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Tag: Advertising/Marketing/Public Relations

  • Intuit braces for negative FTC ruling on free tax prep advertising, vows appeal

    Intuit braces for negative FTC ruling on free tax prep advertising, vows appeal

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    More than a year ago, the Federal Trade Commission sued Intuit Inc., the maker of TurboTax, for allegedly tricking people into thinking they could file their income taxes for free with the tax-preparation giant.

    Now, an administrative judge inside the agency has ruled against Intuit — and the company said in a Friday afternoon SEC filing that it’s going to keep fighting the case, even if that means incurring “significant costs.”

    “We expect to appeal this decision to the FTC Commissioners and, if necessary, then to a federal court of appeals. We intend to continue to defend our position on the merits of this case,” the company said in its 10-K filing.

    “There is no monetary penalty, and Intuit expects no significant impact to its business,” Intuit spokesman Rick Heineman said in a statement. The company will appeal “this groundless and seemingly predetermined decision by the FTC to rule in its own favor,” he said.

    Intuit already reached a $141 million settlement with state attorneys general about the allegations of deceptive advertising. The company says it has been clear and upfront with customers about costs. It did not admit liability in the settlement.

    The FTC could not be immediately reached for comment Friday afternoon.

    In March 2022, the regulator sued Intuit in federal court to immediately stop commercials that repeated “free” over and over. Intuit pulled some of the advertising and after filing season ended, a San Francisco federal judge said the FTC bid for emergency halts didn’t need to happen under the circumstances.

    FTC lawyers also lodged an internal administrative complaint. “Intuit widely disseminated ads on television, on the radio, and online that gave consumers the impression that they could use TurboTax for free, even though two-thirds of taxpayers don’t qualify for Intuit’s free TurboTax offerings,” they wrote in administrative complaint proceedings.

    The ongoing legal fight is happening while the broader fight over of free tax preparation is heating up. The Internal Revenue Service is planning to test its own pilot program in the upcoming filing season where taxpayers can file their taxes directly with the IRS instead of through tax preparation companies or individual preparers.

    TurboTax and the tax software industry oppose the proposed IRS direct file system. So do Congressional Republicans.

    One sticking point in the looming government shutdown is how much money the IRS should be getting in its budget. The House appropriations bill would forbid the IRS from using any money to build the direct file system.

    Intuit Inc.
    INTU,
    +1.44%
    shares closed 1.4% higher Friday, at $549.60, and the disclosure didn’t seem to be having much effect on the shares in after-hours trading. Shares are up 41% year to date, while the Dow Jones Industrial Average
    DJIA
    is up 5% and the S&P 500
    SPX
    is up 17.6%.

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  • Labor Day is just a ‘milestone’ in the marathon to get workers back to the office

    Labor Day is just a ‘milestone’ in the marathon to get workers back to the office

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    The U.S. Labor Day holiday will mark another milestone in the marathon to bring workers back to the office, but it won’t be a quick fix for landlords, according to Thomas LaSalvia, head of commercial real estate economics at Moody’s Analytics.

    Employers from Facebook parent Meta
    META,
    +0.27%
    to Goldman Sachs
    GS,
    -0.26%
    recently laid out mandates for staff to return to the office more frequently, starting this fall, including the big one — the federal government.

    “A lot of companies are saying that after Labor Day, ‘We expect more out of you,” LaSalvia said, referring to days in the office. Still, office attendance, he argues, likely only stages a fuller comeback if a job or promotion is on the line.

    Amazon.com Inc.’s
    AMZN,
    +2.18%
    Chief Executive Andy Jassy has been trying to drive home the point by warning staff to return at least three days a week, or face the consequences.

    That could prove difficult, with Friday’s U.S. jobs report for August expected to show U.S. unemployment at a scant 3.5%, near the lowest levels since the late 1960s, even if hiring has been slowing. The labor market, so far, appears unfazed by the Federal Reserve’s benchmark rate reaching a 22-year high.

    It has been a different story for landlords facing a roughly 19% vacancy rate nationally and piles of debt coming due, especially for owners of older Class B and C office buildings with a bleak outlook or properties in cities with wobbling business centers.

    See: San Francisco’s office market erases all gains since 2017 as prices sag nationally

    As with shopping malls, LaSalvia said it’s largely a problem of oversupply, with many office properties at risk of becoming obsolete as tenants flock to better buildings and locations staging a rebirth. The trend can be traced in leasing data since 2021, with Class A properties in central business districts (blue line) showing a big advantage over less desirable buildings in the heart of cities (orange line).

    Return to office isn’t going to save the entire office property market


    Moody’s Analytics

    “Little by little, we are finding the office isn’t dead,” LaSalvia said, but he also sees more promise in neighborhoods with a new purpose, those catering to hybrid work and communities that bring people together.

    Another way to look at the trend is through rents. Manhattan’s Penn Station submarket, with its estimated $13 billion overhaul and neighboring Hudson Yards development, has seen asking rents jump 32% to $74.87 a square foot in the second quarter since the fourth quarter of 2019, according to Moody’s Analytics. That compares with a 2% bump in asking rents in downtown New York City to $61.39 a square foot for the same period.

    The push for a return to the office also doesn’t mean a repeat of prepandemic ways. Goldman Sachs analysts estimate that part-time remote work in the U.S. has stabilized around 20%-25%, in a late August report, but that’s still up from 2.6% before the 2020 lockdowns.

    Furthermore, the persistence of remote work will likely add another 171 million square feet of vacant U.S. office space through 2029, a period that also will see tenants’ long-term leases expire and many companies opting for less space. The additional vacancies would roughly translate to 57% of Los Angeles roughly 300 million square feet of office space sitting empty.

    “The fundamental reason why we had offices in the first place have not completely disintegrated,” LaSalvia said. “But for some of those Class B and C offices, the writing was on the wall before the pandemic.”

    U.S. stocks were mixed Thursday, but headed for losses in a tough August for stocks, with the S&P 500 index
    SPX
    off about 1.5% for the month, the Dow Jones Industrial Average
    DJIA
    2.1% lower and the Nasdaq Composite
    COMP
    down 2% in August, according to FactSet.

    Related: Some employers mandate etiquette classes as returning office workers walk barefoot, burp loudly and microwave fish

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  • Heineken is the latest Western corporate giant to exit Russia

    Heineken is the latest Western corporate giant to exit Russia

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    Beer giant Heineken N.V. is the latest Western company to exit Russia, announcing Friday the sale of its Russian operations to Arnest Group for one euro.

    Under the terms of the deal, all of Heineken’s
    HEIA,
    +0.77%
    remaining assets, including seven breweries in Russia, will transfer to the new owners, the beer giant said in a statement. The Russian Arnest Group has also taken over responsibility for Heineken’s 1,800 employees in Russia.

    Heineken began the process of exiting Russia in March 2022, following that country’s invasion of Ukraine. The company said it expects to incur a total cumulative loss of €300 million ($324.1 million) as a result of its exit.

    “We have now completed our exit from Russia. Recent developments demonstrate the significant challenges faced by large manufacturing companies in exiting Russia,” Heineken CEO Dolf van den Brink said in a statement. “While it took much longer than we had hoped, this transaction secures the livelihoods of our employees and allows us to exit the country in a responsible manner.”

    Related: Unilever CEO vows to look at Russian operations with ‘fresh eyes’ as pressure to exit the country mounts

    A number of major Western corporations, including U.S. giants Apple Inc.
    AAPL,
    +1.26%    ,
     Alphabet Inc. 
    GOOGL,
    +0.08%

    GOOG,
    +0.21%    ,
     Amazon.com Inc.
    AMZN,
    +1.08%    ,
     International Business Machines  Corp. 
    IBM,
    +1.25%
    and McDonald’s Corp. 
    MCD,
    +0.79%    ,
    have left Russia in response to Moscow’s February 2022 invasion of Ukraine.

    Earlier this week, DP Eurasia, the master franchiser of the Domino’s Pizza Inc.
    DPZ,
    +0.49%
    brand in Turkey, Russia, Azerbaijan and Georgia, also announced its exit from Russia.

    But Heineken is “no hero,” according to Mark Dixon, the founder of the Moral Rating Agency, an organization set up after the invasion of Ukraine to examine whether companies were carrying out their promises of exiting Russia. “It failed to leave Russia for a year and a half,” he told MarketWatch via email. “The explanation that it took longer than expected doesn’t hold water, because of course it’s difficult to find a buyer if you remain so long a pariah state.”

    The Ukraine Solidarity Project said that Heineken’s move should increase the pressure on companies that remain in Russia, such as consumer-goods giant Unilever PLC
    ULVR,
    +0.44%    .
    “The point here is that major companies, like @Heineken, are and have taken loses of hundreds of millions and billions in leaving the Russian market. It is possible,” the Ukraine Solidarity Project tweeted Friday. “We’re sure @Unilever can do it, too.”

    Related: WeWork, Carl’s Jr., Unilever and Shell among companies slammed by Yale over operations in Russia

    The Ukraine Solidarity Project recently launched a high-profile campaign urging Unilever to get out of Russia, using images of Ukrainian veterans injured in the war with Russia. Last month, activists from the Ukraine Solidarity Project held up a giant poster featuring the veterans outside Unilever’s London headquarters.

    The Moral Rating Agency has also reiterated its calls for Unilever to end its Russian operations. 

    “We have always said we would keep our position in Russia under close review,” a Unilever spokesperson told MarketWatch earlier this month. The spokesperson also directed MarketWatch to a statement on the war in Ukraine that the company released in February 2023.

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  • Nvidia may be the AI stock for now, but here are the picks for later, says Goldman Sachs

    Nvidia may be the AI stock for now, but here are the picks for later, says Goldman Sachs

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    Wall Street looks ready to build on Monday’s gains, the first in five sessions for the S&P 500
    SPX
    and Nasdaq Composite
    COMP.
    That’s as expectations build around Nvidia, which has had a lackluster August, to knock it out of the park with earnings on Wednesday.

    Investors have had months to focus on AI darlings such as Nvidia. In our call of the day, Goldman Sachs takes a look at stocks to trade after the big AI trade. A team led by strategists Ryan Hammond and David Kostin complied a basket of companies with the biggest potential long-term earnings per share boost from the impact of AI adoption on labor productivity.

    Their analysis indicates that following widespread AI adoption, EPS for the median stock in that basket could be 72% higher than the baseline, versus 19% for the median Russell 1000 stock.

    “We estimate the potential productivity-related EPS boost from increased revenues or increased margins, using a combination of company-level estimates of the share of the wage bill exposed to AI automation and the labor cost to revenue ratio,” said the Goldman team.

    Since early 2023, when AI emerged as a theme for investors, they note their long-term basket of stocks has outperformed the equal-weight S&P 500 by just 6 percentage points, far less than near-term beneficiaries such as Nvidia
    NVDA,
    -0.49%    ,
    Microsoft
    MSFT,
    +0.94%
    or Meta
    META,
    +0.51%    .


    Goldman Sachs Investment Research

    “The estimated AI-driven earnings boost is likely to occur over the next few years, but should be reflected in stock valuations sooner. However, the eventual share price impact will depend on the ability of companies to use AI to enhance earnings,” said Goldman.

    While unable to pin it exactly, Goldman expects AI adoption will start to a have a “meaningful macro impact” between 2025 and 2030, with regulatory constraints and data privacy concerns likely to slow widespread adoption. Nearly 75% of CEOs see AI take-up impacting companies or cutting labor needs within the next five years, even if they don’t right now.

    Firms with the biggest workforce exposure to AI and larger and more innovative ones, will likely adopt generative AI earlier than others, say the strategists. They say to “expect valuation multiples for these companies to increase first as the adoption timeline crystallizes, even if actual adoption and the associated EPS boost is occur later.”

    Goldman’s estimates on the potential earnings boost for those long-term AI beneficiaries consist of several factors: the share of each company’s wage bill exposed to AI automation, how much of a company’s wage bill is exposed to AI automation and labor cost as a share of revenue.

    “For the typical Russell 1000 stock, 33% of the wage bill is potentially exposed to AI automation and labor costs currently represent 14% of total sales. The potential boost from higher sales would increase earnings by 11% and reduced labor costs would increase earnings by 26%, all else equal,” say the strategists.

    Here is a taster of their long-term AI beneficiaries basket:


    Goldman Sachs

    And a few more:


    Goldman Sachs

    Read: U.S. stocks may bounce this week, but summer selloff is only halfway done, analysts warn

    The markets

    U.S. stocks
    SPX

    COMP
    are trading mixed. The yield on the 10-year Treasury
    BX:TMUBMUSD10Y
    is steady at 4.33%.

    For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

    The buzz

    Microsoft
    MSFT,
    +0.94%
    has proposed a Ubisoft license to win U.K. regulatory approval for its Activision Blizzard
    ATVI,
    +1.09%
    buyout. Activision shares and Ubisoft
    UBI,
    +9.93%
    surged in Paris.

    On the heels of a 7% surge, EV-maker Tesla
    TSLA,
    +2.77%
    is up 1.8%.

    Opinion: SoftBank’s Arm is going public, but it faces a rapidly growing threat

    Lowe’s shares
    LOW,
    +3.34%
    are up after the DIY retailer’s earnings topped expectations, though it notes lower discretionary demand.

    Among Monday’s late earnings news: Fabrinet
    FN,
    +27.25%
    is up 18% after the high-tech manufacturing services company upbeat forecast, with new AI products helping drive results. Videoconferencing group Zoom Video Communications
    ZM,
    -4.15%
    is up 4% after reporting an earnings jump and guidance.

    Read: Why Amazon is this analyst’s top internet stock pick

    The world’s biggest miner BHP
    BHP,
    -0.98%
    reported a 58% slump in annual profit amid tumbling commodity prices in part due to China’s economic troubles. U.S.-listed shares are up 4%.

    Arm Holdings filed its long-awaited IPO, which could be the year’s biggest. The chip designer aims to raise up to $10 billion with a valuation of $60 billion to $70 billion.

    Existing home sales for July are due at 10 a.m., with several Fed speakers throughout the day: Richmond Fed President Tom Barkin at 7:30 a.m. and Chicago Fed President Austan Goolsbee and Fed. Gov. Michelle Bowman both at 2:30 p.m.

    Best of the web

    ‘Own what the Mother of All Bubbles crowd doesn’t.’ This market strategist expects stagflation and is investing for it now.

    New video shows the day police raided 98-year old Kansas newspaper owner’s home.

    Hitler’s birth house in Austria will be turned into a police station with a human rights training center.

    The tickers

    These were the top tickers on MarketWatch as of 6 a.m.:

    Ticker

    		 Security name
    TSLA,
    +2.77%         		Tesla
    NVDA,
    -0.49%         		Nvidia
    AMC,
    -17.31%         		AMC Entertainment
    NIO,
    -1.87%         		Nio
    APE,
    -11.32%         		AMC Entertainment Holdings preferred shares
    TTOO,
    -6.13%         		T2 Biosystems
    GME,
    -3.63%         		GameStop
    AAPL,
    +0.63%         		Apple
    MULN,
    -19.19%         		Mullen Automotive
    AMZN,
    +0.15%         		Amazon.com

    The chart

    Is tech dancing to the beat of its own drum? The Chart Report flagged this one from Scott Brown, founder of Brown Technical Insights, showing performance of the Technology Select Sector SPDR ETF
    XLK
    :


    @scottcharts

    “It’s only been a week, but consensus and conventional wisdom suggest higher yields are bad for Growth/Tech stocks. Meanwhile, Tech is acting like it never got the memo. It’s still too early to tell if Tech is trying to tell us something, but Scott points out that the sector is facing a crucial test this week at the March 2022 highs (around $163). $XLK is solidly above $163 after today’s bounce, but where it ends the week will likely hinge on $NVDA, as the company releases earnings on Wednesday evening,” says Patrick Dunuwila, editor and co-founder of The Chart Report. 

    Random reads

    “We are the champions.” Spain erupted in celebrations to welcome its Women’s World Cup victors. And England’s Lionesses got a 1,000 soccer-ball tribute.

    No, Tropical Storm Hilary didn’t flood Dodger Stadium.

    These thirsty beer-drinking thieves are raccoons.

    Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

    Listen to the Best New Ideas in Money podcast with MarketWatch financial columnist James Rogers and economist Stephanie Kelton.

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  • Chip designer Arm files for long-awaited IPO, as smaller transistors send costs skyrocketing

    Chip designer Arm files for long-awaited IPO, as smaller transistors send costs skyrocketing

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    Arm Holdings Ltd. filed its long-awaited initial public offering late Monday, following last year’s failed bid by Nvidia Corp. to acquire the U.K.-based chip architecture company.

    Arm has reportedly been seeking to raise $8 billion to $10 billion at a valuation of $60 billion to $70 billion, making its IPO the biggest of the year so far, and a number of large tech companies, including Amazon.com Inc.
    AMZN,
    +1.10%    ,
     Intel Corp.
    INTC,
    +1.19%
     and Nvidia
    NVDA,
    +8.47%    ,
     are reportedly in the mix to be anchor investors. 

    In a late Monday filing with the Securities and Exchange Commission, Arm said it was offering to list its U.S. traded shares on the Nasdaq under the ticker symbol “ARM.”

    Arm, which is owned by Japan’s SoftBank Group Corp.
    9984,
    +1.16%    ,
    was the target of an unsuccessful $40 billion acquisition by Nvidia last year. After Nvidia scrubbed the deal and paid a $1.36 billion breakup charge following the U.S. Federal Trade Commission’s unanimous decision to block it, Nvidia disclosed it paid Arm $750 million for a 20-year license to its technology.

    At the time of the breakup, chips sales had hit record highs in 2021, surging 26.2% to a record $555.9 billion, fueled by pandemic-triggered shortages. But the chip industry has since swung to a glut.

    Arm listed Barclays, Goldman Sachs, JP Morgan, Mizuho, BofA Securities, Citigroup, and Deutsche Bank Securities among the IPO’s underwriters.

    Recent reports said SoftBank was in discussions to purchase the 25% stake in Arm that it does not outright own, which is held by its Vision Fund 1, ahead of the IPO.

    Read from Feb. 2022: Wall Street’s reaction to death of Nvidia-Arm deal: No duh

    Arm reported net income of $524 million, or 51 cents a share, on revenue of $2.68 billion for fiscal 2023, which ended March 31, compared with net income of $549 million, or 54 cents a share, on revenue of $2.7 billion, in fiscal 2022, and $388 million, or 38 cents a share, on revenue of $2.03 billion in fiscal 2021.

    Arm uses an architecture that is different from the once-standard x86 one built by Intel in the early days of computing. 

    The company said it has shipped more than 250 billion Arm-based chips since its started in 1990 as a joint venture between Acorn Computers, Apple
    AAPL,
    +0.77%
    and VLSI Technology. In fiscal 2023, Arm said it shipped 30.6 billion chips.

    The company said it is going public as the “resources required to develop leading-edge products are significant and continue to increase exponentially as manufacturing process nodes shrink.” Transistors are expressed in scales of nanometers, with design costs running about $249 million for a 7-nanometer chip and about $725 million for a 2-nm chip.

    “As the world moves increasingly towards AI- and [machine language]-enabled computing, Arm will be central to this transition,” the company said in the filing. “Arm CPUs already run AI and ML workloads in billions of devices, including smartphones, cameras, digital TVs, cars and cloud data centers.”

    Arm said it is working with Alphabet Inc.
    GOOG,
    +0.64%

    GOOGL,
    +0.71%    ,
    GM’s
    GM,
    +0.45%
    Cruise, Mercedes-Benz
    MBG,
    +0.78%    ,
    Meta Platforms Inc.
    META,
    +2.35%    ,
    and Nvidia “to deploy Arm technology to run AI workloads.”

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  • Stock-index futures gain ground after three-week losing streak

    Stock-index futures gain ground after three-week losing streak

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    U.S. stock futures moved higher early Monday, as Wall Street looks to snap a three-week losing streak.

    How are stock-index futures trading

    • S&P 500 futures
      ES00,
      +0.51%
      rose 15 points, or 0.3% to 4397

    • Dow Jones Industrial Average futures
      YM00,
      +0.36%
      gained 79 points, or 0.2% to 34644

    • Nasdaq 100 futures
      NQ00,
      +0.70%
      rose 86 points, or 0.5% to 14830

    On Friday, the Dow Jones Industrial Average
    DJIA
    rose 26 points, or 0.07%, to 34501, the S&P 500
    SPX
    declined 1 points, or 0.01%, to 4370, and the Nasdaq Composite
    COMP
    dropped 26 points, or 0.2%, to 13291.

    What’s driving markets

    Futures are striving to find their footing as Wall Street comes off a three-week losing streak.

    “Global markets have recently experienced a series of stumbles due to concerns about China’s economy and higher sovereign bond yields. Last week the S&P 500 dropped 2.1 %, worryingly, with every sector ending in the red,” noted Stephen Innes, managing partner at SPI asset management.

    Neither of those factors are providing much succor early Monday. A trimming of interest rates over the weekend by China’s central bank has underwhelmed the market, while the 10-year Treasury yield is up about 4 basis points to 4.29%, holding near 15-year highs.

    The rising borrowing costs have been a particular problems for some of the big technology stocks that tend to lead the market, according to Innes.

    “Last week, several prominent stocks within the S&P 500, such as
    GOOGL,
    -1.89%    ,

    TSLA,
    -1.70%    ,

    META,
    -0.65%    ,

    AMZN,
    -0.57%    ,

    MSFT,
    -0.13%    ,

    AAPL,
    +0.28%    ,
    and
    NVDA,
    -0.10%    ,
    all underperformed compared to the broader market index. This dip in performance is attributed to the recent surge in interest rates…This upward rate movement has exerted downward pressure on longer-duration assets,” Innes added.

    With that in mind, the reception afforded Nvidia’s results, due on Wednesday, may shape market sentiment for a while. The chipmaker is among the stragglers of an earnings season that has generally beaten forecasts but failed to deliver additional bullish propulsion to the market.

    “This picture simply means that the fear of a further Fed tightening, prospects of higher interest rates, combined [with] the set of bad news from China simply didn’t let investors enjoy the better-than-expected earnings,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

    However, Tom Lee, head of research at Fundstrat, reckons the recent sell-off will be halted at or before Federal Reserve Chairman Jay Powell makes a speech at the Jackson Hole symposium at the end of the week.

    “Over our many conversations with institutional investors in the past week, the vast majority cite the rise in interest rates as the most concerning for equities,” Lee wrote in a note published over the weekend.

    And he thinks the Fed is worried by the surge in 10-year yields, too, because it represents a meaningful tightening of financial conditions for markets, companies and households.

    “I think the Fed likely says something dovish-ish [sic]. Why? Does Fed want to risk another ‘something breaking’ ala Feb 2023? While some look back at August 2022 when Fed Chair Powell’s statement was hawkish and marked the local top in 2022 (stocks fell -19% next 8 weeks), we think the context is the opposite.” Lee concluded

    Zoom video Communications
    ZM,
    +1.42%
    will report results after Monday’s closing bell. There are no top drawer U.S. economic data due Monday.

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  • ‘Magnificent Seven’ stocks are losing some of their shine, but their bonds are doing fine

    ‘Magnificent Seven’ stocks are losing some of their shine, but their bonds are doing fine

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    The so-called Magnificent Seven grouping of technology stocks lost some of its luster this week after four of the seven moved into correction territory, meaning their stocks have fallen at least 10% from their recent peaks.

    The corporate-bond market, in contrast, seems to like all seven names.

    The group is made up of Facebook parent Meta Platforms Inc.
    META,
    -0.65%    ,
    Apple Inc.
    AAPL,
    +0.28%    ,
    Microsoft Corp.
    MSFT,
    -0.13%    ,
    Nvidia Corp.
    NVDA,
    -0.10%    ,
    Amazon. com Inc.
    AMZN,
    -0.57%    ,
    Google parent Alphabet Inc.
    GOOGL,
    -1.89%

    GOOG,
    -1.80%
    and Tesla Inc.
    TSLA,
    -1.70%    .

    One caveat: Tesla has no outstanding bonds. In the past, the electric-car maker issued convertible bonds, but they have all been converted into equity.

    The group is credited with helping drive the stock market’s gains in the first half of the year, driven by excitement about artificial intelligence. But the rally has stalled in recent weeks as investors have fretted over the potential for U.S. interest-rate increases, surging Treasury yields and China worries, with property developer Evergrande filing for U.S. bankruptcy protection late Thursday.

    On Thursday, Meta followed Apple, Microsoft and Nvidia into correction territory, as MarketWatch’s Emily Bary reported. Tesla, meanwhile, is in a bear market, meaning it’s down more than 20% from its recent peak.

    Read: Have AI stocks like Nvidia reached bubble territory? Here’s what history can tell us.

    The following series of charts from data-solutions provider BondCliQ Media Services show how many bonds each company has issued by maturity and how they have traded as the stocks have pulled back.

    The first chart shows that Microsoft has by far the most bonds, mostly in the 30-year bucket. The software and cloud giant has more than $50 billion in long-term debt, according to its 2023 10-K filing with the Securities and Exchange Commission.

    Outstanding Magnificent Seven debt by maturity bucket.


    Source: BondCliQ Media Services

    This chart shows trading volumes over the last 10 days, divided by trade type. The green shows customer buying, while the red is customer selling. The blue shows dealer-to-dealer flows. Microsoft, for example, has seen almost $1.3 billion in customer buying from dealers in the last 10 days and $960 million in customer sales to dealers.

    Magnificent Seven debt trading volumes (last 10 days).


    Source: BondCliQ Media Services

    This chart shows that every name in the group has enjoyed better net buying in the last 10 days, with Microsoft leading the way.

    Net customer flow of Magnificent Seven debt (last 10 days).


    Source: BondCliQ Media Services

    This chart shows spread performance over the last 50 days for an intermediate-term bond from each of the seven issuers. Most have tightened or remained steady over the period.

    Historical spread performance of Magnificent Seven debt.


    Source: BondCliQ Media Services

    Read also: Red flags waving for tech stocks as AI bounce fades, China fears escalate

    Apple’s stock entered correction Wednesday upon falling more than 10% from its July 31 peak of $196.45. The company sells mainly discretionary products, and right now “consumers are still being pinched” and thinking more carefully about where they spend their money, according to Matt Stucky, senior portfolio manager for equities at Northwestern Mutual Wealth Management.

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  • Nasdaq falls to 6-week low as rising bond yields weigh on ‘Magnificent 7’ stocks

    Nasdaq falls to 6-week low as rising bond yields weigh on ‘Magnificent 7’ stocks

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    U.S. stocks traded lower for a third straight day on Thursday as rising bond yields spurred weakness in some of the so-called Magnificent Seven megacap stocks, helping to drive the Nasdaq to a six-week low.

    How are stocks trading

    • The S&P 500
      SPX
      was down 2 points, or 0.1%, to 4,401.

    • The Dow Jones Industrial Average
      DJIA
      shed 42 points, or 0.1%, to 34,725.

    • The Nasdaq Composite
      COMP
      fell by 46 points, or 0.3%, to 13,428.

    The Dow and S&P 500 were on track to extend a losing streak to a third straight session as major indexes headed for another week in the red. The S&P 500 hasn’t fallen for three weeks in a row since February, FactSet data show.

    What’s driving markets

    Bonds have resumed command of the stock market of late as higher yields lash shares of megacap technology stocks, undermining their status as the undisputed market leaders.

    Long-dated Treasury yields continued to rise Thursday, with the 10-year yield
    BX:TMUBMUSD10Y
    touching its highest level since the 2008 financial crisis, rising north of 4.31%. Bond yields move inversely to prices.

    Rising yields helped heap more pressure on shares of some of this year’s highflying tech stocks, including Tesla Inc.
    TSLA,
    -0.34%    ,
    Apple Inc.
    AAPL,
    -0.91%
    and Microsoft Corp.
    MSFT,
    -0.01%

    The elite group of megacap tech stocks which also includes Amazon.com Inc., Meta Platforms Corp.
    META,
    -0.24%
    and Alphabet Inc.’s Class A
    GOOGL,
    +2.42%
    and Class C
    GOOG,
    +2.48%
    shares has been credited with driving much of the Nasdaq Composite’s nearly 30% run-up year-to-date. But their market dominance has faded in recent weeks as investors have favored other cyclical sectors like energy and materials stocks. Those two sectors were the best performers on the S&P 500 on Thursday.

    “That’s a theme that’s been bubbling up here over the last three to four weeks, but there’s more of an exclamation point on it now,” said David Keller, chief market strategist at Stockcharts.com, during a phone interview with MarketWatch.

    “First you had Microsoft and Apple breaking down a few weeks ago, now you’re getting Meta breaking below its 50-day moving average.”

    Keller added that rising bond yields tend to have a bigger impact on growth stocks like technology names, while sectors like energy are more resilient.

    “Energy can do just fine in a rising rate environment. energy and materials should probably do better in a relative basis,” he said.

    Minutes from the Federal Reserve’s July meeting released Wednesday afternoon were being blamed for the latest leg higher in global bond yields. They showed that Fed policy makers could continue raising interest rates amid concerns that inflation could reaccelerate, potentially pushing bond yields even higher.

    “It’s really uncertain where terminal interest rates will land given the economy isn’t giving us a decisive picture of being too strong or too weak. It’s keeping the window open for more rate hikes potentially,” said Mohannad Aama, a portfolio manager at Beam Capital Management, during a phone interview with MarketWatch.

    Corporate earnings were also in focus as investors received results from Cisco Systems
    CSCO,
    +4.06%
    and retail giant Walmart Inc.
    WMT,
    -1.74%    .
    Cisco reported strong quarterly results after Wednesday’s close. Walmart also reported stronger than expected earnings, helping to offset some concerns about the strength of the consumer spurred by Target Corp.’s
    TGT,
    +1.94%
    lackluster earnings and guidance from Wednesday.

    Shares of Cisco rose 2.6%, while Walmart shares turned lower, down 1.2%.

    Economic updates released Thursday helped support the notion that the U.S. economy is growing at a faster pace than economists had expected, potentially complicating the Fed’s efforts to tamp down inflation.

    First-time jobless-benefit claims fell by 11,000 to 239,000 last week, a sign that layoffs in the U.S. labor market remain low. The Philadelphia Fed factory index also shot higher to 12 in August, up from negative 13.5 during the prior month, a sign that manufacturers in the U.S. could be exiting a slump.

    Companies in focus

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  • Elon Musk vs. Mark Zuckerberg: The stupidest story of the summer appears over

    Elon Musk vs. Mark Zuckerberg: The stupidest story of the summer appears over

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    The stupidest story of the summer may be over. Finally, mercifully.

    Mark Zuckerberg, billionaire and chief executive of Meta Platforms Inc.
    META,
    -1.34%    ,
    on Sunday appeared to pull the grown-up card — or at least the less-immature card — to scuttle a cage fight with Elon Musk, the even richer billionaire, Tesla Inc.
    TSLA,
    -1.10%
    CEO and X owner.

    From the start, it was a story that appeared to live mostly in Musk’s imagination. Yet it still sparked a media frenzy, as the prospect of two emotionally stunted billionaires publicly pummeling each other was not without some appeal.

    But the proposed MMA-style fight apparently met its demise the same way it was born — through a lot of online bluster.

    Weeks after proposing the fight, then resorting to multiple delaying tactics while noting how out of shape and unprepared he was, Musk apparently reached out to Zuckerberg over the weekend asking for a “practice bout” first.

    Author and journalist Walter Isaacson — who is currently writing a biography of Musk — tweeted a text exchange Sunday that he said Musk had sent him.

    “Wanna do a practice bout at your house next week?” a text apparently from Musk reads. The reply, purportedly from Zuckerberg: “If you still want to do a real MMA fight, then you should train on your own and let me know when you’re ready to compete. I don’t want to keep hyping something that will never happen, so you should either decide you’re going to do this and do it soon, or we should move on.”

    In real news: Tesla cuts prices for some Model Y versions in China, as price war ramps back up

    Zuckerberg later posted a more public burn on Meta’s Threads — the Twitter/X rival that sparked this whole thing to begin with — saying: “I think we can all agree that Elon isn’t serious and it’s time to move on…If Elon ever gets serious about a real date and official event, he knows how to reach me. Otherwise, time to move on. I’m going to focus on competing with people who take the sport seriously.”

    It was unclear what the two billionaires now plan to do with their spare time, if not fight each other.

    In completely unrelated news, fellow mega-billionaire and Amazon.com Inc.
    AMZN,
    -0.11%
    founder Jeff Bezos and his fiancée announced a $100 million donation Friday to Maui wildfire relief efforts.

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  • The long-simmering rumor of Apple buying Disney is resurfacing as Bob Iger looks to sell assets

    The long-simmering rumor of Apple buying Disney is resurfacing as Bob Iger looks to sell assets

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    Analysts got to the point early and often during a conference call late Wednesday: What are Disney Chief Executive Robert Iger’s M&A plans, particularly following reports that former Disney executives Kevin Mayer and Tom Staggs, now co-CEOs of Blackstone-backed Candle Media, have been retained in a “consulting capacity” to decide ESPN’s fate?

    There is even the unthinkable, unsinkable decades-old rumor floating about again: Could Apple Inc.
    AAPL,
    -0.90%
    acquire Disney
    DIS,
    -0.73%    ,
    as one Hollywood executive floated to the Hollywood Reporter?

    The prospect of an Apple-Disney combo seems far-fetched in a heated regulatory climate, where the Federal Trade Commission is attempting to crack down on Big Tech acquisitions, but it could happen should Disney sell off assets and Apple gobbles up Disney’s direct-to-consumer business that includes streaming service Disney+, some media analysts speculate. Apple could conceivably even buy ABC, which reportedly is on the block. But the path is long and circuitous.

    Yet the rumors persist, dating back to Apple co-founder Steve Jobs’ reverence for the Disney brand, and the increasingly overlapping businesses of both companies over the years.

    When pressed by analysts during a conference call late Wednesday, Iger declined to discuss the future of Disney’s structure or possible asset sales. When asked if Disney might “plausibly” be snapped up by one company — read Apple — an exasperated Iger said he would not “speculate” on the sale of Disney to a technology company or anyone else, given the current global stance of regulators. The FTC has aggressively challenged mergers from the likes of Microsoft Corp.
    MSFT,
    -1.17%
    and Facebook parent Meta Platforms Inc.
    META,
    -2.38%    ,
    with limited success.

    Since Iger hinted at the potential sale of Disney’s assets in an interview with CNBC last month, rumors have swirled around ESPN.

    ESPN and related properties likely could command at least one-third of Disney’s current depressed market cap of about $150 billion, say some media watchers, though Iger has denied ESPN is for sale. He has acknowledged “the sports leader” is seeking “strategic partners” — possibly with the NFL, MLB, NBA and NHL — to generate revenue. Late Tuesday, ESPN stuck up a deal with Penn Entertainment Inc.
    PENN,
    +9.10%
    to create ESPN Bet, a digital sportsbook to launch in the fall in 16 states.

    Read more: Penn dumps Barstool for ESPN-branded sports-gambling service

    Another possible property being dangled is ABC. But with rights to the NBA Finals and two Super Bowls in the next eight years, it is unclear who would acquire the network and how Disney would replace lucrative sports revenue.

    Other properties on the block include cable channels Freeform and Disney Channel, according to a report by the Wall Street Journal.

    “If an asset sale happens, will the proceeds be deployed into fortifying its balance sheet or beefing up its remaining operations?” Rick Munarriz, senior media analyst at The Motley Fool, said in an email.

    Disney, which is in the midst of a $5.5 billion cost-cutting campaign, is exploring several avenues to prop up sales as linear TV ads shrink, Disney+ subscriptions decline and attendance at Walt Disney World wanes.

    Read more: Disney posts smaller streaming loss amid cost-cutting moves, stock slips

    Shares of Disney are trading at half their highs from a few years ago, in large part because of dwindling sales and profits at ESPN and Disney’s other cable networks.

    Enter Mayer, who previously ran Disney’s strategic planning group for years and engineered a trifecta of mega deals: The acquisition of the aforementioned Pixar Animation Studios from Steve Jobs for $7.4 billion in 2006, the purchase of Marvel Entertainment for $4 billion in 2009, and the acquisition of Lucasfilm for $4.05 billion in 2012. Mayer also led the $71.3 billion acquisition of 20th Century Fox’s entertainment assets in 2019, which has drawn mixed reviews.

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  • Apple’s Tim Cook explains why he won’t showboat around AI

    Apple’s Tim Cook explains why he won’t showboat around AI

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    ““We tend to announce things as they come to market, and that’s our M.O.””


    — Apple CEO Tim Cook

    If Apple Inc.’s Thursday earnings call sounded a bit different than other recent ones from Big Tech players, perhaps that was due to a noticeable lack of artificial-intelligence discussion.

    In fact, AI didn’t come up at all on Apple’s
    AAPL,
    -0.73%
    call until an analyst brought up the topic in the question-and-answer portion, commenting that Apple executives “don’t talk too much” about their AI strategy or investments, unlike many tech peers.

    See also: Apple sees sales decline for third quarter in a row — and says performance could be similar this quarter

    “If you take a step back, we view AI and machine learning as core fundamental technologies that are integral to virtually every product that we build,” Chief Executive Tim Cook replied. AI helps power recently announced software features like live voicemails and the ability to replicate your voice digitally, as well as somewhat older features like automatic crash detection and fall detection.

    AI technology has been “absolutely critical to us,” Cook said, and Apple has “been doing research across a wide range of AI technologies, including generative AI, for years,” something the company plans to continue.

    But don’t necessarily expect Apple to start showboating around its AI efforts going forward: Cook said that Apple’s “M.O.” simply is to announce products when they’re ready for consumers.

    “Apple’s reticence in being dragged into the AI hype is on-brand,” Forrester principal analyst Dipanjan Chatterjee said in emailed comments. “A maniacal focus on what Apple does for its customers and not how it does it is rooted so deeply in the brand’s DNA.”

    In all, there were just six mentions of AI or artificial intelligence on Apple’s earnings call, all of which came during the Q&A exchange with Deutsche Bank analyst Sidney Ho. Compare that to 90 mentions of those terms on Alphabet Inc.’s
    GOOG,
    +0.10%

    GOOGL,
    +0.05%
    earnings call last week, 73 mentions on Microsoft Corp.’s
    MSFT,
    -0.26%    ,
    and 62 mentions on Meta Platforms Inc.’s
    META,
    -0.36%    ,
    according to MarketWatch’s review of transcripts provided by AlphaSense/Sentieo.

    Read: Microsoft and Google can’t stop talking about AI, and this chart proves it

    Amazon.com Inc.
    AMZN,
    +0.55%    ,
    which joined Apple in posting results Thursday, falls somewhere in the middle. The topic of AI garnered 34 mentions on Amazon’s call.

    Whereas Apple has been consistent with its scant mentions of the technology, Amazon executives have been ramping up the rhetoric: AlphaSense/Sentieo data shows just one AI mention on the earnings call Amazon held in February 2022, and then no mentions until the term came up 12 times on its April 2023 call. Volume was of course up considerably from there on Thursday’s call.

    See also: The ‘stabilization’ of AWS may have been the most significant number for Amazon’s earnings

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  • The ‘narrow breadth’ chorus has fallen silent. What broadening participation in stock-market rally means for investors.

    The ‘narrow breadth’ chorus has fallen silent. What broadening participation in stock-market rally means for investors.

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    A wider swath of stocks have joined the S&P 500
    SPX,
    +0.15%    ’s
    upswing after the so-called Magnificent Seven — Apple
    AAPL,
    +0.32%    ,
    Amazon
    AMZN,
    +1.11%    ,
    Alphabet
    GOOG,
    +0.08%    ,
    Microsoft
    MSFT,
    -0.72%    ,
    Meta
    META,
    -2.11%    ,
    Nvidia
    NVDA,
    -0.04%
    and Tesla
    TSLA,
    +0.37%
    — single-handedly propelled the large-cap index into a bull market in early June, with the gauge now up more than 28% from its low notched last October and rising to new highs since April 2022, according to Dow Jones Market Data. 

    Hopes that the U.S. economy could pull off a soft landing and avoid a recession despite the Federal Reserve’s aggressive interest-rate hikes, as well as receding inflation pressures and expectations for the end of the Fed’s monetary tightening campaign, have underpinned a notable expansion in market breadth over the past two months, according Adam Turnquist, chief technical strategist at LPL Financial. 

    The S&P 500 Equal Weighted Index
    SP500EW,
    +0.27%    ,
    which lagged behind the market-cap-weighted S&P 500 index for most of the year, has now kicked back into gear and staged an impressive comeback in July. The equal-weighted index and the S&P 500 each advanced 3.1% this month, according to FactSet data. 

    The equal weighting eliminates the distortion of the megacap components and significantly changes several sector weightings in the S&P 500, including technology, which drops from around 29% on the SPX to only 13% on the equal-weighted index, said Turnquist in a Friday note. Meanwhile, the industrials sector has the biggest increase in weight, jumping from 9% on the SPX to 16% on the equal-weighted index.

    Another way to quantify and compare market breadth is to look at the percentage of stocks on an index trading above their longer-term 200-day moving average (dma), Turnquist said. In general, if a stock is trading above its 200 dma, it is considered to be in an uptrend, and if the price is below the 200 dma, it is considered in a downtrend. Furthermore, a higher percentage of stocks above their 200 dma implies buying pressure is more widespread — suggesting the market’s advance is likely sustainable.

    The chart below shows that 73% of stocks within the S&P 500 are trading above their 200 dma as of July 27, which compares to only 48% at the end of 2022. Moreover, the composition of breadth leadership has turned increasingly bullish. The highest sector readings include technology, industrials, energy, and consumer discretionary.

    “So not only is breadth on the index robust, but cyclical stocks are also leading,” said Turnquist. 

    SOURCE: LPL RESEARCH, BLOOMBERG

    Wall Street often views broadening participation in the stock-market rally as a measure of health and a constructive sign of the sustainability of the bull market. 

    Jimmy Lee, founder and chief executive officer of The Wealth Consulting Group said he is seeing “a lot of money” flowing into areas that are not the Magnificent Seven such as stocks in the industrials, financials, materials, energy and even real-estate sectors.

    The S&P 500’s industrials sector
    SP500.20,
    +0.23%
    climbed 2.9% in July, while the financials sector
    SP500.40,
    +0.44%
    advanced over 4.7% this month. The S&P 500’s energy sector
    SP500.10,
    +2.00%    ,
    which had been the biggest laggard when the rest of the markets exited the bear market in June, jumped 7.3% month to date after the U.S. oil benchmark
    CL.1,
    -0.20%

    CL00,
    -0.20%
    closed above $80 a barrel for the first time since April. 

    Meanwhile, the tech-heavy S&P 500’s communication-services sector
    SP500.50,
    -0.03%
    rose 6.7% in July, while the consumer-discretionary sector
    SP500.25,
    +0.56%
    gained 2.4% and the information-technology sector
    SP500.45,
    +0.13%
    was up 2.6%, according to FactSet data. 

    See: Stocks are on a seemingly unstoppable hot streak, but this bond-market ‘tipping point’ could see it end in a hurry

    Stephen Hoedt, managing director of equity and fixed income research at Key Private Bank, told MarketWatch in an interview that he doesn’t see “any reason to get bearish here with the fundamentals that are underlying,” which gives investors reason to rotate toward the more cyclical areas such as energy, financials and industrials, while broadening the market away from just being concentrated in the megacap technology names. 

    “The growth has been a surprise this year for everyone, so that’s what the market got wrong coming into this year. When I look at growth, nominal GDP growth translates directly into earnings and we’ve seen earnings continue to surprise on the upside,” Hoedt said. 

    Hoedt pointed to the direction of the 12-month forward earnings estimate for the S&P 500 as an important indicator. “As long as the direction of the 12-month forward earnings number for the S&P 500 is going up, it’s really, really difficult to be bearish on the stock market,” he said. “It seems to me that we may start to see another inflection higher in forward earnings revisions that take into account this stronger growth environment that we’re in.” 

    However, the broadening of the stock-market rally and the bullish sentiment were also driving some on Wall Street to believe stocks are overbought and due for a correction. 

    Lee said there’s still too much pessimism out there and too much concern that some investors haven’t chased the market yet. “In the second half of this year, when the Fed does stop raising rates and if the economy stays out of recession, you can see major money — trillions of dollars moving from the money market into equities and other risk assets,” he told MarketWatch in a phone interview on Friday.

    “When that happens, it’s probably going to push valuations even further. So I would imagine when that happens is when you can expect more of a correction to occur, but I think that we still have more room to go before that happens.” 

    U.S. stocks ended higher on Monday, finishing up July on a positive note. Three major stock indexes rallied this month, with the S&P 500 up 3.1% and booking its fifth monthly gain. The tech-heavy Nasdaq Composite
    COMP,
    +0.21%
    gained 4.1% month to date, while the Dow Jones Industrial Average
    DJIA,
    +0.28%
    advanced 3.4%, according to Dow Jones Market Data. 

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  • Amazon and Apple to headline Q2 earnings this week

    Amazon and Apple to headline Q2 earnings this week

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    When Amazon.com Inc. and Apple Inc. report quarterly results on Thursday, we’ll get a look at two big companies, with big expectations, trying to do smaller things — or at least less exciting things, or things that might be more inconveniencing to customers — to stay bigger.

    For Apple
    AAPL,
    +1.35%    ,
    D.A. Davidson analyst Tom Forte said, the focus will be on the iPhone, as always, as well as demand abroad and a new VR headset, as its stock hovers near record highs and its market value holds above $3 trillion. And he said that Amazon
    AMZN,
    +3.09%    ,
    meanwhile, could face questions about the impact of cost cuts on e-commerce growth, and what AI could do to boost slower growth in its cloud business.

    The results from those companies, which are big enough to make or break a single quarter’s worth for the S&P 500 Index
    SPX,
    +0.99%    ,
    will follow those from the other tech giants like Microsoft Corp.
    MSFT,
    +2.31%
    and Facebook parent Meta Platforms Inc.
    META,
    +4.42%    .
    And they’ll arrive as Wall Street starts to get a tad more realistic about AI: Microsoft shares fell after management said the expansion of its AI capabilities would be “gradual” — and gradually more expensive.

    D.A. Davidson analyst Tom Forte, in a research note this month, said Amazon, like other big tech companies, was taking more steps to control its costs. That might help margins, he said. But he said he’d be watching for any impact to e-commerce sales growth, following thousands of layoffs and pulling back on its expansion of Amazon Fresh.

    Amazon began tacking on servicing fees onto some Amazon Fresh delivery orders this year. And Forte noted what he said were other tweaks to service: Charging for a home pickup of a defective smoke alarm that used to be free, and incentives to wait longer during Prime Day.

    “In our view, Amazon is playing a ‘game of chicken’ and banking on other e-commerce companies not to offer a superior service, instead of its historical approach of working backwards with a customer-obsessed approach,” D.A. Davidson analyst Tom Forte said in a research note.

    He added later: “We believe there is something to be said about the experience of having an Amazon-branded delivery vehicle show up at your house EVERY day. Having one show up once a week or twice is not the same.”

    At Apple, Forte said in a separate note, the iPhone, whose sales were still solid, had turned into more of a consumer staple than a discretionary buy. He also said he’d be looking for more detail about the upcoming iPhone 15 — likely to be modestly fancier than previous iPhones — the recovery in China and growth in India. Apple last month also unveiled its Vision Pro VR headset — for $3,499. Forte said he had his doubts.

    “We believe Apple will have to overcome a number of structural challenges to achieve mass adoption for its AR/VR headset,” he said.

    This week in earnings

    Apple and Amazon will report as more companies than normal report quarterly profit ahead of estimates, according to a FactSet report on Friday. For the week ahead, 170 S&P 500 companies report results, with four from the Dow, the repot said.

    Results from Uber Technologies Inc.
    UBER,
    +3.28%
    and DoorDash Inc.
    DASH,
    +4.20%
    will offer an update on the gig economy and how far app-based deliveries can go, while results from Kraft Heinz Inc.
    KHC,
    -0.11%
    will offer an update on food prices and how much they might ease from the highs seen in recent months.

    With the “Barbie” movie lifting rival Mattel Inc.
    MAT,
    -2.40%    ,
    results from Hasbro Inc
    HAS,
    -0.29%
    during the week will offer a glance at the rest of the toy industry, where demand hasn’t exactly been great, and what entertainment options Hasbro has up its sleeve to keep apace with its archrival. Drug maker Pfizer Inc.
    PFE,
    -0.36%
    reports, as does video-game maker Electronic Arts Inc.
    EA,
    +0.25%    .
    Starbucks Corp.
    SBUX,
    +0.47%
    reports as well.

    The call to put on your calendar

    “Barbie,” the Hollywood strike and Warner Bros. Discovery: Mattel has said it wants to turn “Barbie” into a content franchise. Now we’ll hear what Warner Bros. Discovery Inc.
    WBD,
    +4.07%    ,
    the media conglomerate that produced the film, thinks about the film’s results and its prospects, as studios increasingly pump out sequels or offshoots of well-known, established character universes like “Star Wars,” Marvel and DC. The company — which reports oversees Warner Bros. CNN, TNT and the streaming service Max — reports quarterly results on Thursday. But even as “Barbie” and “Oppenheimer” carry the parts of the entertainment industry that are still functioning through the Hollywood strike, Wall Street will likely be focused on contingency plans, and any sense of whether more viewers are turning to streaming with productions on pause.

    The number to watch

    Payments and crypto volumes: Results this week from trading app Robinhood Markets Inc.
    HOOD,
    +4.09%
    and crypto exchange Coinbase Global Inc.
    COIN,
    +2.23%    ,
    along with PayPal Holdings Inc.
    PYPL,
    +2.71%
    and Block
    SQ,
    +3.42%    ,
    will land at the intersection of rebounding markets and job-market concerns.

    UBS analysts predicted solid growth and cost control for Block, and “steady” e-commerce trends for PayPal. But BofA analysts said PayPal’s search for a new chief executive, following the announcement of Dan Schulman’s retirement at the end of the year, would become more important, adding that “we think investors should rightfully expect the CEO search to conclude in the near-term.” While Bitcoin’s rebound helped Coinbase, the company and others in the industry face the prospect of tougher regulations. Robinhood and PayPal report on Wednesday. Coinbase and Block report on Thursday.

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  • Meta’s stock jumps after AI, ad momentum drive earnings, revenue jump

    Meta’s stock jumps after AI, ad momentum drive earnings, revenue jump

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    Facebook parent Meta Platforms Inc. is raking in digital ads, as its earnings attest, and Wall Street is rewarding it. The company’s stock rose about 7% in after-hours trading Wednesday.

    Meta
    META,
    +1.39%
    reported fiscal second-quarter net income of $7.79 billion, or $2.98 a share, compared with net income of $6.7 billion, or $2.46 a share, in the year-ago quarter.

    Revenue climbed 11% to $32 billion from $28.8 billion in the year-ago quarter.

    Analysts surveyed by FactSet had expected on average net income of $2.91 a share on revenue of $31.1billion.

    Also see: Zuck beats Musk at his own game with Meta’s year of efficiency

    A rebound in advertising, the monetization of Instagram and Reels, and AI-fueled ad targeting and measurement contributed to the quarter’s performance. Meta’s better-than-expected performance comes on the heels of a similarly strong quarter from Google parent
    GOOGL,
    +5.78%

    GOOG,
    +5.59%
    Alphabet Inc. and poor results from Snap Inc.
    SNAP,
    -14.23%    .

    “We had a good quarter. We continue to see strong engagement across our apps and we have the most exciting roadmap I’ve seen in a while with Llama 2, Threads, Reels, new AI products in the pipeline, and the launch of Quest 3 this fall,” Meta Chief Executive Mark Zuckerberg said in a statement announcing the results. AI has been an increasingly dominant story line for Meta, which has quickly shifted its focus from the metaverse. Zuckerberg said AI remains the company’s near-term focus, with metaverse poised to have a long-term impact.

    “In many ways, the two are interrelated,” Zuckerberg said of AI and metaverse in a conference call with analysts. He also spotlighted the potential of Threads, a Twitter-like service that launched earlier this month with much fanfare. “When it gets to hundreds of millions of users, we’ll see how it monetizes,” he said. “It is a long road ahead.”

    Meta executives forecast third-quarter revenue of $32 billion to $34.5 billion, while analysts on average were expecting $31.2 billion, according to FactSet.

    Facebook had 2.06 billion daily active users, up 5% from a year ago, and the “family” of Meta apps — which includes Instagram — reported daily active users of 3.07 billion, up 7%.

    There were blips amid the hoopla, however. Meta says it expects 2023 total expenses will be in the range of $88 billion to $91 billion, compared to the prior range of $86 billion to $90 billion because of legal-related expenses in the second quarter. And Meta’s headcount dropped 14% from a year ago to 71,469 as of June 30. Zuckerberg said Meta’s austerity program will continue into 2024.

    Meta’s stock improved 1.4% to $298.57 in the regular session. The stock has sky-rocketed 148% so far this year, while the broader S&P 500 index 
    SPX,
    -0.02%
     has increased 19%.

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  • Sales forecast sinks Snap stock, and execs say more investments are likely ahead to improve platform

    Sales forecast sinks Snap stock, and execs say more investments are likely ahead to improve platform

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    Like other social-media platforms, Snap has struggled with a slowdown in the digital ad market.


    AFP/Getty Images

    Shares of Snap Inc. slid in after-hours trade Tuesday after the social-media platform forecast third-quarter sales that were below expectations, amid concerns about a wobbly digital advertising backdrop and the company’s spending push to improve the way people interact and advertise when they log on.

    Snap
    SNAP,
    -1.34%
    said it expects third-quarter revenue of $1.07 billion to $1.13 billion. The midpoint of that range was below FactSet estimates for $1.13 billion.

    Shares tumbled 18.4% after hours on Tuesday.

    “From a revenue perspective, our business remains in a period of rapid transition as we work to improve our advertising platform, while forward visibility of advertising demand remains limited,” executives said in Snap’s earnings release.

    Like other social-media platforms, Snap has struggled with a slowdown in the digital ad market, amid advertiser wariness of a recession. Snap has also faced competition from the likes of Tiktok and Instagram and Facebook parent Meta Platforms Inc.
    META,
    +0.98%    .

    Snap has invested heavily strengthening its advertising platform, to serve users with more relevant ads and bring more impact to the businesses trying to advertise. It has also been spending to boost user engagement. Management, during Snap’s earnings call on Tuesday, said it would likely make “a further step up in investment here in Q3” to accelerate the progress being made on those efforts.

    Executives said during the earnings call that engagement with Snapchat friend stories in the U.S. had started to fall more slowly, with viewership trending better than they had forecast. And they said time spent watching Spotlight — a part of the site that helps users explore and discover content — more than tripled year over year.

    JPMorgan analysts, in a note earlier this month, said they continued to monitor Snap’s “heightened infrastructure costs.” But they said that the digital ad market had “stabilized” in the second quarter and that advertisers weren’t feeling as cautious, despite worries over the state of the economy.

    “That said, we continue to believe it will take multiple quarters of improved execution for many investors to get more comfortable with the story longer-term,” the analysts said.

    For the second quarter, Snap reported a net loss of $377 million, or 24 cents a share, compared with $422 million, or 26 cents a share, in the same quarter last year. Revenue fell to $1.07 billion, compared with $1.11 billion in the prior-year quarter.

    Analysts polled by FactSet expected Snap to report a per-share loss of 25 cents a share, on revenue of $1.05 billion.

    Daily active users rose 14% year over year to 397 million.

    Evan Spiegel, Snap’s chief executive, said during Tuesday’s call that despite the competition from larger social platforms, it still had some advantages — namely, communication with friends and family.

    “We actually think providing this place for friends and family to communicate has only become more important as more and more platforms focus on public social-media-style features where people feel like they have to compete for popularity, compete for likes and comments,” Spiegel said.

    “It’s never been more important to actually build deeper relationships with your friends and family,” he added.

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  • Alphabet earnings push stock up 6%; CFO Ruth Porat to become president, chief investment officer

    Alphabet earnings push stock up 6%; CFO Ruth Porat to become president, chief investment officer

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    Google parent Alphabet Inc.’s stock jumped 6% in after-hours trading Tuesday after the company beat estimates on the top and bottom line, and announced the transition of Chief Financial Officer Ruth Porat to president and chief investment officer in September.

    Fueled by strong advertising sales, Alphabet
    GOOGL,
    +0.56%
     
    GOOG,
    +0.75%
    racked up fiscal second-quarter net income of $18.4 billion, or $1.44 a share, compared with net income of $16 billion, or $1.21 a share, in the same quarter a year ago.

    Total revenue was $74.6 billion, compared with $69.7 billion a year ago. Sales minus traffic-acquisition costs were $62.06 billion, vs. $57.5 billion last year.

    Analysts surveyed by FactSet had expected on average net earnings of $1.34 a share on revenue of $72.85 billion and ex-TAC revenue of $60.25 billion.

    “There’s exciting momentum across our products and the company, which drove strong results this quarter,” Alphabet Chief Executive Sundar Pichai said in a statement. “Our continued leadership in AI and our excellence in engineering
    and innovation are driving the next evolution of Search, and improving all our services.”

    During a conference call Tuesday afternoon, he highlighted the intertwining of advertising and Alphabet’s strides in generative AI. He added the company continues to consolidate and align operations to streamline spending.

    Shares of Alphabet have advanced 39% so far this year largely on the strength of generative AI and its potential. The broader S&P 500 index 
    SPX,
    +0.28%
    is up 19%. Alphabet’s stock inched up 0.6% to $122.21 in the regular session Tuesday.

    Google’s total advertising sales improved to $58.14 billion from $56.3 billion a year ago, and edged analysts’ average expectations of $57.45 billion. Google Cloud hauled in $8 billion, compared with $6.3 billion last year. YouTube ad sales rebounded to $7.7 billion from $7.34 billion a year ago.

    “The proverbial floodgates aren’t opening yet but clients are starting to see pockets of opportunity and are willing to invest for a direct return,” Aaron Levy, vice president of paid search at Tinuiti, said in an email.

    Porat, who has played an essential role in Google’s advertising success since she became CFO in 2015, will start her new role on Sept. 1. She will be responsible for Alphabet’s investments in its Other Bets portfolio, and the company’s investments in countries and communities around the world. Porat will continue to report to Pichai.

    “We see technology can make so much of a difference in people’s lives… and in economic growth globally,” Porat said during the conference call late Tuesday.

    The monetization of AI continues to be an obsession of investors and Wall Street. Microsoft Corp.’s
    MSFT,
    +1.70%
    AI version, Bing, hit the market first, but Google’s competing entry, Bard, is making headway, according to analysts. Alphabet is ramping up AI initiatives to improve operational efficiency and productivity.

    When asked on the call about AI monetization, Pichai said the technology expands the company’s total addressable market, brings in potential new customers, deepens the versatility of its product portfolio, and differentiates core products such as cybersecurity.

    AI’s importance was underscored by a Wall Street Journal report on Tuesday that Google co-founder Sergey Brin has been spotted at the company’s Mountain View, Calif., headquarters in recent weeks working with AI researchers on a large-scale project. Brin has been largely out of sight after stepping down from an executive role at parent company Alphabet in 2019.

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  • AMC, Chevron, Tesla, Domino’s, Microsoft, and More Stock Market Movers

    AMC, Chevron, Tesla, Domino’s, Microsoft, and More Stock Market Movers

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    This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

    https://www.barrons.com/articles/stock-market-movers-2b3602a5

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  • With Microsoft, Meta and Alphabet earnings hanging on AI, more investors are asking: ‘How are you going to pay for that?’

    With Microsoft, Meta and Alphabet earnings hanging on AI, more investors are asking: ‘How are you going to pay for that?’

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    Shares of big tech companies have coasted through this year on AI euphoria, but as Microsoft Corp., Alphabet Inc. and Meta Platforms Inc. prepare to report results this week, some investors are starting to ask how much those AI advancements might actually cost.

    Those questions have surfaced after several months during simply saying “AI” on earnings calls appeared to be enough for investors. If the economy sours though — as some expect in the second half of this year or next year — big tech’s AI ambitions could go with it.

    “Given the exorbitant costs associated with the development, hosting and serving of AI products, many investors are concerned about the potential for [fiscal 2024] commentary regarding a material increase,” Jefferies analyst Brent Thill wrote, according to a MarketWatch earnings preview for Microsoft’s
    MSFT,
    -0.89%
    results.

    Microsoft and Alphabet Inc.
    GOOGL,
    +0.69%

    GOOG,
    +0.65%    ,
    which both report on Tuesday, have been in heated competition in the world of online search and digital advertisements, as Microsoft leans more on its massive investments in research lab OpenAI to muscle up its own search capabilities. But a Deutsche Bank analyst said that so far, Google appears to have the upper hand in that battle.

    Still, for Microsoft, after a broader pullback in IT spending earlier this year, analysts have found more to like about its cloud-computing business — namely market-share gains, generally-sturdy demand, and whatever ways AI can fit into the equation. Wolfe Research analyst Alex Zukin, in a recent note, said he believed “the focus will turn from what is good enough, to how good can it be,” as Microsoft moves deeper into AI.

    “How good can it be?” might also be a question for Meta
    META,
    -2.73%    ,
    which reports second-quarter results on Wednesday.

    Shares of the social-media company have more than doubled in value so far this year. JMP analyst Andrew Boone, in a recent note, cited likely improvements in Meta’s digital ad segment, better engagement, and a broader advertising backdrop that “appears to be stable” after a slowdown in spending, Still, there are signs that the initial user attraction to Threads, Meta’s answer to Twitter, has fizzled.

    This week in earnings

    For the week ahead, 166 companies in the S&P 500 index report results, including 12 from the Dow, according to FactSet. Among them are Domino’s Pizza Inc.
    DPZ,
    -0.62%    ,
    which now plans to deliver pizza via Uber Eats after years of chafing at third-party delivery apps. Industrials General Electric Co.
    GE,
    -0.82%
    and 3M Co.
    MMM,
    +0.04%
    also report, after 3M agreed to pay $10.3 billion to settle accusations it was responsible for so-called “forever chemicals” in drinking water.

    Quick-service restaurant chains Chipotle Mexican Grill Inc.
    CMG,
    +0.20%
    and McDonald’s Corp.
    MCD,
    -0.51%
    also report, with BofA analysts expecting an “almost normal” quarter for the industry, after spending at chain restaurants grew last month and costs for some ingredients started to ease following two years of supply disruptions. Auto makers General Motors Co.
    GM,
    -1.81%
    and Ford Motor Co.
    F,
    -0.71%
    also report, and while parts shortages that have constrained vehicle production have shown signs of fading, so has electric-vehicle “euphoria.”

    The calls to put on your calendar

    Visa, Mastercard: Earlier this month executives from the big banks said U.S. consumers are generally doing OK despite still-rampant inflation, although perhaps less OK than in prior months. This week credit-card giants Visa Inc. and Mastercard Inc. report results on Tuesday and Thursday, respectively. The profit, sales and credit-card volume figures from Visa
    V,
    -0.15%
    and Mastercard
    MA,
    -0.14%
    will offer more specifics on consumer spending, as vacations and concerts compete with more expensive and more pressing needs, like groceries and other bills.

    Shares of Visa and Mastercard are up so far this year, but some analysts said there could be more room investors to step in. SVB MoffettNathanson analyst Lisa Ellis recently said shares of both companies were hovering at “unusually attractive” levels.

    The number to watch

    Mattel outlook, and anything ‘Barbie’-related: The “Barbie” movie hit theaters nationwide on Friday. And after an epic marketing campaign, Mattel Inc.’s investors, banking on the film to drive a rebound for the toy maker during the second half of this year, will be zeroed in on the box-office results following the film’s debut on Friday.

    Expectations for the film are huge. And when Mattel
    MAT,
    -0.42%
    reports second-quarter results on Wednesday, executives could offer the first answers to some big questions: Has the film helped revive toy sales? Sales for anything else? Will the “Barbenheimer” effect help or hurt financials?

    The film — directed by Greta Gerwig, written Gerwig and Noah Baumbach, and starring Margot Robbie and Ryan Gosling — brings together two writers with indie bona fides and two actors with mainstream starpower. Reviews so far have been favorable, and Barbie is already Mattel’s most profitable franchise. But the movie isn’t directly geared toward children, movie theaters have struggled to get back on track after pandemic lockdowns, and toy demand through this year has been weak after ballooning during the pandemic. And some analysts don’t expect “Barbie” to do much for Mattel’s stock.

    Emily Bary and Jon Swartz contributed reporting to this story.

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  • Here’s why Wall Street has fallen out of love with Tesla — for now

    Here’s why Wall Street has fallen out of love with Tesla — for now

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    Late on Wednesday, Tesla Inc.
    TSLA,
    -1.10%
    reported that quarterly sales were up 47% from a year earlier. But the stock tumbled 10% on Thursday.

    Tesla’s shares are still up 113% this year. The company is among a group of 13 in the S&P 500 that stand out with high growth expectations for sales, earnings and free cash flow through 2025.

    But less than half of analysts polled by FactSet rate Tesla a buy. Emily Bary explains what they are worried about.

    Traders have placed large short bets against Tesla and two of its rival EV makers — Rivian Automotive Inc.
    RIVN,
    -2.09%
    and Nio Inc.
    NIO,
    +2.52%    .
    Claudia Assis looks into how well those trades have been working out.

    Cody Willard explains why he remains confident that Tesla and Rivian will dominate the EV market over the long term.

    Related coverage:

    Here’s what may propel U.S. stocks for years.

    Chipotle Mexican Grill is among 14 stocks named by Michael Brush for consideration by investors looking to ride along with long-term improvement of U.S. labor productivity.


    AP

    The S&P 500
    SPX,
    +0.03%
    has returned 19% this year, following its 18% decline in 2022. On the same basis, with dividends reinvested, the benchmark index is still down 2% since the end of 2021.

    What is going on? Michael Brush believes that a high level of corporate investment in new technology and equipment is setting the stage for a long phase of earnings growth for U.S. companies. He shares four developments behind the coming productivity boom and 14 stocks expected to benefit from it.

    A signal for the stock-market’s health


    Getty Images

    The Dow Jones Industrial Average
    DJIA,
    +0.01%
    is up 6% this year. The venerable index has trailed the S&P 500, but its closing level of 35,255.18 on Thursday was only 4% shy of its record close a 36,799.65 on Jan. 4, 2022. Joseph Adinolfi explains Dow Theory, which according to technical analysts is sending a strong bullish signal for the stock market.

    Other opinions about market sentiment:

    Even if you have resisted the idea of a Roth IRA, you may soon be forced to have one

    This year if you are age 50 or older and are already maxing-out your contribution to a 401(K), 403(B) or other qualified employer-sponsored tax-deferred retirement plan at $22,500, you can make an additional “catch up” tax deductible contribution of $7,500 for a total of $30,000. But starting in 2024, the catch up contribution will no longer be tax deductible if you earn at least $145,000 a year. You can still make the contribution with after-tax money into a Roth 401(K) account that your plan administrator may already have set up for you.

    Alessandra Malito provides more details and news about employers’ efforts to delay the rule’s implementation.

    Beth Pinker writes the Fix My Portfolio column. This week she digs into Roth IRA conversions, through which you can simplify your taxes down the line.

    A hot vote in Spain

    The center of Madrid on July 15, 2023. A brutal heat wave could affect turnout for the country’s general election on July 23.


    Uncredited

    Barbara Kollmeyer reports from Spain about a highly contested election on Sunday, with controversy over the government’s policies during the pandemic, parties’ social policies and the possibility of a coalition government that might rattle financial markets.

    Meta vs. Alphabet

    Shares of Meta Platforms Inc. and Alphabet Inc. trade only slightly higher than the S&P 500 on a forward price-to-earnings bases, while Nvidia Corp., Microsoft Corp. and Apple Inc. trade much higher.


    FactSet

    Leslie Albrecht looks at Meta Platforms Inc.
    META,
    -2.73%    ,
    which is Facebook’s holding company and has a hit on its hands with the new Threads social-media platform, and Google holding company Alphabet Inc.
    GOOGL,
    +0.69%    ,
    to consider which stock is a better buy.

    Brett Arends: ‘I used to work at Nvidia. The stock I got is now half my portfolio. Should I sell?’

    The Ratings Game

    In The Ratings Game column, MarketWatch reporters track analysts’ thoughts about various stocks. Here’s a sampling of this week’s coverage:

    You don’t know every bad factor causing air travel to be nothing but harassment

    Getting there is half the fun.


    Getty Images

    The U.S. flying scene — from shortages of equipment and labor (and runways) to ill-staffed air-traffic control towers — is a well-known nightmare for U.S. travelers. But there is more to the story. Jeremy Binckes looks into other factors that may surprise you and cause great inconvenience this summer.

    The Federal Reserve is expected to raise interest rates again next week

    The Federal Open Market Committee will meet next Tuesday and Wednesday, to be immediately followed by a policy announcement. Economists expect the central to raise the federal-funds rate by another quarter point. The question is whether or not this will end the Fed’s inflation-fighting rate cycle.

    More coverage of the Fed:

    How much would you pay for 100% downside protection in the stock market?


    MarketWatch illustration/iStockphoto

    Over the past 30 years, the SPDR S&P 500 ETF Trust
    SPY,

    has returned 1,650%, for an average annual return of 10%, with dividends reinvested, according to FactSet. But it hasn’t been a smooth ride. The ETF, which tracks the benchmark S&P 500, fell 18% last year and 37% during 2008, for example. And there have been even larger declines if the analysis isn’t confined to calendar years.

    But can you ride through market declines? Many studies have shown that most investors who try to time the market sell after a decline has started and buy back in well after a recovery is under way, which means their long-term performance can suffer significantly.

    In this week’s ETF Wrap column (and emailed newsletter), Isabel Wang describes a new buffered fund that can give you 100% downside protection over a two-year period, in return for a cap on your potential gains in the stock market. Here’s the price you would pay for the protection.

    The World Cup games have started

    Hannah Wilkinson scored the home team’s first goal against Norway during the first World Cup game in Auckland, New Zealand, on July 20.


    Getty Images

    The Women’s World Cup began Thursday with an upset victory by New Zealand over Norway.

    James Rogers reports on what is expected to be a much easier environment for FIFA and corporate sponsors than that of last year’s Men’s World Cup in Qatar.

    U.S. Soccer Federation President Cindy Parlow Cone participated in MarketWatch’s Best New Ideas in Money podcast and spoke about the long-term effort to achieve equal treatment for women soccer players.

    More coverage of the World Cup:

    Want more from MarketWatch? Sign up for this and other newsletters to get the latest news and advice on personal finance and investing.

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  • Pinterest stock advances, Masimo shares slump on outlook and other stocks on the move

    Pinterest stock advances, Masimo shares slump on outlook and other stocks on the move

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    Here are some of the biggest movers of the day:

    Stock gainers:

    Shares of Pinterest Inc.
    PINS,
    +3.64%
    were gaining 4% after an Evercore ISI analyst moved to a bullish stance, cheering better advertising-market conditions and improvements made by Chief Executive Bill Ready, who is about a year into his stint.

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