Tag: company activities and management

Saudi oil giant Aramco becomes latest energy firm to post record profits | CNN Business

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Saudi Arabian oil giant Aramco on Sunday reported a record annual net profit of $161.1 billion for 2022, up 46% from the year earlier, on higher energy prices, increased volumes sold and improved margins for refined products.

The profits follow similar reports in February from international peers BP, Shell, Exxon Mobil and Chevron which have mostly posted record profits for last year.

Oil prices swung wildly in 2022, climbing on geopolitical worries amid the war in Ukraine, then sliding on weaker demand from top importer China and worries of an economic contraction.

“Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real – including contributing to higher energy prices,” Aramco’s chief executive Amin Nasser said in the results statement.

To address those challenges, the company is not only focused on expanding oil, gas and chemicals production, but also investing in new lower-carbon technologies with potential to achieve additional emission reductions, Nasser said.

Aramco’s capital expenditure rose 18% to $37.6 billion in 2022 and the company said it expects this year’s spending to be around $45.0 billion to $55.0 billion including external investments.

Aramco declared a dividend of $19.5 billion for the fourth quarter, an increase of 4% from the previous quarter.

Its board also recommended to issue bonus shares, with eligible shareholders receiving one share for every 10 shares owned.

Free cash flow reached a record of $148.5 billion in 2022, compared to $107.5 billion in 2021.

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March 12, 2023
Camp toy store pleads for help after Silicon Valley Bank collapse | CNN Business

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A toy company based in New York has gotten caught up in the collapse of Silicon Valley Bank and is pleading with customers for help keeping it afloat.

Camp, a venture-backed retailer, sent an email to customers Friday announcing it was slashing prices and would use sales to help fund its continued operations after much of its money was tied up in the bank failure.

“Unfortunately, we had most of our company’s cash assets at a bank which just collapsed. I’m sure you’ve heard the news,” co-founder Ben Kaufman said in an email to customers.

He urged customers to use the code “BANKRUN” to save 40% off all merchandise, in an apparent nod to the run on the bank that may have helped bring down the Silicon Valley lender. Camp also said customers could pay full price, which it said would be appreciated.

Kaufman said the company was “hopeful that this will be resolved soon.”

CNN has not confirmed if Camp had funds with Silicon Valley Bank when the bank collapsed.

Silicon Valley Bank was put under control of the US Federal Deposit Insurance Corporation on Friday, capping off a stunning 48 hour period during which fears of a liquidity crisis at the firm prompted some startups to weigh withdrawing funds.

The sudden collapse of the Silicon Valley lender has pushed tech investors and startups to scramble to figure out their financial exposure to the bank, with founders worrying about getting their money out, making payroll and covering operating expenses.

The rapidly unfolding fallout at Silicon Valley Bank comes at a challenging moment for startup and tech industries. Rising interest rates have eroded the easy access to capital that helped fuel soaring startup valuations and funded ambitious, money-losing projects.

Kaufman, a former BuzzFeed executive, founded Camp in 2018. It has nine stores in California, Connecticut, Massachusetts, New York, New Jersey and Texas.

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March 11, 2023
Mental health startup exposes the personal data of more than 3 million people | CNN Politics

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A mental health startup exposed the personal data of as many as 3.1 million people online. In some cases, possibly sensitive information on mental health treatment was leaked, according to a company statement and a Department of Health and Human services filing.

Cerebral, a California-based firm that connects people suffering from anxiety and depression with mental health professionals via video calls, said it discovered the “inadvertent” data exposure more than three years after it started using “pixels” – a common method that companies and advertisers use to track user behavior for marketing purposes.

The company determined in January that tracking pixels had been sharing client and user data to “third-party platforms” and “subcontractors” that it didn’t name, according to a privacy notice near the bottom of its website.

Cerebral said it was unaware of any misuse of the protected health information that was disclosed. But privacy advocates have for years warned that such data troves can be used to aggressively market products at consumers and infringe on their privacy.

Some of the data potentially exposed in the Cerebral breach includes answers to online “self-assessments” about mental health that Cerebral asks prospective clients to fill out. That can include questions on whether someone is experiencing panic attacks, abusing alcohol or has a personality disorder, CNN’s review of the online assessments found.

Cerebral said in a statement to CNN on Friday that it was “committed to correcting historical errors and leading the industry in privacy standards moving forward.”

Cerebral notified the Department of Health and Human Services (HHS), which said in a filing this month that the breach affects over 3.1 million users. The department investigates potential violations of the Health Insurance Portability and Accountability Act (HIPAA), a law that requires medical providers to safeguard patient data.

Rachel Seeger, a spokesperson for the HHS Office for Civil Rights, said the office typically “does not comment on open or potential investigations.”

Cerebral said in its public statement that it had disabled the tracking pixels on its platforms and stopped sharing data with subcontractors “not able to meet all HIPAA [Health Insurance Portability and Accountability Act] requirements.”

“It is important to note that Cerebral never impermissibly transmitted clinician generated notes or clinician communications,” the company told CNN.

Cerebral spokesperson Chris Savarese did not respond to emailed questions about which and how many platforms and contractors to which the company disclosed the client health information.

Some analysts argue that the broader market for data tracking tools is out of control. A group of conservative Catholics has spent millions of dollars to buy mobile data that identified priests who used gay dating and hookup apps, the Washington Post reported this week.

Andrea Downing, who has done extensive research on pixel tracking and privacy, said patients are often unaware of how much personal data health care startups collect and potentially transmit to other parties.

“What is in the fine print or the details of how data is being shared for advertising is not apparent to us when we’re going through the trauma of a diagnosis and seeking knowledge,” said Downing, who is co-founder of Light Collective, a digital rights nonprofit.

“The only thing that is incentivizing change right now is the threat of liability,” Downing told CNN.

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March 10, 2023
Credit Suisse delays annual report after ‘late call’ from the SEC | CNN Business

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Credit Suisse can’t catch a break.

In the latest piece of troubling news, the beleaguered Swiss bank has delayed the publication of its 2022 annual report following a “late call” from the US Securities and Exchange Commission on Wednesday evening.

The SEC got in touch over revisions the bank had previously made to its cash flow statements for 2019 and 2020, Credit Suisse

(CS) said in a statement Thursday.

Shares in the bank, which have been trading around record lows, slid 5%.

“Management believes it is prudent to briefly delay the publication of its accounts in order to understand more thoroughly the comments received,” the company said.

Credit Suisse added that its 2022 financial results were not impacted. Those revealed the biggest annual loss since the financial crisis in 2008, laying bare the scale of the challenge the bank faces as it attempts a turnaround.

Thursday’s news underscores that challenge and will also add to concerns about governance at Credit Suisse. It is already in the crosshairs of Switzerland’s financial regulator, which is reportedly looking into comments the lender’s chairman made about the health of its finances.

Customers withdrew 111 billion Swiss francs ($121 billion) in the final three months of 2022, when the bank was hit by social media speculation that it was on the brink of collapse.

The rumors, which sparked a selloff in the lender’s shares, followed a series of missteps and compliance failures that have hurt the bank’s reputation and profit, as well as costing top executives their jobs.

Finma, the Swiss regulator, is seeking to establish the extent to which Axel Lehmann, and other bank representatives, were aware that clients were still withdrawing funds when he told reporters that outflows had stopped, Reuters reported last month, citing people familiar with the matter.

Finma declined to comment and Credit Suisse told CNN it did not “comment on speculation.”

In October, Credit Suisse embarked on a “radical” restructuring plan that entails cutting 9,000 full-time jobs, spinning off its investment bank and focusing on wealth management.

“We have a clear plan to create a new Credit Suisse and intend to continue to deliver on our three-year strategic transformation by reshaping our portfolio, reallocating capital, right-sizing our cost base, and building on our leading franchises,” CEO Ulrich Körner said on February 9.

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March 9, 2023
US safety regulators to investigate Tesla for steering wheels that can fall off | CNN Business

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Federal safety regulators are investigating Tesla’s Model Y SUV after at least two instances in which owners said their steering wheels became detached while the vehicle was being driven.

The National Highway Traffic Safety Administration is looking at the 2023 model year. It said in the two instances in which the steering wheel came off, the cars were delivered to buyers without the retaining bolt that attaches the steering wheel to the steering column.

The report from the agency did not say if there were accidents or injuries as a result of the problem.

NHTSA said around 120,000 vehicles on US roads could be affected by the problem. This is an investigation, a step the agency takes before ordering a recall.

Tesla is not the only company facing safety questions about its steering wheel. Nissan also just disclosed to NHTSA that it is recalling about 1,100 Nissan Ariyas, its electric SUV, because it may be missing a bolt required on its steering wheel.

There were three vehicles found in dealer inventories in which there was too much play in the steering wheels, and upon inspection it was discovered the bolts were missing in each. But in none of those cases did the steering wheel come off while the cars were being driven, and there were no reports of accidents or injuries caused by the missing bolts.

In February, Tesla was required to issue a recall of nearly 363,000 vehicles equipped with what it calls its “Full Self Driving” software after NHTSA determined it “led to an unreasonable risk to motor vehicle safety based on insufficient adherence to traffic safety laws.”

Among the traffic rules the cars violated in FSD mode was “traveling straight through an intersection while in a turn-only lane, entering a stop sign-controlled intersection without coming to a complete stop, or proceeding into an intersection during a steady yellow traffic signal without due caution.”

Tesla CEO Elon Musk objected to calling that a “recall,” saying it entailed only an over-the-air software update that did not require the owner to bring the cars to service centers to be fixed.

But Tesla did order a recall last month of 3,470 2022-2023 Model Y cars due to bolts in the second-row seat back frames not being secured correctly, which could cause the seat belts in those seats to not work properly in a crash.

Tesla has not had a public relations staff for several years and email inquiries to its press office are no longer accepted.

CNN’s Ramishah Maruf contributed to this report.

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March 8, 2023
$30 million of Funko Pop! toys will be thrown in the trash | CNN Business

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Thirty million dollars worth of Funko

(FNKO) Pop! figures – those big-headed, vinyl pop-culture dolls – will soon make their way into the hands of a new collector: The garbage collector.

Funko said in its fourth quarter earnings report that a combination of waning demand for the toys and a surplus of inventory is creating financial trouble for the company. Last year, they had to rent excess warehouse space just to hold the buildup of Funko figures, which range from Baby Yoda to Eddie Van Halen.

Funko was holding onto about $246.4 million worth of dolls at the end of 2022. That’s 48% more than what they had on hand just one year before.

The company intends to “eliminate” a bit of that nearly $250 million in inventory in the first half of 2023 “to reduce fulfillment costs by managing inventory levels to align with the operating capacity of our distribution center,” Funko said in a statement Wednesday. “This is expected to result in a write down in the first half of 2023 of approximately $30 to $36 million.”

In short, the product they’re storing is now worth less than the cost of keeping it on hand, so they’re dumping at least $30 million worth of it.

On a call with investors last week, CEO Brian Mariotti said Funko had already filled its Arizona distributing center to the brim with dolls and was forced to rent excess storage containers for them. The cost of that extra storage, he said, was causing the company to lose money at a rapid clip.

Company executives also announced that they would cut 10% cut of their workforce as a cost-saving measure.

Funko benefited during the pandemic boom, posting $1 billion in net sales for 2021 – a 58% increase from 2020 – but those gains didn’t hold up as the global economy reopened.

The company reported a total loss of $47 million in the fourth quarter of 2022. That’s down from a profit of $17 million during the same period the year before.

“It was clear on our last earnings call that the business and our operations hit an inflection point,” Mariotti said. “A combination of macro factors and Funko-specific issues have disrupted our financial and operating performance to an unacceptable degree.”

Funko stock has fallen by 9.4% so far this year.

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March 5, 2023
Tesla recalls almost 3,500 Model Y cars for loose bolts | CNN Business

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Tesla is recalling 3,470 2022-2023 Model Y cars due to bolts in the second-row seat back frames not being secured properly.

An estimated 4% of cars are affected, a recall report submitted in late February said.

The loose bolts could cause the seat belts to not work properly in a crash, “which may increase the risk of an injury for occupants seated in affected second-row seating positions,” the National Highway Traffic Administration said.

On Model Y vehicles, the second-row driver- and passenger-side seat back frames are secured with four bolts per seat back. But during production for certain Model Y cars, one or more of the bolts securing the seat back frames to the lower seat frame “may not have been torqued to specifications.”

Owners can tell if their car is affected by seeing if their second-row seat back frame folds improperly or if it’s loose and rattles when driving.

Tesla found five warranty claims regarding the bolts since last December, but is not aware of any injuries or deaths due to it.

A driver in Fremont, California, found a faulty seat back bolt last December, triggering a Tesla investigation and risk assessment which ended February 17. A recall determination was made on the same day.

Tesla will inspect the bolts and tighten them if necessary for free of charge, and owner notification letters will be mailed.

The recall was filed the same month Tesla recalled all 363,000 US vehicles with the “Full Self Driving” driver assist software due to safety risks, a significantly larger recall, which was a blow to the automaker’s business model.

The NHTSA said, based on its analysis, Tesla’s “Full Self Driving” feature “led to an unreasonable risk to motor vehicle safety based on insufficient adherence to traffic safety laws.” And it warned the feature could violate traffic laws at some intersections “before some drivers may intervene.”

“The FSD Beta system may allow the vehicle to act unsafe around intersections, such as traveling straight through an intersection while in a turn-only lane, entering a stop sign-controlled intersection without coming to a complete stop, or proceeding into an intersection during a steady yellow traffic signal without due caution,” said the recall notice, posted on NHTSA’s website.

Tesla will attempt to fix the feature, which costs $15,000, through an over-the-air software update, the notice added.

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March 4, 2023
What you need to know about this earnings season | CNN Business

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

New York
CNN
—

About 99% of all S&P 500 companies have reported fourth quarter earnings and the results aren’t great.

Companies listed in the S&P 500 index beat analysts’ earnings estimates by an average of just 1.3% last quarter. For context, that’s way down on the index’s 5-year average of 8.6%, according to FactSet data.

What’s happening: There have been some steep and disappointing profit misses as corporate America feels the sting of sticky inflation and the Federal Reserve’s interest rate hikes.

Tech companies fared poorly this season: Apple

(AAPL) recorded a rare earnings miss while Intel

(INTC) and Google-parent company Alphabet also fell short of expectations.

But it wasn’t all doom-and-gloom. Energy companies brought in yet another quarter of record profits, with Big Oil companies — such as Chevron, ConocoPhillips, Exxon and Shell — notching their most profitable years in history. Elsewhere, Tesla

(TSLA) reported record revenue gains and beat earnings expectations. Big box retailers Target

(TGT) and Walmart

(WMT) also surpassed estimates as US consumers kept on spending.

Here’s what else traders need to know about the final few months of last year and beyond.

Corporate profits could drop for the first time since 2020

S&P 500 companies are on track to report a 4.6% drop in earnings year-over-year, according to FactSet data. That would mark their first earnings decline since the third quarter of 2020, when Covid shut down large swaths of the economy.

Gloomy forecasts abound

About 81 S&P 500 companies have issued negative earnings-per-share guidance for the first quarter of 2023, according to FactSet. That’s a lot higher than the 23 companies reporting positive guidance.

There was no shortage of foreboding forecasts from top execs on earnings calls this season.

Walmart beat estimates last quarter, but they also lowered expectations for future earnings.

Home Depot

(HD) CEO Ted Decker said he was concerned that consumers were becoming less resilient to the economy. “We noted some deceleration in certain products and categories, which was more pronounced in the fourth quarter,” he said on an analyst call.

Lowe’s executives, meanwhile, warned that they were preparing for a “more cautious consumer” this year.

Investors feel like celebrating

Wall Street traders appear to be taking this dour earnings season in their stride. The market is “rewarding positive earnings surprises more than average and punishing negative earnings surprises much less than average for the fourth quarter,” reports FactSet.

Inflation is (still) a big deal

More than 325 S&P 500 companies have cited the term “inflation” during their earnings calls for the fourth quarter. That’s well above the 10-year average of 157, according to FactSet document searches.

But the worries over price hikes appear to be waning, at least a little bit. This marks the lowest number of S&P 500 companies using the “I”-word on their calls since the third quarter of 2021. Since last quarter, the number of inflation mentions has fallen by about 20%.

▸ ISM Services PMI — a report that measures the strength of the US service sector — is due out at 10 a.m. ET. The data is expected to show a slight slowdown in growth between January and February (54.5 in February vs. 56.5 in January. For context, a reading above 50 means the services economy is expanding).

That deceleration would be a big deal. It would signal that the economy is beginning to cool and that the Fed’s efforts to fight inflation by raising interest rates are working. If services sector growth accelerates, however, it could signal that more aggressive rate hikes are ahead and send markets lower.

▸ Wall Street is anticipating (or dreading, depending on who you ask) next Friday’s unemployment report. The February data is expected to shed some light on a shockingly resilient labor market.

Another unexpected surge in non-farm payrolls, like the 517,000 new jobs added in January, could indicate more Fed rate hikes are ahead. That could roil markets in this “good news is bad news” environment.

Analysts expect that the economy added 200,000 new jobs last month, according to Refinitiv data.

▸ The Chinese economy surprised investors this week by quickly bouncing back from its zero-Covid shutdowns. China’s first consumer price index, producer price index and trade figures of 2023 are set to be released next week, which will show the full extent of the country’s rebound.

“These numbers will offer the first official indications of mainland China’s reopening effect following the rebound seen in PMI numbers,” wrote analysts at S&P Global.

Global manufacturing rose in February for the first time in seven months, according to the latest PMI surveys compiled by S&P Global. That growth was largely spurred on by China’s reopening.

Shares of Silvergate Capital, a large lender to cryptocurrency firms, plunged nearly 60% — a record drop — on Thursday after the company told the Securities and Exchange Commission that it won’t be able to file its annual report on time and cited concerns about its ability to remain in business.

The majority of Silvergate’s crypto clients, including Coinbase, Paxos, Galaxy Digital and Crypto.com, quickly cut ties with the bank amid the chaos.

So what does it all mean?

My colleague Allison Morrow explains: The California-based lender reported a $1 billion loss for the fourth quarter as investors panicked over the collapse of FTX, the exchange founded by Sam Bankman-Fried that is now at the center of a massive federal fraud investigation.

FTX’s collapse in November rippled through the digital asset sector, forcing several firms to halt operations and even declare bankruptcy as liquidity dried up and investors fled.

But unlike FTX, BlockFi, Celsius, Voyager and other crypto companies that folded last year, Silvergate is a traditional, federally insured lender that has positioned itself as a gateway to the crypto sector.

It’s among the first major instances of crypto’s volatility spilling into the mainstream banking system — a scenario regulators and crypto skeptics have long feared.

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March 3, 2023
Tesla, Musk sued by shareholders over self-driving safety claims | CNN Business

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Tesla

(TSLA) and its Chief Executive Elon Musk were sued on Monday by shareholders who accused them of overstating the effectiveness and safety of their electric vehicles’ Autopilot and Full Self-Driving technologies.

In a proposed class action filed in San Francisco federal court, shareholders said Tesla defrauded them over four years with false and misleading statements that concealed how its technologies, suspected as a possible cause of multiple fatal crashes, “created a serious risk of accident and injury.”

They said Tesla’s share price fell several times as the truth became known, including after the National Highway Traffic Safety Administration began investigating the technologies, and reports that the Securities and Exchange Commission was investigating Musk’s Autopilot claims.

The share price also fell 5.7% on Feb. 16 after NHTSA forced a recall of more than 362,000 Tesla vehicles equipped with Full Self-Driving beta software because they could be unsafe around intersections.

Tesla has said it acquiesced to the recall, though it disagreed with NHTSA’s analysis.

“As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s common stock, plaintiff and other class members have suffered significant losses and damages,” the complaint said.

Tesla, which does not have a media relations department, did not immediately respond to requests for comment.

Monday’s lawsuit led by shareholder Thomas Lamontagne seeks unspecified damages for Tesla shareholders from Feb. 19, 2019 to Feb. 17, 2023. Chief Financial Officer Zachary Kirkhorn and his predecessor Deepak Ahuja are also defendants.

Tesla’s share price closed Monday up $10.75, or 5.5%, at $207.63, but the stock has lost about half its value since peaking in Nov. 2021.

Musk is expected at Tesla’s March 1 investor day to promote the company’s artificial intelligence capability and plans to expand its vehicle lineup.

The case is Lamontagne v Tesla Inc et al, U.S. District Court, Northern District of California, No. 23-00869.

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March 3, 2023
The US dollar is at a crossroads | CNN Business

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

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CNN
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Wall Street investors are reaching for their neck braces in preparation for yet another volatile swing in stock markets: A surging US dollar.

The greenback — which is not just the dominant global currency but also “the key variable affecting global economic conditions,” according to the New York Federal Reserve — reached a 20-year high last year after the Fed turned hawkish with its aggressive rate hikes.

Since then, inflation seemed to have softened, pushing the dollar down. But in recent weeks, as a slew of economic data has shown the Fed’s inflation battle is far from over, the currency soared by about 4% from its recent lows, and now sits near a seven-week high.

Investors are stressing about this sudden rebound, since a stronger dollar means American-made products become more expensive for foreign buyers, overseas revenue decreases in value and global trade weakens.

Multinational companies, naturally, aren’t thrilled about any of this. And around 30% of all S&P 500 companies’ revenue is earned in markets outside the US, said Quincy Krosby, chief global strategist for LPL Financial.

What’s happening: The US dollar “finds itself at a significant crossroads yet again,” said Krosby. “While the Fed remains steadfastly data dependent, the dollar’s course as well remains focused on inflation and the Fed’s monetary response.”

“The strong US dollar has been a headwind for international earnings and stock performance (for US investors),” wrote Wells Fargo analysts in a recent note.

February was a rough month for markets: The Dow ended February down 4.19%, the S&P 500 fell 2.6% and the Nasdaq lost just over 1%.

What’s next: Investors are clearly focused on the next Fed policy meeting, which is still three weeks away, for signals about the direction of rates. But until then, investors may gain some insight Tuesday when Fed Chairman Jerome Powell speaks before the Senate Banking Committee.

They’ll also be watching next Friday’s jobs report for any softening in the labor market that could temper the Fed’s hawkish mood.

Don’t forget the debt ceiling: Another significant threat to the dollar is looming in Congress — the ongoing debt ceiling fight. The United States could start to default on its financial obligations over the summer or in the early fall if lawmakers don’t agree to raise the debt limit — its self-imposed borrowing limit — before then, according to a new analysis by the Bipartisan Policy Center.

That could potentially lead to a disastrous downgrade to America’s credit rating and could send the dollar spiraling as investors start to sell off their US assets and move their money to safer currencies.

“It would certainly undermine the role of the dollar as a reserve currency that is used in transactions all over the world. And Americans — many people — would lose their jobs and certainly their borrowing costs would rise,” Treasury Secretary Janet Yellen told CNN in January.

▸ A lot has changed in the last twenty years. The gender pay gap hasn’t.

In 2022, US women on average earned about 82 cents for every dollar a man earned, according to a new Pew Research Center analysis of median hourly earnings of both full- and part-time workers.

That’s a big leap from the 65 cents that women were earning in 1982. But it has barely moved from the 80 cents they were earning in 2002.

“Higher education, a shift to higher-paying occupations and more labor market experience have helped women narrow the gender pay gap since 1982,” the Pew analysis noted. “But even as women have continued to outpace men in educational attainment, the pay gap has been stuck in a holding pattern since 2002, ranging from 80 to 85 cents to the dollar.”

▸ Initial jobless claims, which measures the number of people who filed for unemployment insurance for the first time last week, are due out at 8:30 a.m. ET on Thursday.

This will be the last official jobs data investors see before February’s heavily anticipated unemployment report next Friday.

Economists are expecting 195,000 Americans to have filed for unemployment, which is higher than the seasonally adjusted 192,000 who applied two weeks ago.

Initial claims have come in lower than expected in recent weeks and remain well below their pre-pandemic levels.

The white-hot labor market in the US added more than 500,000 jobs in January, blowing analysts’ expectations out of the water and bringing the unemployment rate to its lowest level since May of 1969.

That’s bad news for the Federal Reserve where policymakers have been attempting to tame inflation by cooling the economy through painful interest rate hikes.

▸ It’s a big day for groceries. Kroger (KR), Costco (COST) and Anheuser-Busch (BUD) all report earnings on Thursday.

Investors will be watching closely for clues about consumer sentiment during an uncertain retail earnings season. On Tuesday, Kohl’s reported that it had a rough holiday season and executives at the company put the blame on inflation. The company said higher prices squeezed sales and forced it to mark down some products to entice shoppers — which hurt its profit margin.

Those comments echoed those of other big box retailers like Walmart (WMT) and Target (TGT), who have said consumers are feeling the pinch of inflation.

Still, Target and Walmart’s bottom lines were bolstered by food sales even as consumers pulled back on discretionary purchases.

The US Senate voted on Wednesday to overturn a Biden administration retirement investment rule that allows managers of retirement funds to consider the impact of climate change and other ESG factors when picking investments.

As my CNN colleagues Ali Zaslav, Clare Foran and Ted Barrett write: The rule is not mandated – it allows, but does not require, the consideration of environmental, social and governance factors in investment selection.

Republicans complained that the rule is a “woke” policy that pushes a liberal agenda on Americans and will hurt retirees’ bottom lines.

“This rule isn’t about saying the left or the right take on a given environmental, social, or governance issue is ‘correct,’” countered Senator Patty Murray (D-WA) on the Senate floor Wednesday. “It’s about acknowledging these factors are reasonable for asset managers to consider.”

The measure will next go to President Joe Biden’s desk as it was passed by the House on Tuesday. The administration, however, has issued a veto threat. As a result, passage of the resolution could pave the way for Biden to issue the first veto of his presidency.

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March 2, 2023
Alphabet’s self-driving car unit has cut 8% of its staff this year | CNN Business

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CNN
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Waymo, the self-driving car division of Google

(GOOGL)’s parent company Alphabet, said on Wednesday that it has cut approximately 8% of its staff across two rounds of layoffs this year.

Some 209 jobs were eliminated in total, after cuts in late January and another more recent round, the company confirmed on Wednesday.

“We took a thoughtful approach and feel confident that we’re providing for each of these former teammates through this transition,” the company said in a statement to CNN Wednesday. “We’re confident that we have the right teams in place to achieve success for Waymo.”

The Waymo job cuts come amid a spate of layoffs in the tech sector, as the industry adjusts to waning demand for digital services years into the pandemic and confronts broader uncertainty in the global economy. Rising interest rates have also dried up the easy access to funding tech companies used to fuel ambitious projects and bets on the future.

Alphabet said in January that it was cutting 12,000 jobs, or 6% of its workforce, after having grown by more than 50,000 employees over the prior two years. The cuts to Waymo highlight how even Alphabet’s most ambitious and high-profile long-term bets are not immune to its renewed focus on reining in costs.

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March 1, 2023
Tesla to build next plant in Mexico | CNN Business

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Tesla’s next vehicle assembly plant will be in Mexico near Monterrey, CEO Elon Musk announced Wednesday.

“We’re super excited about it,” Musk said during an investor day for the company. “We’ll continue to expand production at all of our existing factories. So this is not moving output to anywhere, from anywhere. This is supplemental production.”

The company currently has capacity to build about 2 million cars a year at four factories, in Fremont, California; Shanghai, China; Austin, Texas; and Berlin, Germany. It has set a goal of eventually building 20 million cars a year. The company delivered just over 1.3 million cars in 2022. The largest automaker in the world by production volume, Toyota, delivered just over 10 million cars globally in 2022.

Tesla did not comment on the cost of the new plant. The news was a confirmation of plans announced Tuesday by Mexican President Andres Manuel Lopez Obrador for Tesla to build its next factory in the country. Reuters reported that Mexican officials said the plant could cost $1 billion.

The company estimates to build the additional plants needed to reach 20 million vehicles will cost a total of $150 billion to $175 billion, including the $28 billion in investment that it has already made in its history.

“Maybe this total investment looks large,” said CFO Zachary Kirkhorn. “I think its quite small relative to our ambitions.”

The company also announced that earlier Wednesday it built 4 million vehicles in its history.

Shares of Tesla

(TSLA) slipped more than 5% in after-hours trading Wednesday, although that was up a bit from a larger decline before Musk’s announcement more than three hours into the presentation. There had been hope by some investors that Tesla

(TSLA) would announce details about a next generation of vehicles. Musk declined to answer a question about the next generation vehicle.

“We will have a proper sort of product event,” Musk said. “We’d be jumping the gun if we were to answer that question.”

In response to another question from an analyst, Musk said he doesn’t anticipate Tesla ever having more than 10 different vehicles in its product lineup. He derided the broad offerings of competing automakers as simply a “shuffling” of many similar models.

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March 1, 2023
Nissan recalling more than 700,000 SUVs that can accidentally shut off while driving | CNN Business

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Nissan is recalling more than 700,000 Rogue and Rogue Sport compact SUVs because they can be shut off accidentally while driving.

Some model year 2016 through 2020 Nissan Rogue and 2017 through 2022 Rogue Sports, have jackknife-style keys – the type in which the metal blade of the key flips out from within a plastic key fob. An internal joint in the key can weaken over time, allowing the key to accidentally fold while in use. If this happens while the key is in the ignition, then the vehicle can be accidentally turned off if they is key is touched or bumped.

The recall only involves the base Rogue S and smaller Rogue Sport S models. Nissan hasn’t yet worked out a solution to the problem, according to documents the automaker filed with the National Highway Traffic Safety Administration. Once a solution is available, according to NHTSA, it will be provided by Nissan dealers free of charge.

In the meantime, owners of vehicles involved in the recall are advised not to attach anything to the keys that might pull it down and, also, to insert the key into the ignition in a direction that allows the key to fold fold only upward, not down.

Nissan will begin alerting owners about the recall later in March. Owners with questions about recall can also call NHTSA’s Vehicle Safety Hotline at 888-327-4236.

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February 28, 2023
Pending home sales blew past expectations last month as buyers pounced on lower rates | CNN Business

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Pending home sales crushed expectations in January, when mortgage rates dropped from recent highs of more than 7% and home buyers jumped at the opportunity.

According to data released Monday from the National Association of Realtors, it was the largest monthly sales increase since June 2020.

The pending sales index, based on signed contracts to buy a home rather than the final sales that are accounted for in existing home sales, rose by 8.1% from December to January, beating economists’ predictions for a rise of 1%. January’s jump followed a downwardly revised 1.1% rise in December.

“Buyers responded to better affordability from falling mortgage rates in December and January,” said Lawrence Yun, chief economist at NAR.

But since then, mortgage rates have risen again, climbing almost half a percentage point since the beginning of February, according to Freddie Mac.

“Mortgage rates took a breath in December and January before resuming their climb in February, reaching 6.5%, the highest level of the new year,” said Hannah Jones, an economic data analyst at Realtor.com.

At the current mortgage rate, the monthly payment on a median-priced home is about 45% higher — or $630 more — than it was at the same time last year, she said. “Many buyers are still holding off, waiting to see if prices or rates give a bit before getting into the market.”

Last year’s persistent increase in both mortgage rates and home prices pushed many would-be home purchasers out of the market, said Jones. This resulted in a slowing of new homes in the building pipeline and fewer sellers listing their homes, which limited options for buyers still in the market.

“New listings were at the lowest level in the last six years in January as sellers stayed on the sidelines, waiting to see buyers return, before placing their homes for sale,” said Jones. “However, the first month of the year brought glimmers of hope as year-over-year declines in both existing and new home sales slowed, and buyer sentiment improved slightly.”

While home sales were down by 24.1% from the still-hot market of a year ago, activity appears to be bottoming out in the first quarter of this year, before incremental improvements will occur, Yun said.

“An annual gain in home sales will not occur until 2024,” said Yun. “Meanwhile, home prices will be steady in most parts of the country with a minor change in the national median home price.”

All regions saw a month-to-month increase in pending home sales, with the Northeast up 6%, the Midwest up 7.9%, the South up 8.3% and the West up 10.1%.

“An extra bump occurred in the West region because of lower home prices, while gains in the South were due to stronger job growth in that region,” Yun said.

Home prices are dropping fastest in areas where prices ran up the most in the frenzied market of the past few years.

But overall, the number of home sales are expected to drop this year, according to NAR’s forecast.

NAR anticipates the economy will continue to add jobs throughout this year and next, with the 30-year fixed mortgage rate steadily dropping to an average of 6.1% in 2023 and 5.4% in 2024.

Even with an improving interest rate environment and job gains, Yun still expects annual existing-home sales to drop about 11% this year from last year, before jumping up about 18% in 2024. NAR projects new-home sales will fall about 4% this year compared with last year before surging nearly 20% in 2024.

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February 27, 2023
Union Pacific CEO to leave after push from activist shareholder | CNN Business

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Union Pacific shares jumped 10% in premarket trading Monday after the railroad company announced CEO Lance Fritz will leave the company by year-end, following a call by an activist hedge fund for his ouster.

Union Pacific just reported a record profit for the second straight year. But the hedge fund, Soroban Capital Partners, put out a statement saying that Fritz had lost the confidence of “shareholders, employees, customers, and regulators.”

“UNP’s total shareholder return has been the worst in the industry,” said Soroban’s letter to the board. “Among all S&P 500 companies, UNP is rated by employees as the worst place to work and has the lowest employee CEO approval rating (ranked 500th out of 500 in both),” said the letter. And it said that the Surface Transportation Board, one of the regulators of freight railroads, ranked Union Pacific as providing the worst service among the major railroads.

Soroban only owns about 1% of Union Pacific’s shares.

“It is my honor and privilege to serve this great company. I am proud of our team and all we have built together,” said Fritz in a statement. “Union Pacific has been my home for 22 years and I am confident that now is the right time for Union Pacific’s next leader to take the helm.”

Union Pacific said its process of looking for a new CEO had been ongoing for a year and that it decided to make a public statement in light of Soroban’s public call for a change.

“The Board is grateful to Lance for his unwavering leadership, dedication and oversight in driving our company forward over the last eight years as CEO. Lance created an environment that has allowed Union Pacific to make a measurable impact with our customers, communities and employees alike,” said Michael McCarthy, lead independent director of the Board. “He has capably led our company during a time of significant challenge and change.”

But, overall, the level of service and on-time performance in the freight railroad industry has been declining for years, as the railroads attempted to trim costs and staffing.

Despite the industry’s record profits, stocks in major freight railroads have lagged other sectors. Shares of Union Pacific

(UNP) are down about 20% over the last 12 month through Friday’s close, even with a rebound in share price so far in 2023. That’s worse than the drop in share price at other major railroads like Norfolk Southern

(NSC) and CSX

(CSX).

As far as employee relations, Union Pacific was seen as a leader among freight railroads in contentious labor negotiations last year that would have resulted in an economy-crippling strike had Congress not stepped in and imposed an unpopular contract. The contract granted employees an immediate 14% raise, including back pay, but denied them the paid sick days they had sought.

Union Pacific and other railroads argued during the negotiations that it couldn’t afford to meet union demands for paid sick days, even though the unions estimated it would cost the entire industry $321 million a year at a time when the railroads are each making billions of dollars in profits.

Union Pacific last year earned a net income of $7 billion, up about $500 million, or 7%, from the previous record profit it posted for 2021. Total employee compensation for the year came to $4.6 billion, far less than the $6.3 billion that Union Pacific spent repurchasing shares of stock in the period.

Last week, Union Pacific reached an agreement with two of its smaller unions granting their members up to four sick days a year, as well as greater flexibility to use three personal days as sick days without prior notice and approval.

“We will continue to work with other unions to address paid sick time solutions,” according to the company’s statement on sick pay last week. The move came after another major railroad, CSX, reached deals granting sick days with six of its unions. UP did act before a third railroad, Norfolk Southern, reached a deal with one of its unions on sick days in the wake of a major train derailment in East Palestine, Ohio, which released toxic materials into the area.

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February 27, 2023
Norfolk Southern is paying $6.5 million to derailment victims. Meanwhile, it’s shelling out $7.5 billion for shareholders | CNN Business

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CNN
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Norfolk Southern CEO Alan Shaw pledged Tuesday the freight railroad will spend $6.5 million to help those affected by the release of toxic chemicals from its derailment nearly three weeks ago in East Palestine, Ohio. But in a plan released earlier this year, the company said it’s planning to spend more than a thousand times that amount — $7.5 billion — to repurchase its own shares in order to benefit its shareholders.

The company spent $3.4 billion on share repurchases last year, and $3.1 billion in 2021, bringing its recent share repurchases to $6.5 billion. That towers over what it said is its financial commitment to East Palestine, which it said exceeds $6.4 million in direct aid to families and government agencies, in addition to what will be required in cleanup costs.

There is no estimate as to the total cost to Norfolk Southern from the derailment, including the cost of cleanup that the Environmental Protection Agency says will be the railroad’s responsibility.

It’s not clear how much of the accident’s cost will fall on Norfolk Southern. The company revealed Wednesday during a conference call with investors that it has as much as $1.1 billion worth of liability insurance coverage that it can draw upon to compensate third parties for losses caused by the accident. It also has about $200 million worth of insurance coverage to cover damage to its own property, such as tracks or equipment.

In March 2022, Norfolk Southern

(NSC) announced a new $10 billion share repurchase plan. Its latest annual financial report, filed just hours before the derailment this month, shows that it still had $7.5 billion available to buy additional shares under that repurchase plan as of December 31.

Norfolk Southern did not respond to questions Wednesday on whether it expects to change its share repurchase plans in the wake of the derailment.

The company also returned an additional $1.2 billion to shareholders in the form of dividend payments in 2022, and $1 billion in 2021, bringing total payments to shareholders to $4.6 billion last year and $4.1 billion in 2021.

The shareholders did much better than the company’s 19,000 employees. Total employee compensation in 2022 came to $2.6 billion, up from $2.4 billion in 2021.

The amount that Norfolk Southern and other major freight railroads are spending on shareholders got a lot of attention in December, when they successfully fought a move in Congress to require them to give hourly workers at least seven sick days a year as part of a labor contract imposed on the industry by Congress in order to avoid an economically crippling rail strike. And it’s getting new attention in the wake of the derailment, along with questions about whether the environmental disaster could have been avoided if the railroad had spent more on staffing and safety.

“Corporations do stock buybacks, they do big dividend checks, they lay off workers,” said Democratic Sen. Sherrod Brown of Ohio, on CNN’s State of the Union on Sunday. “They don’t invest in safety rules and safety regulations, and this kind of thing happens.”

The accident is under investigation by the National Transportation Safety Board. While the cause has yet to be determined, it is known that freight railroads have fought tougher safety rules in the past.

One rule the industry successfully fought would have required a more modern braking system on trains carrying significant amounts of hazardous materials. The Federal Railroad Administration, which proposed the rule under the Obama administration, estimated a more modern braking system would reduce by nearly 20% the number of rail cars in a derailment that puncture and release their contents.

The FRA estimated those better brakes would cost the entire industry $493 million, spread over a period of 20 years. The Association of American Railroads, the trade industry group that represents most US freight railroads, estimated a much greater cost — about $3 billion, but again, spread over 20 years. That would mean around $150 million a year for an entire industry that is earning billions of dollars of annual profits.

Still, it was able to block the rule from ever taking effect, based partly on the argument it was too costly for the potential benefit.

“The railroads are quick to point out their lack of funds to provide adequate staffing, paid sick leave and improved safety, yet they have billions of dollars to spend on stock repurchases,” said Eddie Hall, national president of the Brotherhood of Locomotive Engineers, the industry’s second-largest union behind the one that represents conductors.

Share repurchases are designed to help increase the value of the stock by reducing the number of shares outstanding.

In theory, each remaining share becomes more valuable since it represents a greater percentage of the company’s overall ownership. The earnings per share, a key measure used by investors to judge a company’s profitability, can rise even if the total dollars earned by the company goes down, as the pool of shares available to the public shrinks further.

But Norfolk Southern’s profits aren’t going down. They’re going up — by quite a bit. It posted record profits from railway operations of $4.45 billion in 2021, and broke that record in 2022 when it earned $4.8 billion on that basis.

Other freight railroads are also reporting improving profits, and have joined Norfolk Southern in massive share repurchases.

Union Pacific

(UNP) purchased $6.3 billion worth of shares in 2022, and has plans to purchase an additional 84 million shares, worth more than $16 billion at its current value. CSX repurchased $4.7 billion worth of shares last year and has plans to buy an additional $3.3 billion going forward. Like Norfolk Southern, both UP and CSX spent more on share repurchases than they did on total employee compensation.

Share repurchases are not limited to the rail industry. Chevron

(CVX) recently announced plans to repurchase $75 billion worth of its stock with windfall record profits that came from high oil prices. Across corporate America, share repurchases reached almost $1 trillion for the first time last year, coming in at $936 billion according to S&P Dow Jones Indices, up from $882 billion in 2021.

Share repurchases are forecast to top $1 trillion this year.

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February 22, 2023
Amazon closes its acquisition of One Medical, but scrutiny of the deal is not over | CNN Business

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CNN
—

Amazon closed its acquisition of health care provider One Medical and its parent in a $3.9 billion deal on Wednesday, hours after the Federal Trade Commission said it would not challenge the purchase but that regulators were still investigating potential competitive and consumer harms of the transaction.

The landmark deal will turn the e-commerce giant into a provider of primary medical care with access to more than 200 brick-and-mortar doctors’ offices, along with roughly 815,000 One Medical members, according to that company’s latest financial statement.

The One Medical deal would also allow Amazon to expand its telehealth services and acquire valuable relationships with hospital systems, industry analysts have said.

On Wednesday, Amazon said One Medical will offer new customers a $55 discount on annual memberships for a limited time.

“We’re on a mission to make it dramatically easier for people to find, choose, afford, and engage with the services, products, and professionals they need to get and stay healthy, and coming together with One Medical is a big step on that journey,” said Neil Lindsay, senior vice president of Amazon Health Services, in a release. “One Medical has set the bar for what a quality, convenient, and affordable primary care experience should be like. We’re inspired by their human-centered, technology-forward approach and excited to help them continue to grow and serve more patients.”

But while Amazon can consummate the deal without the immediate threat of an FTC antitrust suit, the agency is still investigating the acquisition and can still challenge the deal after the fact.

“The FTC’s investigation of Amazon’s acquisition of One Medical continues,” said FTC spokesman Douglas Farrar. “The commission will continue to look at possible harms to competition created by this merger, as well as possible harms to consumers that may result from Amazon’s control and use of sensitive consumer health information held by One Medical.”

The FTC plans to warn Amazon it may close the deal at its own risk, an agency official said. Known as a “pre-consummation warning,” the FTC began sending such letters to merging companies in 2021 in response to a surge in proposed deals that threatened to overwhelm regulators’ investigative capacity.

The warning highlights the continued legal risk for Amazon and the potential concerns driving the FTC probe. Worries include not only the potential for Amazon to entrench its economic dominance but also fears that its acquisition of valuable health data could lead to the misuse of that information for other purposes, such as targeted advertising or e-commerce, the agency official said.

Amazon’s deal to acquire One Medical follows its 2018 purchase of the online pharmacy service PillPack, which later became Amazon Pharmacy. Separately, Amazon partnered with JPMorgan Chase and Berkshire Hathaway on an effort to provide better health care services and insurance at a lower cost to workers and families at the three companies, and possibly other businesses, too. That effort, called Haven, shut down in 2021.

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February 22, 2023
Dow drops more than 500 points as retail earnings disappoint | CNN Business

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US stocks dropped on Tuesday afternoon after fourth-quarter earnings and forecasts from mega-retailers like Walmart and Home Depot raised concerns about the strength of demand from the US consumer.

The Dow was down about 500 points, or 1.5%, on Tuesday afternoon. The S&P 500 fell by 1.6% and the Nasdaq Composite was 1.8% lower.

Walmart

(WMT) topped revenue expectations, but shares of the stock fell nearly 2% in morning trading after the retailer lowered its outlook for the year ahead. Walmart

(WMT)’s CFO said that he was worried about inflation and its impact on the US consumer.

“The consumer is still very pressured, and if you look at economic indicators, balance sheets are running thinner and savings rates are declining relative to previous periods,” Walmart CFO John Rainey said during the earnings call. “And so that’s why we take a pretty cautious outlook on the rest of the year.”

Shares of the stock had recovered by the early afternoon and were up by about 0.6%.

Home Depot

(HD) reported record earnings for the fiscal year that ended in January, and boosted both hourly wage and the stock dividend. But the fourth quarter painted a different picture, as the company missed revenue expectations for the first time since 2019, before the pandemic.

The company also lowered its outlook for the year ahead as executives struck a more cautious tone about recession and inflation forecasts on the call that followed earnings.

Shares of the stock fell by nearly 6% on Tuesday as the housing market weakens – US existing home sales dropped to their lowest level in more than 12 years in January.

“After a year of defying gravity, the slowing economy and pressures on consumers have finally caught up with Home Depot,” said Neil Saunders, managing director of GlobalData. “For most of 2022, the number of existing homes sold has been in decline. However, the pace of decline accelerated in December with the volume of completed sales down by a sharp 36.3%.”

Target, Best Buy, Macy’s and Gap will report later this month.

Investors, meanwhile, are gearing up for a week full of important economic data. Minutes from the Federal Reserve’s last meeting are coming on Wednesday, a second revision of GDP will be released on Thursday and Friday brings January’s Personal Consumption Expenditures – the Fed’s preferred inflation gauge.

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February 21, 2023
With a little ‘tickle,’ a new technology gives hope to stroke patients with paralysis | CNN

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For nearly a decade, Heather Rendulic hasn’t been able to use her left hand to feed herself or pick up something as light as a soup can – but that changed when she became part of a clinical trial that could radically improve the lives of people who’ve been paralyzed after a stroke.

The results of that trial were published Monday in the journal Nature Medicine.

Rendulic has a rare brain disease called cavernous angioma, a blood vessel abnormality that can cause stroke. She had series of them – five total – over a period of 11 months when she was just 22 years old that left her paralyzed on her left side.

“The most challenging part of my condition is living one-handed in a two-handed world,” the Pittsburgh resident said.

A stroke cuts off the blood supply to the brain, and cells start to die within minutes. A person can have paralysis if the stroke damages the part of the brain that sends messages to trigger muscles to move.

Rendulic eventually regained some function on her left side, but she was still unable to use a fork or make a fist with that hand.

In 2021, as a part of a joint project between the University of Pittsburgh and Carnegie Mellon University, researchers implanted a pair of thin metal electrodes along her neck.

Doctors already use spinal cord stimulation technology to treat persistent pain. Research has shown that the technology could be used to restore leg movement after a spinal cord injury, but hand movements are a little trickier. A hand that functions properly has a unique kind of dexterity and a wide range of motion.

For the trial, scientists implanted electrodes along the surface of the spinal cord that look like strands of spaghetti. The electrodes give tiny impulses that stimulate specific regions and activate nerve cells inside the spinal cord.

“The sensory nerves from the arm and hand send signals to motor neurons in the spinal cord that control the muscles of the limb,” said study co-author Dr. Douglas Weber, a professor of mechanical engineering at the Neuroscience Institute at Carnegie Mellon University. “By stimulating these sensory nerves, we can amplify the activity of muscles that have been weakened by stroke. Importantly, the patient retains full control of their movements: The stimulation is assistive and strengthens muscle activation only when patients are trying to move.”

This technology could work with a wide range of patients, the researchers said.

Rendulic said the stimulation feels “kind of like a tickle.” It’s never painful, but it takes a little getting used to.

As tiny black plastic boxes light up and flashing green lights travel up and down her arm, the device allows motion that would have been unthinkable years ago.

Even on the first day, she had a new range of movement. She didn’t have to be shown how to open the hand or reach the arm, the researchers said. For more complex tasks, a little training was needed.

“When the stimulation is on, I feel like I now have control of my arm and my hand again that I haven’t had in over nine years,” she said.

Rendulic can lift her arm above her head, use a fork to bring food to her mouth, and fully open and close her fist. The other person participating in the trial had similarly promising results.

At one point during the trial, Rendulic picked up a soup can and released it on a marked spot on a board. The lab around her erupted in cheers, and she pumped her other arm in the air in triumph.

“It’s just awesome,” she said.

The researchers got another pleasant surprise, too: “We found that after a few weeks of use, some of these improvements endure when the stimulation is switched off, indicating exciting avenues for the future of stroke therapies,” said study co-author Dr. Marco Capogrosso, an assistant professor of neurological surgery at Pitt.

This means even after the device is removed, with some intense physical training, subjects may have long-term improvements, the researchers said.

No treatments are considered effective for treating paralysis six months or more after a stroke, in what doctors call the chronic stage.

The stimulation technology needs to be tested further, but it has great potential, the researchers said.

And it may fill a growing need. Doctors predict that 1 in every 4 people over the age of 25 will have a stroke in their lifetime, and many will develop some kind of paralysis, according to the World Stroke Organization.

“Creating effective neurorehabilitation solutions for people affected by movement impairment after stroke is becoming ever more urgent,” said study co-author Dr. Elvira Pirondini, an assistant professor of physical medicine and rehabilitation at Pitt.

“Even mild deficits resulting from a stroke can isolate people from social and professional lives and become very debilitating, with motor impairments in the arm and hand being especially taxing and impeding simple daily activities, such as writing, eating and getting dressed.”

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February 20, 2023
Warren Buffett is missing out on this year’s market comeback | CNN Business

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New York
CNN
—

Warren Buffett is arguably the most legendary investor of all time. But the Oracle of Omaha has missed out on this year’s stock market rally. So far, at least.

Shares of Buffett’s Berkshire Hathaway

(BRKB) conglomerate, a company that owns businesses ranging from Geico and the Burlington Northern Santa Fe railroad to consumer brands like Dairy Queen, Duracell and Fruit of the Loom, are down slightly this year — lagging the market, as the S&P 500 is up 6%. (The Nasdaq has done even better, surging 12%.)

Berkshire Hathaway also has a giant stock portfolio that Buffett helps run. Apple

(AAPL) is now by far the top holding for Berkshire, which also has big stakes in Bank of America

(BAC), Chevron

(CVX), American Express

(AXP) and Coca-Cola

(KO).

So is Berkshire’s portfolio, dare we say it, a little too boring? After all, if you want exposure to the big blue chips he owns, you could just buy an S&P 500 index fund.

Buffett, in fact, has promoted that idea to investors many times, arguing that most individual stock pickers will not be able to beat the market. The 92-year-old Buffett, who has a net worth of more than $100 billion according to Forbes, even said that he wants the trustee in charge of his will to put 90% of his wife’s inheritance in index funds.

Still, investors pay extremely close attention to Buffett every time he speaks. So traders will be poring over every word in his annual shareholder letter, which will be released the morning of Saturday, February 25, along with Berkshire’s latest earnings report.

Don’t expect any major surprises. Buffett will probably continue to extol the virtues of a long-term, patient approach to investing and give a bullish outlook for the US economy. And to his credit, that usually pays dividends: Berkshire stock was up 3% last year in a down market.

But market watchers are looking to see what Buffett says about the current inflationary scourge that has had a big impact on consumers and investors. He has lived through a couple of bouts of high inflation, after all.

“I would like to hear Buffett address what’s going on with interest rates and inflation up as much they are,” said Steve Check, president of Check Capital Management, an investment firm that owns Berkshire shares. “He talked a lot about how concerned he was in the 1970s and 1980s.”

Buffett has made numerous comments about inflation over the past few decades. And he was particularly nervous during the late 1970s and early 1980s, when soaring oil prices created an inflationary shock that severely hurt the economy.

“High rates of inflation create a tax on capital that makes much corporate investment unwise,” Buffett said in his 1980 shareholder letter to Berkshire investors. Buffett also described inflation as a gigantic parasitic “tapeworm” for businesses in 1981.

Buffett may also need to address how top-heavy and concentrated his portfolio has become. Berkshire’s five largest holdings make up about 75% of the company’s stock investments.

“The portfolio is significantly overweight [in] technology, energy, consumer staples, and financials relative to the S&P 500,” said Bill Stone, chief investment officer with The Glenview Trust Company, another Berkshire shareholder, in a report. Stone noted that Berkshire also has big stakes in Kraft Heinz

(KHC) and oil company Occidental Petroleum

(OXY).

Investors also want to hear more about what Buffett plans to do with Berkshire’s massive pile of cash. The company has more than $100 billion on its balance sheet. Are more acquisitions coming?

Buffett has talked for the past few years about how he’s longing to do an “elephant-sized” deal with Berkshire’s cash. Its most recent big deal was last year’s purchase of insurer Alleghany for $11.6 billion.

Still, the recent sluggish performance of Berkshire’s stock is unlikely to deter the faithful Buffett fans, many of whom are expected to make the annual pilgrimage to Omaha on May 6 for the company’s shareholder meeting.

Berkshire vice chairman Charlie Munger will likely be on stage with Buffett. So will Greg Abel, the chairman and CEO of Berkshire Hathaway Energy who Buffett has handpicked to eventually succeed him as Berkshire Hathaway CEO.

Buffett’s faith in the US economy is well founded. American consumers have proven to be remarkably resilient despite rampant inflation. The surprisingly strong retail sales gains for January is further proof of that.

Investors will get several more clues about consumer spending this week when several top retailers report earnings.

Dow components Walmart

(WMT) and Home Depot

(HD) are the highlights. Walmart

(WMT), which has a massive grocery business, should shed some light on how shoppers are coping with surging grocery prices.

Walmart could still benefit from its reputation as a place for bargains, though. That could even attract more affluent shoppers looking to save a buck.

“With inflation remaining elevated in the U.S., we expect Walmart to see continued trade-down benefits…particularly from higher-income customers,” said Arun Sundaram, an analyst at CFRA Research, in a report.

And investors will be looking for clues about the health of the housing market when Home Depot reports. Placer.ai, a research firm that measures foot traffic at top retailers, said in a recent report that consumers are returning to Home Depot and rival Lowe’s at almost pre-pandemic levels — even despite the housing slowdown.

One reason? Current homeowners may decide to spend more on renovations if they now plan to stick in their current house longer instead of looking to sell.

“Although the hot home-buying market is cooling off…foot traffic remains close to pre-pandemic levels due to a shift towards projects aimed at sprucing up a current living space,” said Placer.ai’s Ezra Carmel in a report. “It appears that projects that enhance the prospect of staying in place also have the ability to drive visits.”

Investors will be keeping close tabs on several other retailers set to report earnings this week, including TJX

(TJX) — the owner of TJ Maxx, Marshalls and HomeGoods — as well as online retailers eBay

(EBAY), Etsy

(ETSY), Overstock

(OSTK), Wayfair

(W) and China’s Alibaba

(BABA).

The US government is also set to release personal spending figures for January on Friday, another data point that will give a glimpse of consumers’ financial health.

Monday: US stock and bond markets closed for Presidents’ Day

Tuesday: US existing home sales; Eurozone and UK PMI; earnings from Walmart, Home Depot, Medtronic

(MDT), Fluor

(FLR), Molson Coors

(TAP), Caesars Entertainment

(CZR), Diamondback Energy

(FANG), Chesapeake Energy

(CHK), Palo Alto Networks

(PANW), Coinbase, La-Z-Boy

(LZB) and Hostess Brands

(TWNK)

Wednesday: Weekly crude oil inventories; earnings from Stellantis, Baidu

(BIDU), TJX, Garmin

(GRMN), Overstock, Wingstop

(WING), Nvidia

(NVDA), eBay, Etsy and Bumble

Thursday: US weekly jobless claims; US Q4 GDP (second estimate); Eurozone inflation; Turkey interest rate decision; earnings from Alibaba, Netease

(NTES), Keurig Dr Pepper

(KDP), Wayfair, Newmont, Domino’s

(DPZ), Papa John’s

(PZZA), Yeti

(YETI), Nikola, CNN owner Warner Bros. Discovery, Block

(SQ), Booking Holdings

(BKNG), Live Nation

(LYV), Carvana

(CVNA), Intuit

(INTU) and Beyond Meat

(BYND)

Friday: US personal income and spending; US PCE inflation figures; US new home sales; Japan inflation; Germany Q4 GDP; earnings from CIBC

(CM), Scripps

(SSP) and Cinemark

(CNK)

Saturday: Berkshire Hathaway earnings and Warren Buffett annual shareholder letter

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February 19, 2023