app that is owned by ByteDance, a Chinese tech company. Lawmakers are pressuring the Biden administration to ban the app from the country.

U.S. lawmakers from both sides of the aisle quizzed Chew on whether American user data could be accessed by the Chinese government, but also demanded he address examples of harmful content posted on the app.

Rep. Cathy McMorris Rodgers, a Republican from Washington, kicked off the hearing saying that within minutes of creating an account on TikTok, the content algorithm promotes self-harm and eating disorder content, and encourages “dangerous” challenges that can put kids’ lives at risk.

Like other social media platforms, TikTok has long faced scrutiny over its policing of content on the app. The Center for Countering Digital Hate, a nonprofit that fights hate speech and disinformation, said in a December report that TikTok can “bombard” kids as young as 13 with eating disorder and self-harm content.

Similarly, Eko, a corporate accountability group, said its research found hashtags on TikTok that included suicide content had racked up over a million posts and 8.8 billion views.

Rep. Frank Pallone, a Democrat from New Jersey, said content on TikTok “exacerbated feelings of emotional stress” in children.

Chew testified that while the “vast majority” of TikTok users are over the age of 18, the company has invested in measures to protect young people who use the app.

Pew Research Center said 67% of U.S. teens ages 13 to 17 use TikTok, and 16% of all teens say they use the app almost constantly.

TikTok has rolled out more parental control tools recently, and earlier this month said it was in the early stages of developing a feature that would let parents block their teens from seeing videos that contain certain words or hashtags.

Rep. Bob Latta, Republican from Ohio, spoke during the hearing of a 10-year-old girl who suffocated herself doing a so-called “blackout challenge” from videos posted on the app.

Latta said TikTok should not be protected by Section 230 of the Communications Decency Act of 1996, a law that generally gives online platforms immunity for content generated by users.

Chew said such incidents were “devastating” and that dangerous challenges were prohibited from TikTok.

(Reporting by Sheila Dang in Dallas and Rami Ayyub in Washington; Editing by Mark Porter and Lincoln Feast.)

By Jonathan Stempel

NEW YORK (Reuters) – A key prosecution witness whose testimony helped convict Theranos founder Elizabeth Holmes of fraud sued Walt Disney Co on Thursday over a recent Hulu miniseries that he says defamed him by portraying him as corrupt.

Adam Rosendorff, a former Theranos lab director, objected in a New York state court filing to a fictional character who held the same job in “The Dropout,” which starred Amanda Seyfried as Holmes, chronicling her rise and fall at the blood-testing startup.

Rosendorff said the character, Mark Roessler, covered up Theranos’ fraud by ordering the destruction of damaging lab results, falsifying records and engaging in other dishonest and unethical conduct.

According to Rosendorff, the portrayal has had a “devastating effect” on his reputation and career as a physician because media and even acquaintances have concluded that Roessler was based on him.

“At the time of the trial, (Rosendorff) was considered a heroic whistle-blower, a witness who was instrumental in the jury’s verdict convicting Holmes,” the filing said. “Now he has been falsely portrayed as a perjurer, a criminal, and of being completely unfit to practice his profession.”

“The Dropout” made its debut last March.

Neither Disney nor Hulu immediately responded to requests for comment. Disney owns 67% of Hulu, while Comcast Corp’s NBCUniversal owns 33%.

Richard Altman, a lawyer for Rosendorff, said neither he nor his client would have additional comment.

Holmes, 39, was found guilty in January 2022 and later sentenced to 11-1/4 years in prison for defrauding investors in Theranos, which was once valued at $9 billion.

Now a mother of two young children, Holmes is trying to delay her sentence while she appeals her conviction. Prosecutors have opposed a delay, calling Holmes a flight risk.

The case is Rosendorff v Hulu LLC et al, New York State Supreme Court, New York County, No. 152734/2023.

(Reporting by Jonathan Stempel in New York; Editing by Bill Berkrot)