The stock market bounced back early Thursday, recovering a portion of the steep losses from late Wednesday. Investors appear to be trying to come to grips with the Federal Reserve's adamant stance in fighting inflation, even if it means raising interest rates to levels that could have detrimental effects on the economic picture. Shortly after the open, major stock indexes were higher, with the Nasdaq Composite (^IXIC -0.07%) climbing more than 1.25%.

However, there were some companies that didn't manage to participate in the rally. Shares of Coinbase Global (COIN 4.23%) and Chewy (CHWY -5.48%) fell to begin the session, and shareholders need to understand what's happening with these businesses and what motivated the declines in their stock prices.

Coinbase prepares for a fight

Shares of Coinbase Global fell 16% early Thursday morning. Shareholders weren't happy to see that the company faces a new threat from the U.S. Securities and Exchange Commission (SEC) that could bring about something that many investors have feared for quite a while.

Coinbase made a regulatory filing that disclosed that the SEC had served it with what's known as a Wells Notice. This advised the cryptocurrency exchange that the regulatory body has made a preliminary determination that SEC staff members are recommending the filing of a formal enforcement action against the company. Such an action would allege violations of various securities laws.

In particular, Coinbase believes that the target of the SEC action will be its Coinbase Earn, Prime, and Wallet products. It's not clear what relief the SEC would seek from a court in such an action, but Coinbase believes that regulators could seek to stop the exchange from continuing to offer those services, or it could seek civil penalties or disgorgement of profits from the business segments.

Coinbase pushed back hard in a blog post on its own website, arguing that it had lobbied extensively for lawmakers to impose reasonable regulation throughout the cryptocurrency industry. Specifically, Coinbase stated that there's no way to register with the SEC as a crypto exchange, and it still believes that its listings aren't securities.

Cryptocurrency is a murky area from a regulatory standpoint, and that's part of why shareholders in Coinbase are reacting so strongly to the SEC move. In the long run, though, the company is right that regulators need to do a better job of defining their role to protect investors.

Chewy falls despite reversing year-ago losses

Elsewhere, shares of Chewy were down 4% shortly after the beginning of the morning trading session on Thursday. The pet products retailer reported fiscal fourth-quarter financial results for the period ended Jan. 29, and despite making significant progress in rebounding from tough conditions, shareholders still weren't satisfied with how far Chewy has come.

Chewy's financial numbers looked solid. Sales of $2.71 billion were up 13% year over year. Gross margin jumped nearly 3 percentage points to 28.1%, and adjusted net income of $69.6 million reversed a year-ago loss of nearly $48 million. That produced adjusted earnings of $0.16 per share, closing a year in which Chewy posted an adjusted profit of $0.53 per share.

Yet investors weren't happy to see that active customer counts stopped growing. The figure of 20.4 million active customers was down 1.2% from year-ago levels, which Chewy believes was a result of reduced discretionary income available for consumers to spend.

In the long run, Chewy does need to keep finding ways to promote its growth. Otherwise, the stock might not be able to recover to its heights from early 2021.