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  • Asia Stocks Stage Relief Rally, Earnings in Focus: Markets Wrap

    Asia Stocks Stage Relief Rally, Earnings in Focus: Markets Wrap

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    (Bloomberg) — Asian stocks advanced, as the focus shifted from Middle East tensions to company earnings and economic data for insight into the direction of central bank policy.

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    Benchmarks across the region recouped some of last week’s slide as traders took comfort in the absence of further escalation from Iran following Israel’s retaliatory strike. Hong Kong rallied more than 2%, with measures from Chinese authorities to bolster the city’s status as a financial hub giving an added boost.

    Demand for safe havens eased, after traders last week were whipsawed by Middle East tensions as well as hawkish comments from Federal Reserve officials indicating reluctance to cut rates anytime soon. Oil and gold both fell. The dollar was weaker while the yield on 10-year US Treasury yields advanced.

    “We are seeing a relief rally underway this morning as geopolitical risks subside,” said Kyle Rodda, a senior market analyst at Capital.com in Melbourne. “The move basically squares the ledger now and allows the markets to go back to focus on macroeconomic and corporate fundamentals.”

    Contracts for US equities edged higher after the S&P 500 recorded its worst week since March 2023. Asian chip stocks also slumped after Nvidia tumbled 10% on Friday, the most in four years.

    Investors are recalibrating their positions after stronger-than-expected US data forced the Fed resets the clock on its first interest rate cut. Data prints later in the week are likely to help finesse policy bets, with both US growth and the Fed’s preferred measure of inflation due. Investors must also absorb a hefty slate of Treasuries auctions, a major test of whether yields have peaked for the year.

    Higher-than-expected interest rates amid persistent inflation are perceived as the biggest threat to financial stability among market participants and observers, the Fed said in its semiannual Financial Stability Report published Friday.

    More than half of the “Magnificent Seven” cohort of tech megacaps will report earnings this week — leaving investors wondering whether those firms are going to live up to the high expectations set for artificial intelligence. “Nevertheless, this may offer market participants the opportunity to watch for any signs of weakness in rallies to sell the rip.”

    “This week will present a slew of big tech earnings, which has the tendency to crush earnings expectations,” said Jun Rong Yeap, a market strategist at IG Asia.

    Profits for the seven biggest growth companies in the S&P 500 — Apple Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc., Nvidia, Meta Platforms Inc. and Tesla Inc. — are on course to surge 38% in the first quarter, according to Bloomberg Intelligence. When excluding them, the rest of the benchmark index’s profits are anticipated to shrink by 3.9%.

    Elsewhere this week, inflation readings in Australia and Malaysia are due. Bank Indonesia will give a policy decision just as the currency comes under pressure, while earnings at global growth bellwether Caterpillar are due.

    Key events this week:

    • Eurozone consumer confidence, Monday

    • Philippines and US military forces commence annual war games near Taiwan and South China Sea, Monday

    • ECB President Christine Lagarde speaks, Monday

    • Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Tuesday

    • UK S&P Global, CIPS Manufacturing PMI, Tuesday

    • Australia CPI, Wednesday

    • Indonesia rate decision, Wednesday

    • IBM, Boeing, Meta Platforms earnings, Wednesday

    • Malaysia CPI, Thursday

    • South Korea GDP, Thursday

    • Turkey rate decision, Thursday

    • US GDP, wholesale inventories, initial jobless claims, Thursday

    • Microsoft, Alphabet, Airbus, Caterpillar earnings, Thursday

    • Japan rate decision, Tokyo CPI, inflation and GDP forecasts, Friday

    • US personal income and spending, University of Michigan consumer sentiment, Friday

    • Exxon Mobil, Chevron earnings, Friday

    Some of the main moves in markets:

    Stocks

    • S&P 500 futures rose 0.3%, ending a six-day losing streak as of 11:48 a.m. Tokyo time

    • Nikkei 225 futures (OSE) rose 0.7%

    • Japan’s Topix rose 1.3%, more than any closing gain since March 21

    • Australia’s S&P/ASX 200 rose 1%, more than any closing gain since March 21

    • Hong Kong’s Hang Seng rose 2.3%, more than any closing gain since April 2

    • The Shanghai Composite rose 0.1%

    • Euro Stoxx 50 futures rose 0.4%

    Currencies

    • The Bloomberg Dollar Spot Index fell 0.1%

    • The euro was little changed at $1.0666

    • The Japanese yen was little changed at 154.65 per dollar

    • The offshore yuan was little changed at 7.2516 per dollar

    Cryptocurrencies

    • Bitcoin rose 0.2% to $64,756.97

    • Ether fell 0.2% to $3,143.95

    Bonds

    • The yield on 10-year Treasuries advanced four basis points to 4.66%

    • Australia’s 10-year yield advanced seven basis points, more than any closing advance since April 11

    Commodities

    • West Texas Intermediate crude fell 0.3% to $82.92 a barrel

    • Spot gold fell 0.7% to $2,375.91 an ounce

    This story was produced with the assistance of Bloomberg Automation.

    –With assistance from Matthew Burgess, Michael G. Wilson, Richard Henderson and Tassia Sipahutar.

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    ©2024 Bloomberg L.P.

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  • Microsoft, Google post strong quarterly sales growth as Big Tech continues its comeback | CNN Business

    Microsoft, Google post strong quarterly sales growth as Big Tech continues its comeback | CNN Business

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    New York
    CNN
     — 

    Big tech companies are continuing a turnaround from last year, as Alphabet, Microsoft and Snap kicked off earnings season with strong sales results for the quarter ended in September.

    Google parent company Alphabet on Tuesday reported quarterly sales of $76.69 billion, up 11% from the same period in the prior year. The company also posted profits of $19.69 billion for the quarter.

    Meanwhile, Microsoft posted 13% year-on-year sales growth to $56.5 billion, also beating expectations. Microsoft’s quarterly profits hit $22.3 billion, up 27% from the year-ago period.

    Snapchat parent Snap on Tuesday reported a return to sales growth in the September quarter, after two consecutive quarters of declining sales. The company reported revenue of nearly $1.2 billion, an increase of 5% from the same period in the prior year and ahead of analysts’ projections. The company reported a net loss of $368 million.

    The strong results come after Microsoft, Alphabet, Snap and other tech companies carried out mass layoffs and other cost cutting moves over the past year following a difficult 2022 when advertisers and other clients cut back on their spending due to concerns over the macroeconomic environment.

    Despite beating Wall Street’s sales expectations, shares of both Alphabet (GOOGL) and Snap (SNAP) each dipped around 5% in after-hours trading following the reports, although Snap’s quickly regained some ground. Microsoft (MSFT) shares gained around 4% in after-hours trading.

    “Q3 tech season has been quite strong thus far,” Tejas Dessai, research analyst at investment fund GlobalX said in a statement. “These numbers clearly defy concerns of near term economic weakness looming.”

    Google’s advertising business generated quarterly revenue of $59.6 billion, up from $54.5 billion in the prior year. YouTube ads, meanwhile, garnered some $7.9 billion in revenue, up roughly 12% year-over-year.

    YouTube Shorts, the company’s TikTok competitor, hit a milestone 70 billion daily views last quarter, Alphabet CEO Sundar Pichai said on a call with analysts Tuesday afternoon.

    Google’s cloud business, however, reported revenue of $8.41 billion — missing analysts’ estimates.

    Jesse Cohen, a senior analyst at Investing.com, attributed Alphabet’s after-hours stock fall to the “relatively weak performance in its Google cloud platform, which is at risk of falling further behind [Microsoft’s] Azure and [Amazon’s] AWS.” Still, despite taking a hit in 2022 amid a broader tech sector downturn, shares for Alphabet have climbed roughly 56% since the start of 2023, beating the tech-heavy Nasdaq index.

    Google’s report comes as the tech giant is in the antitrust hot seat. US prosecutors officially opened a landmark antitrust trial against Google last month with sweeping allegations that the company engaged in anticompetitive behavior to maintain its dominance over search. (As the legal showdown rages on, Google has continued to deny allegations that it operated illegally.)

    Google also confirmed last month plans to lay off hundreds of staffers in its recruiting division, as it continues cost cutting efforts in some areas. These more targeted layoffs came after Alphabet in January cut around 12,000 jobs — about 6% of its workforce.

    Still, Google has signaled that it remains committed to investing heavily in generative artificial intelligence technology. Last month, Google rolled out a major expansion of its Bard AI chatbot tool.

    “As we expand access to our new AI services, we continue to make meaningful investments in support of our AI efforts,” Pichai said on the call. “We remain committed to durably re-engineering our cost base in order to help create capacity for these investments, in support of long-term sustainable financial value.”

    Microsoft’s recent investments in AI technology helped boost its sales in the September quarter, especially in its key cloud division. Sales from Microsoft’s “intelligent cloud” business — its biggest revenue driver — grew 19% from the year-ago quarter to $24.3 billion.

    Revenue from the company’s “productivity and business processes” business, which includes LinkedIn and Office commercial and consumer products, also grew 13% year-over-year to $18.6 billion.

    “Microsoft is firing on all cylinders and AI is clearly driving growth,” Cohen said in a research note following the company’s report. “The results indicated that artificial intelligence products are stimulating sales and already contributing to top and bottom-line growth.”

    But economic jitters among consumers appear to still have some impact on the company’s bottom line. Devices revenue, which includes sales of laptops, tablets and Xbox consoles, decreased 22% year-over-year, despite a 3% sales increase in the overall “more personal computing” segment. Ongoing concerns about a potential economic slowdown could continue to weigh on the company as it heads into the crucial holiday device sales season.

    The report is Microsoft’s first since the company closed its $69 billion acquisition of “Call of Duty” maker Activision Blizzard earlier this month. While the deal didn’t factor into this quarter’s results, it’s expected to supercharge the company’s gaming business.

    “Microsoft now controls 30 game studios and some of the most well-known games across the industry,” Edward Jones analyst Logan Purk said in a research note earlier this month. “With a massive cloud network and now a compelling library of games, Microsoft has a leg up on peers” in gaming, he said.

    Following the Activision takeover, “we’re looking forward to one of our strongest first-party holiday [game] lineups ever, including new titles like Call of Duty Modern Warfare 3,” CEO Satya Nadella said on an analyst call Tuesday. The company said it expects roughly $400 million of operating expenses in the fourth quarter to come as a result of the acquisition.

    Snap said its sales growth was driven in part by its ongoing efforts to revamp its advertising technology, following changes to Apple’s app tracking policies that took a hit to the business models of Snapchat, Facebook and other platforms.

    “We are focused on improving our advertising platform to drive higher return on investment for our advertising partners, and we have evolved our go-to-market efforts to better serve our partners and drive customer success,” CEO Evan Spiegel said in a statement.

    Snap also reported that it now has 406 million daily active users, up 12% compared to the year-ago quarter. And time spent watching Spotlight — Snapchat’s TikTok clone — grew 200% year-over-year, according to the company.

    The company also recently announced that it had reached more than 5 million subscribers to its Snapchat+ subscription program, a key effort to diversify its revenue.

    Snap said Tuesday that its chief operating officer, Jerry Hunter, plans to retire. Hunter, who spent seven years at the company, will step down from his role as of the end of the month, but will remain at the company until July 1, 2024, to support the transition.

    The company noted that some advertisers temporarily paused their spending following the outbreak of the Israel-Hamas war. Because of the “unpredictable nature” of the war, Snap declined to provide formal guidance for the fourth quarter, but said its internal forecast assumes year-over-year quarterly revenue growth between 2% and 6%.

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  • Samsung flags 78% profit drop as chip demand remains weak | CNN Business

    Samsung flags 78% profit drop as chip demand remains weak | CNN Business

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    Hong Kong
    CNN
     — 

    Samsung warned that operating profit in the third quarter likely plunged 78% as it continues to contend with lower than usual demand for consumer devices.

    The South Korean tech giant released earnings estimates Wednesday, forecasting operating profit of about 2.4 trillion Korean won ($1.8 billion) for the three months ended September. That compares with 10.85 trillion won ($8 billion) in the same period last year.

    Revenue was also projected to drop 12.7% from a year ago.

    That continues a dreary run for the electronics maker, which has reported major losses in recent months as global economic uncertainty weighs on consumers around the world, leading many people to hold on to their cell phones and laptops longer.

    According to Counterpoint Research, “2023 is on track to be the worst year for global smartphone shipments in 10 years,” with shipments forecast to decline 6% to fewer than 1.2 billion units.

    In major markets like North America, “consumers are hesitant to upgrade their devices,” the firm noted in an August report.

    Samsung has already been feeling the effects. The firm’s operating profit plummeted 95% in the first quarter, following a record loss in its semiconductor business. It saw similar results in the second quarter.

    After a historic supply shortage during Covid, the global semiconductor industry is now seeing a glut in some areas that has driven losses for Samsung, the world’s largest memory chip and smartphone maker.

    According to consultancy Bain, “the semiconductor industry’s post-pandemic rebound boosted capacity to the extent that some foresee an oversupply.”

    In a report last month, Bain suggested the trend was merely cyclical, attributing it to “normal” ups and downs in the industry.

    Samsung has also told shareholders it anticipates a gradual comeback in global demand in the second half of the year.

    This “should lead to an improvement in earnings driven by the component business,” it said in a July earnings statement.

    “However, continued macroeconomic risks could prove to be a challenge,” the company cautioned.

    Analysts believe a downturn in memory chips will also turn around, benefiting manufacturers like Samsung.

    In a recent note to clients, Nomura analysts said they expected a recovery in the sector “to accelerate” through the rest of this year.

    “The team expects memory prices to remain flat or slightly increase in [the third quarter], then show strong growth in [the fourth quarter],” the analysts wrote, maintaining a buy rating on Samsung’s stock.

    The company’s shares climbed 3.5% in Seoul on Wednesday following its announcement.

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  • Dollar General shares tumble after it cuts forecasts, blaming a spending slump and theft | CNN Business

    Dollar General shares tumble after it cuts forecasts, blaming a spending slump and theft | CNN Business

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    New York
    CNN
     — 

    Dollar General slashed its sales and profit outlook for the year on Thursday, blaming headwinds including weaker consumer spending on non-essential purchases and increasing theft.

    Dollar General shares tumbled nearly 17% in pre-market trading Thursday.

    The discount store’s challenges are yet another sign of American consumers pulling back on shopping as inflation remains well above the Federal Reserve’s 2% target.

    “One of the key reasons for this is because Dollar General’s core customers are feeling the acute pressure of the cost-of-living-crisis,” Neil Saunders, retail analyst and managing director at GlobalData, said in a report Thursday.

    “This has been exacerbated by cuts in SNAP payments as temporary pandemic benefits came to an end. As a result, lower-income shoppers are cutting back on non-consumable and indulgent purchases from the chain in a bid to save money,” he said. “Unfortunately, this dynamic will not change any time soon as, if anything, finances will tighten over the second half of the year.”

    The discount retailer now expects sales for the full year to rise between 1.3% to 3.3%, down from its previous forecast of a 3.5% to 5% increase. It expects full-year earnings to decline 22% to 34% from its previous estimate of a flat-to-8% decrease.

    The retailer said its same-store sales (or sales at stores open at least a year) are expected to range from a decline of about 1% to an increase of 1% for the year, compared to its previous expectation of a 1% to 2%. increase.

    For its second quarter, Dollar General logged a 1% drop in its same-store sales. It said weaker customer traffic to its stores hurt sales in the period, combined with budget-conscious shoppers pulling back on higher-priced discretionary purchases such as home items and clothing in favor of lower-priced everyday necessities.

    The Consumer Price Index rose 3.2% for the year through July, adding pressure on shoppers looking for bargains.

    In addition, food stamp recipients started to receive about $90 a month less in benefits, on average, starting in March, as a pandemic hunger relief program comes to an end nationwide three years after Congress approved it.

    Meanwhile, close on the heels of Dick’s Sporting Goods sounding the alarm on store theft eating into its profit this year, Dollar General also flagged an increase in product theft, among other factors, hurting its profit.

    The company said “an increase in expected inventory shrink for the second half of 2023” factored into its lower guidance. Shrink is an industry term encompassing inventory losses caused by external theft, including organized retail crime, employee theft, human errors, vendor fraud, damaged or mismarked items and other losses.

    Retailers large and small say they are struggling to contain an escalation in store crimes — from petty shoplifting to organized sprees of large-scale theft that clear entire shelves of products. Target warned earlier this year that it was bracing to lose half a billion dollars because of rising theft. It reported a large number of incidents of shoplifting and organized retail crime in its stores nationwide.

    At the same time, it’s not clear that store crime is growing significantly more serious. Within the industry, at least one major player has argued that the problem is being overhyped.

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  • Apple’s sales fall for the third consecutive quarter | CNN Business

    Apple’s sales fall for the third consecutive quarter | CNN Business

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    CNN
     — 

    Apple said Thursday that its revenue slipped 1% to $81.8 billion for its quarter ending July 1, marking the third consecutive year-over-year drop in quarterly revenue for the world’s most valuable company.

    There were some bright spots, however. The company said its services revenue reached a new all-time high of $21.2 billion. The services business — which includes Apple Music and Apple TV+ — is an increasingly important revenue driver for Apple.

    Moreover, Apple’s results narrowly beat Wall Street’s estimates for revenue and profit.

    iPhone revenue came in at $39.7 billion for the quarter, marking an approximately 2% year-over-year decline. Mac revenue was $6.8 billion for the quarter, a 7% drop, and iPad revenue was down nearly 20%. (The new iPad Air launched in the same quarter last year.)

    Shares of Apple ticked down by more than 1% in after-hours trading Thursday. But the stock has climbed some 50% from the start of the year.

    In a statement accompanying the earnings results, CEO Tim Cook touted the rosy services figure and strong performance in emerging markets.

    “We are happy to report that we had an all-time revenue record in Services during the June quarter, driven by over 1 billion paid subscriptions, and we saw continued strength in emerging markets thanks to robust sales of iPhone,” Cook said.

    On a call with analysts Thursday, Cook added, “We continue to face an uneven macroeconomic environment, including nearly four percentage points of foreign exchange headwinds.”

    “Looking ahead, we’ll continue to manage for the long term, always pushing the limits of what’s possible and always putting the customer at the center of everything we do,” Cook said.

    Apple’s June quarter is typically the slowest of the year for the tech giant, which usually unveils new iPhone models in September. Customers often hold out on upgrading until the new models are released. The quarter also ends before back-to-school shopping and the lucrative December holidays.

    The latest earnings report also comes as PC and smartphone sales slump, after an initial surge seen in the early days of the pandemic. Global PC shipments fell 16.6% last quarter, according to preliminary data from Gartner released last month. Worldwide smartphone shipments, meanwhile, dropped 7.8% last quarter compared to the same period the previous year, according to separate preliminary data from market research firm IDC last week.

    “Like other major tech companies, even Apple is suffering from the negative impact of a worsening macro backdrop and ongoing supply chain woes, though it has done a better job of navigating through the challenging environment,” Jesse Cohen, senior analyst at Investing.com, said in a note Thursday evening. “Investors appear to be reacting to the slight miss in iPhone sales, but I wouldn’t read too much into it as many consumers are holding out until the next iPhone release.”

    Looking forward, Apple’s CFO Luca Maestri said on the call that the company expects its quarter ending in September year-over-year revenue performance “to be similar to the June quarter,” assuming macroeconomic outlook doesn’t worsen.

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  • The big bottleneck for AI: a shortage of powerful chips | CNN Business

    The big bottleneck for AI: a shortage of powerful chips | CNN Business

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    CNN
     — 

    The crushing demand for AI has also revealed the limits of the global supply chain for powerful chips used to develop and field AI models.

    The continuing chip crunch has affected businesses large and small, including some of the AI industry’s leading platforms and may not meaningfully improve for at least a year or more, according to industry analysts.

    The latest sign of a potentially extended shortage in AI chips came in Microsoft’s annual report recently. The report identifies, for the first time, the availability of graphics processing units (GPUs) as a possible risk factor for investors.

    GPUs are a critical type of hardware that helps run the countless calculations involved in training and deploying artificial intelligence algorithms.

    “We continue to identify and evaluate opportunities to expand our datacenter locations and increase our server capacity to meet the evolving needs of our customers, particularly given the growing demand for AI services,” Microsoft wrote. “Our datacenters depend on the availability of permitted and buildable land, predictable energy, networking supplies, and servers, including graphics processing units (‘GPUs’) and other components.”

    Microsoft’s nod to GPUs highlights how access to computing power serves as a critical bottleneck for AI. The issue directly affects companies that are building AI tools and products, and indirectly affects businesses and end-users who hope to apply the technology for their own purposes.

    OpenAI CEO Sam Altman, testifying before the US Senate in May, suggested that the company’s chatbot tool was struggling to keep up with the number of requests users were throwing at it.

    “We’re so short on GPUs, the less people that use the tool, the better,” Altman said. An OpenAI spokesperson later told CNN the company is committed to ensuring enough capacity for users.

    The problem may sound reminiscent of the pandemic-era shortages in popular consumer electronics that saw gaming enthusiasts paying substantially inflated prices for game consoles and PC graphics cards. At the time, manufacturing delays, a lack of labor, disruptions to global shipping and persistent competing demand from cryptocurrency miners contributed to the scarce supply of GPUs, spurring a cottage industry of deal-tracking tech to help ordinary consumers find what they needed.

    But the current shortage is much different in kind, industry experts say. Instead of a disruption to supplies of consumer-focused GPUs, the ongoing shortage reflects the sudden, exploding demand for ultra high-end GPUs meant for advanced work such as the training and use of AI models.

    Production of those GPUs is at capacity, but the rush of demand has overwhelmed what few sources of supply there are.

    There is a “huge sucking sound” coming from businesses representing the unrivaled demand for AI, said Raj Joshi, a senior vice president at Moody’s Investors Service who tracks the chips industry.

    “Nobody could’ve modeled how fast or how much this demand is going to increase,” Joshi said. “I don’t think the industry was ready for this kind of surge in demand.”

    One company in particular stands to benefit massively from the AI surge: Nvidia, the trillion-dollar chipmaker that according to industry estimates controls 84% of the market for discrete GPUs. In a research note published in May, Joshi estimated that Nvidia would experience “unparalleled” revenue growth in the coming quarters, with revenue from its data center business outstripping that of rivals Intel and AMD combined.

    In its May earnings call, Nvidia said it had “procured substantially higher supply for the second half of the year” to meet the rising demand for AI chips. The company declined to comment on Tuesday, citing its latest pre-earnings quiet period.

    AMD, meanwhile, said Tuesday it expects to unveil its answer to Nvidia’s AI GPUs closer to the end of the year.

    “There’s very strong customer interest across the board in our AI solutions,” said AMD CEO Lisa Su on the company’s earnings call. “There is a lot more to do, but I would say the progress that we’ve made has been significant.”

    Compounding the issue is that GPU-makers themselves cannot get enough of a key input from their own suppliers, said Sid Sheth, founder and CEO of AI startup d-Matrix. The technology, known as a silicon interposer, works by marrying standalone computing chips with high-bandwidth memory chips and is necessary for completing GPUs.

    The Biden administration has made increasing US chip manufacturing capacity a priority; the passage of the CHIPS Act last year is set to provide billions in funding for the domestic chip industry and for chip research and development. But those investments are aimed at a broad swath of chip technologies and not specifically targeted at boosting GPU production.

    The chip shortage is expected to ease as more manufacturing comes online and as competitors to Nvidia also expand their offerings. But that could take as long as two to three years, some industry experts say.

    In the meantime, the shortage could force companies to find creative ways around the problem. Companies that can’t get their hands on enough chips are now having to be more efficient, said Sheth.

    “Necessity is the mother of invention, right?” Sheth said. “So now that people don’t have access to unlimited amounts of computing power, they are finding resourceful ways of using whatever they have in a much smarter way.”

    That could include, for example, using smaller AI models that may be easier and less computationally intensive to train than a massive model, or developing new ways of doing computation that don’t rely as heavily on traditional CPUs and GPUs, Sheth said.

    “Net-net, this is going to be a blessing in disguise,” he added.

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  • Illinois passes a law that requires parents to compensate child influencers | CNN Business

    Illinois passes a law that requires parents to compensate child influencers | CNN Business

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    CNN
     — 

    When 16-year-old Shreya Nallamothu from Normal, Illinois, scrolled through social media platforms to pass time during the pandemic, she became increasingly frustrated with the number of children she saw featured in family vlogs.

    She recalled the many home videos her parents filmed of herself and her sister over the years: taking their first steps, going to school and other “embarrassing stuff.”

    “I’m so glad those videos stayed in the family,” she said. “It made me realize family vlogging is putting very private and intimate moments onto the internet.”

    She said reminders and lectures from her parents about how everything is permanent online intensified her reaction to the videos she saw of kid influencers. “The fact that these kids are either too young to grasp that or weren’t given the chance to grasp that is really sad.”

    Nallamothu wrote a letter last year to her state senator, Democrat Dave Koehler, urging him to consider legislation to protect young influencers. Last week, her home state became the first to pass a law that establishes safeguards for minors who are featured in online videos – and how they’re compensated.

    Illinois Gov. J. B. Pritzker on Friday signed a bill, inspired by Nallamothu’s letter, amending the state’s Child Labor Law that will allow teenagers over the age of 18 to take legal action against their parents if they were featured in monetized social media videos and not properly compensated, similar to the rights held by child actors.

    Starting July 1 2024, parents in Illinois will be required to put aside 50% of earnings for a piece of content into a blocked trust fund for the child, based on the percentage of time they’re featured in the video. For example, if a child is in 50% of a video, they should receive 25% of the funds; if they’re in 100%, they are required to get 50% of the earnings. However, this only applies in scenarios during which the child appears on the screen for more than 30% of the vlogs in a 12-month period.

    “We understand that parents should receive compensation too because they have equity in this, but we don’t want to forget about the child,” Koehler told CNN.

    Many YouTube parent vloggers or social media influencers post multiple videos each month or weekly, sharing intimate details about their lives, ranging from family financial troubles and the birth of a new baby to opening new toys or going through a child’s phone or report card. Although children are predominantly featured in these monetized videos, parents have had no legal obligation to give them any portion of the earnings.

    Meanwhile, kid influencer accounts, which can at times earn $20,000 or more for sponsored posts, are typically run by parents and not often set up in the child’s name due to age restrictions on social media platforms.

    “We often see with emerging technology and trends that legislation is always a reaction to that,” Koehler said. “But we know with the explosion of social media that parents are using it to monetize kids being on videos. If money is being made and nothing is set up for the children, it’s the same thing as a child actor.”

    The new law is modeled off of the 1936 Jackie Coogan’s Law, the Hollywood silent actor discovered by Charlie Chaplin whose parents swindled him out of his earnings. That California law required parents to set aside a portion of 15% of child earnings in a blocked trust account that the child actor could access after the age of 18.

    Although similar bills have been proposed in California and Washington, Jessica Maddox — an assistant professor at The University of Alabama who studies the social media influencer community — said she’s hopeful other states will follow in Illinois’ footsteps.

    “Even though Illinois is the first state to pass such a law, this legislation is a long time coming,” Maddox said. “Social media labor and careers are becoming increasingly common and viable forms of income, and it’s important that the law catches up with technology to ensure minors aren’t being exploited.”

    Maddox said it also breathes new life into the long-simmering debate over what is appropriate for parents to document online and whether a child can really consent to participating.

    “I’ve seen organic conversations start to emerge between individuals who had been featured heavily in their parents’ social media content but are now of age to tell their stories and admit that had they really understood what was going on, they would have never consented for their lives to be broadcast for everyone.”

    Chris McCarty — the 19-year-old founder of Quit Clicking Kids, an advocacy and education site to combat the monetization of children on social media, who is helping to develop child influencer legislation in Washington State — believes that as the kids featured in family vlogs grow up and share their stories, there will be an increase in public pressure to provide more privacy protections.

    “When children are slightly older, often the narratives get increasingly personal; for example. detailing trouble with bullies, first periods, doctor’s visits, and mental health issues,” McCarty said. “A lot of consumers assume that children working in a family vlog and child actors have the same experiences. This is not the case. As difficult as it is to be a child actor, child actors are still playing a part rather than having their intimate personal details shared for entertainment and monetary purposes.”

    Nallamothu agrees that the next step is for legislation to evolve over time to include more regulations around consent.

    “I know this bill isn’t going to be perfect off the bat but I don’t want perfection to get in the way of progress because regulations have only started coming up,” she said. “I’m glad it’s getting there.”

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  • Nvidia’s quarterly sales double on the back of AI boom | CNN Business

    Nvidia’s quarterly sales double on the back of AI boom | CNN Business

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    New York
    CNN
     — 

    The artificial intelligence boom continues to fuel a blockbuster year for chipmaker Nvidia.

    Nvidia’s stock jumped as much as 9% in after-hours trading Wednesday after the Santa Clara, California-based company posted year-over-year sales growth of 101%, to $13.5 billion for the three months ended in July.

    The results were even stronger than the $11.2 billion in revenue that Wall Street analysts expected. The company’s non-GAAP adjusted profits grew a stunning 429% from the same period in the prior year to $2.70 per share, also beating analysts’ expectations. GAAP stands for generally accepted accounting principles.

    Nvidia’s stock has climbed by just over 220% since the start of this year amid a surge in the popularity of and demand for artificial intelligence technology. The American chipmaker produces processors that power generative AI, technology that can create text, images and other media — and which forms the foundation of buzzy new services such as ChatGPT.

    “A new computing era has begun. Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI,” Nvidia CEO Jensen Huang said in a statement, adding that the company is working with “Leading enterprise IT system and software providers … to bring NVIDIA AI to every industry.”

    “The race is on to adopt generative AI,” he said.

    Huang had said following the company’s May earnings report that the firm was ramping up its supply to meet “surging demand.”

    “Nvidia’s hardware has become indispensable to the AI-driven economy,” Insider Intelligence senior analyst Jacob Bourne said in emailed commentary. “The pressing question is whether Nvidia can consistently exceed the now-higher expectations.”

    This story is developing and will be updated.

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  • T-Mobile to lay off 5,000 employees | CNN Business

    T-Mobile to lay off 5,000 employees | CNN Business

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    New York
    CNN
     — 

    T-Mobile on Thursday announced it plans to lay off 5,000 employees, or around 7% of its total staff, over the next five weeks.

    The reductions will largely affect corporate and back-office jobs that are “primarily duplicative” to other roles and will reduce the company’s middle management layers, CEO Mike Sievert said in a letter to employees Thursday. The company also plans to reduce its spending on “external workers and resources,” but its retail and “consumer care” staff who work directly with customers will not be affected, he said.

    “What it takes to attract and retain customers is materially more expensive than it was just a few quarters ago,” Sievert said.

    T-Mobile’s cuts comes after months of mass layoff announcements at a range of other technology companies — including Microsoft and Meta — as firms grapple with an uncertain economic environment.

    In its most recent quarterly earnings report last month, T-Mobile reported sales down 2.5% year-over-year and net customer additions fell slightly from the same period in the prior year, although it posted record low customer churn and profit growth. T-Mobile’s stock has fallen more than 7% since last August. Shares were trading down around 1% following its layoff announcement.

    In Thursday’s letter, Sievert said that in the three years since closing T-Mobile’s acquisition of rival carrier Sprint, it has been working to streamline the combined businesses and accelerate the build-out of its high-speed internet business. However, he suggested it was important for the company to now narrow its focus.

    “It is clear that doing everything we are doing and just doing it faster is not enough to deliver on these changing customer expectations going forward,” he said. “Today’s changes are all about getting us efficiently focused on a finite set of winning strategies.”

    T-Mobile plans to notify employees who will be laid off by the end of September. The company estimates it will incur a pre-tax charge of $450 million in the September quarter related to the reductions, according to a Thursday securities filing.

    Affected employees will receive “competitive severance packages” based on tenure, as well as accelerated stock vesting, access to career transition services and other benefits, Sievert told employees. He added that the company is not planning additional, widespread employee reductions in the foreseeable future.

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  • LinkedIn is cutting more than 650 jobs | CNN Business

    LinkedIn is cutting more than 650 jobs | CNN Business

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    New York
    CNN
     — 

    LinkedIn is laying off 668 people across its engineering, product, talent and finance teams as part of a broader restructuring, the social media platform announced Monday.

    In a blog post, the social media site for professionals said it is making changes to its organizational structure and streamlining its decision making.

    “Talent changes are a difficult, but necessary and regular part of managing our business,” the company said. Microsoft bought LinkedIn in 2016.

    The company is dedicating many of its resources toward artificial intelligence. Recently, LinkedIn announced an AI-assisted candidate discovery for recruiters using the site. And in Microsoft’s most recent earnings report, LinkedIn reported its AI-powered collaborative articles are the fastest-growing traffic driver on the site.

    LinkedIn already cut 716 positions in May and shut down its jobs app in mainland China. That decision was made amid shifts in customer behavior and slower revenue growth, CEO Ryan Roslansky said in a letter to employees.

    In the wake of mass layoffs across the tech sector at the end of last year, LinkedIn enjoyed an uptick in users and “record engagement” among its 875 million members at the time, Microsoft CEO Satya Nadella told analysts in last October’s earnings call.

    The company continues to grow financially. LinkedIn also announced in its most recent earnings report that it surpassed $15 billion in revenue for the first time during this fiscal year, and that its membership growth “accelerated” for the eighth quarter in a row.

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  • Lachlan Murdoch: No change in strategy at Fox News | CNN Business

    Lachlan Murdoch: No change in strategy at Fox News | CNN Business

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    New York
    CNN
     — 

    Despite a turbulent and expensive few weeks, Fox News isn’t changing course.

    Fox Corp. CEO Lachlan Murdoch said there will be no change in strategy at the company’s top rated cable news network, despite the firing of its top rated anchor Tucker Carlson and a massive $787.5 million settlement to Dominion Voting Systems that resulted in the company swinging to a loss in the just completed period.

    “There is no change to our programming strategy at Fox News,” Murdoch said in response to an analyst who asked about Carlson’s ouster during the investor call Tuesday to discuss its financial results.

    Murdoch described Fox News as “obviously a successful” and suggested Carlson’s firing was a tweaking of its strategy, not a departure from it.

    “As always, we are adjusting our programming and lineup and that is what we continue to do,” Murdoch said.

    His comments came after the company reported a $50 million net loss for the just completed quarter, compared to $290 million in profit a year earlier.

    The reason was a $719 million charge including the cost of the Dominion settlement, other legal settlements related to its news division and other legal costs, including attorney fees, which was partly offset by equity earnings of it affiliates and a change in the market value of some of its investments.

    The earnings statement didn’t mention Dominion Voting Systems, although it does refer to charges related to legal settlement costs at Fox News Media. On the company’s call with investors Murdoch referred to the settlement with Dominion as in the best interest of the company and its shareholders, given rulings by the Delaware court that he said limited its defense. He said going to trial could have led to two to three years of appeals.

    “We’re proud of our Fox News team, the exceptional quality of their journalism and their stewardship of the Fox News brand,” he said. “So as we look ahead, we are confident in the strength of the Fox brands and the strength of our balance sheet.”

    And he again defended the company’s post-election coverage of the false conspiracy theories made against Dominion, even though internal communications among Fox anchors made public during the discovery process showed many of them didn’t believe the claims being made.

    “We always acted as a news organization reporting on the newsworthy events of the day,” Murdoch told investors Tuesday. “Now we have been and remain confident in the merits of our position that the first amendment protects a news organization’s reporting and allegations being made by a sitting president of the United States. However, the Delaware court severely limited our defenses and trial through pre-trial rulings.”

    Fox did not have to apologize or admit wrongdoing as part of the settlement in Dominion’s defamation suit against it, although its statement did say it acknowledged “the Court’s rulings finding certain claims about Dominion to be false.”

    Fox still faces a lawsuit from another voting machine manufacturer, Smartmatic, which is seeking $2.7 billion in damages. Murdoch told investors that case is “fundamentally different” from the Dominion case and that Fox will have greater defenses available to it than in the Delaware court hearing the Dominion case. He predicted that case won’t go to trial until 2025.

    The Dominion settlement was reached on April 18, but it was still reported in Fox’s fiscal third quarter, which concluded March 31. Excluding the legal costs and other special items reported Tuesday, it was a pretty good financial quarter for Fox.

    It reported adjusted earnings of $494 million, or 94 cents a share, up from $459 million a year earlier. That was better than the 87 cents a share forecast by analysts surveyed by Refinitiv. The company was helped by the profits and revenue gain it received from airing this year’s Super Bowl.

    Revenue at the company rose 18% to $4.1 billion, slightly higher than analysts’ forecasts. Most of that gain was due to a 43% surge in advertising revenue, helped greatly by $650 million in Super Bowl ads. Fox did not broadcast the Super Bowl in 2022.

    Fox had plenty of money available to pay the settlement. It said it had $4.1 billion in cash and cash equivalent on hand as of March 30, about three weeks before the settlement was reached. It also announced it repurchased $1.8 billion of its shares in the nine months ending March 31, as part of a $7 billion share repurchase plan. So far, Fox has repurchased $4.4 billion worth of shares as part of its plan.

    Murdoch said Fox is better positioned than many other media companies to ride out the delays and lost revenue that could take place from a prolonged strike by the Writers Guild of America. Some programming, such as late night shows, have already gone dark due to the strike that started last week, and production on other shows has been halted.

    But Murdoch said the fact that Fox has more of its revenue and profit coming from sports and news, which are not affected by the strike, puts it in a better position.

    “Our healthy balance of scripted and unscripted content on the network puts us in a tremendous position,” he said.

    The hit from the settlement was well known by investors ahead of the report. But even with the better than expected results, Fox

    (FOX)     shares were up only about 1% in trading at the market open following the report.

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  • Apple posts second consecutive quarterly revenue decline | CNN Business

    Apple posts second consecutive quarterly revenue decline | CNN Business

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    CNN
     — 

    Apple on Thursday reported that its revenue fell 3% to $94.8 billion for the first three months of the year as consumers scale back spending on smartphones and computers amid looming recession fears.

    The company’s revenue was slightly better than what Wall Street had expected, but it nonetheless represented the second consecutive quarterly revenue decline for the iPhone maker.

    Apple attempted to appease investors by announcing up to $90 billion in share buybacks. Shares of Apple were largely flat in after-hours trading Thursday following teh results.

    Despite the continued revenue decline, there were bright spots in the report.

    Apple CEO Tim Cook said Apple hit a “a March quarter record for iPhone despite the challenging macroeconomic environment” and that the installed base of active devices reached an all-time high.

    Apple’s latest quarterly earnings report comes amid a sharp decline in PC and smartphone sales globally after a surge earlier in the pandemic.

    Worldwide PC shipments declined 30% in the first quarter of 2023 compared to the year prior, according to data from Gartner. Global smartphone shipments plunged 14.6% last quarter, according to separate data from market intelligence firm IDC.

    Apple’s report on Thursday caps off a closely-watched earnings season for Silicon Valley amid broader economic jitters. All five Big Tech companies beat Wall Street’s estimates, but the numbers paint a stark picture of the industry at this moment.

    Apple and its peers once enjoyed seemingly limitless growth. Now these business are struggling to grow sales and profits – or posting declines.

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  • Ford cuts price of the Mustang Mach-E again | CNN Business

    Ford cuts price of the Mustang Mach-E again | CNN Business

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    New York
    CNN
     — 

    Ford is once again cutting the price of its electric SUV, the Mustang Mach-E, as it ramps up its price war with Tesla.

    Tesla, the leader in EV sales by a large margin, has cut prices six times so far this year. Its price cuts have eaten into its industry-leading profit margins and added pressure to its stock price.

    Ford’s price cuts for the Mach-E come to $3,000 to $4,000 for most models, or about 6%. It’ll put the sticker price at between $43,000 and $60,000. It also said it would increase production of the Mach-E in the second half of this year.

    Ford cut the price of the Mach-E in January but it has not announced price cuts for its other electric vehicles, including the F-150 Lightning pickup. Tesla has yet to deliver its first electric pickup, due out later this year.

    Tesla’s profit margins have been falling, because it sells only EVs. But Ford still gets the overwhelming majority of its sales from its profitable sales of gasoline powered cars and trucks. So it was able to report improved results even with the EV price cuts announced earlier.

    And on Tuesday, Ford stuck with the full-year earnings guidance it issued in March despite the new price cut. Even with the EV losses, Ford confirmed its earlier guidance that it expects to earn between $9 billion and $11 billion on an adjusted basis this year. The EV sales at Ford are still a fraction of its overall sales and pricing changes don’t move the profit needle the way it does at Tesla.

    Ford is still losing money on its EV sales. It said Tuesday it expects to lose about $3 billion before taxes, interest and depreciation from its electric vehicle division during the year, but that’s the same guidance it gave when it met with investors in March and broke out the results for that segment for the first time. It lost $722 million on that basis from EVs in the first quarter.

    Overall, Ford’s profit for the first quarter was much better than expected. It earned $2.5 billion, or 63 cents a share, up nearly $1 billion from what it earned on that basis a year ago. That was far better than the 41 cents a share earnings forecast by analysts surveyed by Refinitiv.

    Sales grew 20% to $41.5 billion, fueling the stronger than expected results. While revenue from the EV segment fell 27%, that segment only had sales of $700 million, a fraction of its overall revenue. Overall, the number of EVs Ford sold fell 32% to 12,000, despite the lower pricing for the Mustang Mach E. Tesla sales have increased after it lowered prices.

    Ford sold 1.1 million total vehicles in the quarter, up 9%.

    Shares of Ford

    (F)     fell 2% in after hours trading, despite the strong results and unchanged earnings guidance.

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  • Big banks are bidding for troubled First Republic as FDIC deadline looms | CNN Business

    Big banks are bidding for troubled First Republic as FDIC deadline looms | CNN Business

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    New York
    CNN
     — 

    Federal regulators are holding an auction for ailing regional bank First Republic, a person familiar with the matter tells CNN.

    Final bids are due for First Republic Bank at 4 p.m. ET on Sunday, the source said.

    The Federal Deposit Insurance Corporation, the independent government agency that insures deposits for bank customers, is running the auction.

    Neither First Republic nor the FDIC were immediately available for comment.

    Shares of First Republic

    (FRC)     plunged from $122.50 on March 1 to around $3 a share as of Friday on expectations that the FDIC would step in by end of day and take control of the San Francisco-based bank, its deposits and assets. But that never happened.

    The FDIC had already done so with two other similar sized banks just last month — Silicon Valley Bank and Signature Bank — when runs on those banks by their customers left the lenders unable to cover customers’ demands for withdrawals.

    The Wall Street Journal previously reported that JPMorgan Chase and PNC Financial are among the big banks bidding on First Republic in a potential deal that would follow an FDIC seizure of the troubled regional bank.

    PNC declined to comment. JPMorgan did not respond to requests for comment.

    “We are engaged in discussions with multiple parties about our strategic options while continuing to serve our clients,” First Republic said in a statement Friday night.

    If there is a buyer for First Republic, the FDIC would likely be stuck with some money-losing assets, as was the case after it found buyers for the viable portions of SVB and Signature after it took control of those banks.

    A kind of shotgun marriage, arranged by regulators who didn’t want a significant bank to end up in the hands of the FDIC before it was sold, occurred several times during the financial crisis of 2008 that sparked the Great Recession. Notably, JPMorgan bought Bear Stearns for a fraction of its earlier value in March of 2008, and then in September bought savings and loan Washington Mutual, soon after Bank of America bought Merrill Lynch.

    The failure of Washington Mutual in 2008 was the nation’s largest bank failure ever. First Republic, which is bigger than either SVB or Signature Bank, would be the second largest.

    Soon after collapses of SVB and Signature in March, First Republic received a $30 billion lifeline in the form of deposits from a collection of the nation’s largest banks, including JPMorgan Chase

    (JPM)    , Bank of America

    (BAC)    , Wells Fargo

    (WFC)    , Citigroup

    (C)     and Truist

    (TFC)    , which came together after Treasury Secretary Janet Yellen intervened.

    The banks agreed to take the risk and work together to keep First Republic flush with the cash in the hopes it would provide confidence in the nation’s suddenly battered banking system. The banks and federal regulators all wanted to reduce the chance that customers of other banks would suddenly start withdrawing their cash.

    But while the cash allowed First Republic to make it through the last six weeks, its quarterly financial report Monday evening, with the disclosure of massive withdrawals by the end of March, spurred new concerns about its long-term viability.

    The financial report showed depositors had withdrawn about 41% of their money from the bank during the first quarter. Most of the withdrawals were from accounts with more than $250,000 in them, meaning those excess funds were not insured by the FDIC.

    Uninsured deposits at the bank fell by $100 billion during the course of the first quarter, a period during which total net deposits fell by $102 billion, not including the infusion of deposits from other banks.

    The uninsured deposits stood at 68% of its total deposits as of December 31, but only 27% of its non-bank deposits as of March 31.

    In its earnings statement, the bank said insured deposits declined moderately during the quarter and have remained stable from the end of last month through April 21.

    Banks never have all the cash on hand to cover all deposits. They instead take in deposits and use the cash to make loans or investments, such as purchasing US Treasuries. So when customers lose confidence in a bank and rush to withdrawal their money, what is known as a “run on the bank,” it can cause even an otherwise profitable bank to fail.

    First Republic’s latest earnings report showed it was still profitable in the first quarter — its net income was $269 million, down 33% from a year earlier. But it was the news on the loss of deposits that worried investors and, eventually, regulators.

    While some of those who had more than $250,000 in their First Republic accounts were likely wealthy individuals, most were likely businesses that often need that much cash just to cover daily operating costs. A company with 100 employees can easily need more than $250,000 just to cover a biweekly payroll.

    First Republic’s annual report said that as of December 31, 63% of its total deposits were from business clients, with the rest from consumers.

    First Republic started operations in 1985 with a single San Francisco branch. It is known for catering to wealthy clients in coastal states.

    It has 82 branches listed on its website, spread across eight states, in high-income communities such as Beverly Hills, Brentwood, Santa Monica and Napa Valley, California; in addition to San Francisco, Los Angeles and Silicon Valley. Outside of California, branches are in other high-income communities such as Palm Beach, Florida; Greenwich, Connecticut; Bellevue, Washington; and Jackson, Wyoming.

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  • NBCUniversal CEO stepping down over ‘inappropriate relationship’ | CNN Business

    NBCUniversal CEO stepping down over ‘inappropriate relationship’ | CNN Business

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    New York
    CNN
     — 

    NBCUniversal CEO Jeff Shell is leaving the company after an outside investigation “into a complaint of inappropriate conduct,” its parent company Comcast announced Sunday.

    Shell will depart effective immediately in the wake of an investigation led by an outside counsel.

    “Today is my last day as CEO of NBCUniversal. I had an inappropriate relationship with a woman in the company, which I deeply regret,” Shell said in a statement. “I’m truly sorry I let my Comcast and NBCUniversal colleagues down, they are the most talented people in the business and the opportunity to work with them the last 19 years has been a privilege.”

    The brief statement did not specify who the woman was or include any other details about the investigation. CNN has reached out to Comcast and NBCUniversal.

    Shell had been named CEO in January 2020 after leading content creation, programming and distribution for NBCUniversal Film and Entertainment.

    Shell had expressed confidence in NBC’s streaming service, Peacock, which surpassed 20 million paid subscribers at the end of 2022 and “nearly tripled” its revenue to $2.1 billion, according to its fourth quarter earnings report, which ended at the end of 2022. Its adjusted earnings loss, however, was wider.

    “There’s no question the whole television landscape is changing,” Shell said in an interview on CNBC “Squawk on the Street” last October. “If you have the right content, and you offer a broad distribution platform, your consumers are going to find you and that’s what we’re doing with Peacock.”

    Comcast is set to report its first quarter earnings on Thursday.

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  • Three investors on how to protect your portfolio | CNN Business

    Three investors on how to protect your portfolio | 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
     — 

    Wall Street has been hit with a barrage of complex signals about the economy’s health over the past month. From banking turmoil to weakening jobs data to slowing inflation, and now the start of earnings season, investors have remained largely resilient.

    But the Federal Reserve’s March meeting minutes revealed last week that officials believe the economy will enter a recession later this year. While that’s not new news to investors who have worried that a recession is on the horizon for the past year, it does mean that markets could take a turn for the worse.

    So, how should investors protect their portfolios? Investors say there isn’t one asset that Wall Street should pile all their bets on, but there are fundamentals that should underlie their investment strategies.

    Jimmy Chang, chief investment officer at Rockefeller Global Family Office, says he advises clients to be patient, defensive and selective when navigating the market.

    In other words, investors should make decisions based on logic, not a fear of missing out.

    “You chase these rallies and then it fizzles out — you’re left holding the bag,” he said.

    Chang also recommends that investors stay defensive by investing in high-quality blue chip stocks with solid balance sheets and keep dry powder.

    Doug Fincher, portfolio manager at Ionic Capital Management, says investors should brace their portfolios against inflation.

    The Personal Consumption Expenditures price index rose 5% for the 12 months ended in February, showing that inflation remains much higher than the Fed’s 2% target.

    Coupled with the fact that the central bank has signaled that it plans to pause interest rate hikes sometime this year, it’s possible inflation could prove stickier than Wall Street expects.

    “It is the boogeyman of traditional investments,” Fincher said.

    He manages the Ionic Inflation Protection exchange-traded fund, which seeks to specifically perform well during periods of high inflation. The portfolio’s core exposure is inflation swaps, which are transactions in which one investor agrees to swap fixed payments for floating payments tied to the inflation rate. The fund also invests in short-duration Treasury Inflation Protected Securities.

    Megan Horneman, chief investment officer at Verdence Capital Advisors, says that her firm has hedged its portfolio in cash. A well-known haven, cash is a better alternative to other perceived safe spots like gold, which tends to be volatile and run up too fast, she said.

    Investors have rushed into money market funds in recent weeks after the banking turmoil both shook their confidence in the banking system and sent ripples through the market.

    “Cash is actually earning you something at this point,” Horneman said. “You have to look long term.”

    Earnings season kicked off Friday with a bonanza of earnings from the nation’s largest banks.

    Perhaps most noteworthy out of the bunch was JPMorgan Chase, which reported record revenue and an earnings beat for its latest quarter.

    The bank has $3.67 trillion in assets, making it the largest bank in the country and a bellwether for the economy. Strong earnings reports from the New York-based bank and its peers including Wells Fargo, Citigroup and PNC Financial Services have shown a promising start to the earnings season.

    Charles Schwab, Goldman Sachs, Bank of America and Morgan Stanley report next week.

    Here are some key takeaways from JPMorgan Chase’s first-quarter earnings:

    • The company guided net interest income to be about $81 billion in 2023, up $7 billion from its previous estimate. That’s especially important because this earnings season is all about guidance, as investors try to gauge whether the economy is headed for a recession and which companies will be able to weather a potential downturn.
    • CEO Jamie Dimon said in the post-earnings conference call that while financial conditions are a bit tighter after the collapse of Silicon Valley Bank and Signature Bank, he doesn’t see a credit crunch. But chances of a recession are now higher, he said.
    • The company said that its portfolio’s exposure to the office sector is less than 10%, addressing concerns that the $20 trillion commercial real estate industry could be the next space to see turmoil.

    Read more here.

    Monday: Empire State manufacturing index and homebuilder confidence index. Earnings report from Charles Schwab (SCHW).

    Tuesday: Earnings reports from Bank of America (BAC), Goldman Sachs (GS), Johnson & Johnson (JNJ), Netflix (NFLX), United Airlines (UAL) and Western Alliance Bancorp (WAL).

    Wednesday: Earnings reports from Citizens Financial Group (CFG), Morgan Stanley (MS), Tesla (TSLA) and International Business Machines (IBM). Speech from NY Federal Reserve President John Williams.

    Thursday: Philadelphia Fed manufacturing index, jobless claims, mortgage rates, US leading economic indicators and existing home sales. Earnings reports from AutoNation (AN) and American Express (AXP).

    Friday: Manufacturing PMI and services PMI. Earnings report from Procter & Gamble (PG).

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  • What markets are watching after digesting the US jobs data | CNN Business

    What markets are watching after digesting the US jobs data | 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
     — 

    In an unusual coincidence, the US jobs report was released on a holiday Friday — meaning stock markets were closed when the closely-watched economic data came out.

    It was the first monthly payroll report since Silicon Valley Bank and Signature Bank collapsed. It also marked a full year of jobs data since the Federal Reserve began hiking interest rates in March 2022.

    While inflation has come down and other economic data point to a cooling economy, the labor market has remained remarkably resilient.

    Investors have had a long weekend to chew over the details of the report and will likely skip the typical gut-reaction to headline numbers.

    What happened: The US economy added 236,000 jobs in March, showing that hiring remained robust though the pace was slower than in previous months. The unemployment rate currently stands at 3.5%.

    Wages increased by 0.3% on the month and 4.2% from a year ago. The three-month wage growth average has dropped to 3.8%. That’s moving closer to what Fed policymakers “believe to be in line with stable wage and inflation expectations,” wrote Joseph Brusuelas, chief economist at RSM in a note.

    “That wage data tends to suggest that the risk of a wage price spiral is easing and that will create space in the near term for the Federal Reserve to engage in a strategic pause in its efforts to restore price stability,” he added.

    The March jobs report was the last before the Fed’s next policy meeting and announcement in early May. The labor market is cooling but not rapidly or significantly, and further rate hikes can’t be ruled out.

    At the same time Wall Street is beginning to see bad news as bad news. A slowing economy could mean a recession is forthcoming.

    Markets are still largely expecting the Fed to raise rates by another quarter point. So how will they react to Friday’s report?

    Before the Bell spoke with Michael Arone, State Street Global Advisors chief investment strategist, to find out.

    This interview has been edited for length and clarity.

    Before the Bell: How do you expect markets to react to this report on Monday?

    Michael Arone: I think that this has been a nice counterbalance to the weaker labor data earlier last week and all the recession fears. This data suggests that the economy is still in pretty good shape, 10-year Treasury yields increased on Friday indicating there’s less fear about an imminent recession.

    There’s this delicate balance between slower job growth and a weaker labor market without economic devastation. I think this report helps that.

    As it relates to the stock market, I would expect the cyclical sectors to do well — your industrials, your materials, your energy companies. If interest rates are rising, that’s going to weigh on growth stocks — technology and communication services sectors, for example. Less recession fears will mean investors won’t be as defensively positioned in classic staples like healthcare and utilities.

    Could this lead to a reverse in the current trend where tech companies are bolstering markets?

    Yes, exactly. It’s difficult to make too much out of any singular data point, but I think this report will hopefully lead to broader participation in the stock market. If those recession fears begin to abate somewhat, and investors recognize that recession isn’t imminent, there will be more investment.

    What else are investors looking at in this report?

    We’ve seen weakness in the interest rate sensitive parts of the market — areas that are typically the first to weaken as the economy slows down. So things like manufacturing, things like construction. That’s where the weakness in this jobs report is. And the services areas continue to remain strong. That’s where the shortage of qualified skilled workers remains. I think that you’re seeing continued job strength in those areas.

    What does this mean for this week’s inflation reports? It seems like the jobs report just pushed the tension forward.

    it did. I expect that inflation figures will continue to decelerate — or grow at a slower rate. But I do think that the sticky part of inflation continues to be on the wage front. And so I think, if anything, this helps alleviate some of those inflation pressures, but we’ll see how it flows through into the CPI report next week. And also the PPI report.

    Is the Federal Reserve addressing real structural changes to the labor market?

    The Fed was confused in February 2020 when we were in full employment and there was no inflation. They’re equally confused today, after raising rates from zero to 5%, that we haven’t had more job losses.

    I’m not sure why, but from my perspective, the Fed hasn’t taken into consideration the structural changes in the labor force, and they’re still confused by it. I think the risk here is that they’ll continue to focus on raising rates to stabilize prices, perhaps underestimating the kind of structural changes in the labor economy that haven’t resulted in the type of weakness that they’ve been anticipating. I think that’s a risk for the economy and markets.

    A few weeks ago, Before the Bell wrote about big problems brewing in the $20 trillion commercial real estate industry.

    After decades of thriving growth bolstered by low interest rates and easy credit, commercial real estate has hit a wall. Office and retail property valuations have been falling since the pandemic brought about lower occupancy rates and changes in where people work and how they shop. The Fed’s efforts to fight inflation by raising interest rates have also hurt the credit-dependent industry.

    Recent banking stress will likely add to those woes. Lending to commercial real estate developers and managers largely comes from small and mid-sized banks, where the pressure on liquidity has been most severe. About 80% of all bank loans for commercial properties come from regional banks, according to Goldman Sachs economists.

    Since then, things have gotten worse, CNN’s Julia Horowitz reports.

    In a worst-case scenario, anxiety about bank lending to commercial real estate could spiral, prompting customers to yank their deposits. A bank run is what toppled Silicon Valley Bank last month, roiling financial markets and raising fears of a recession.

    “We’re watching it pretty closely,” said Michael Reynolds, vice president of investment strategy at Glenmede, a wealth manager. While he doesn’t expect office loans to become a problem for all banks, “one or two” institutions could find themselves “caught offside.”

    Signs of strain are increasing. The proportion of commercial office mortgages where borrowers are behind with payments is rising, according to Trepp, which provides data on commercial real estate.

    High-profile defaults are making headlines. Earlier this year, a landlord owned by asset manager PIMCO defaulted on nearly $2 billion in debt for seven office buildings in San Francisco, New York City, Boston and Jersey City.

    Dig into Julia’s story here.

    Tech stocks led market losses in 2022, but seemed to rebound quickly at the start of this year. So as we enter earnings season, what should we expect from Big Tech?

    Daniel Ives, an analyst at Wedbush Securities, says that he has high hopes.

    “Tech stocks have held up very well so far in 2023 and comfortably outpaced the overall market as we believe the tech sector has become the new ‘safety trade’ in this overall uncertain market,” he wrote in a note on Sunday evening.

    Even the recent spate of layoffs in Big Tech has upside, he wrote.

    “Significant cost cutting underway in the Valley led by Meta, Microsoft, Amazon, Google and others, conservative guidance already given in the January earnings season ‘rip the band- aid off moment’, and tech fundamentals that are holding up in a shaky macro [environment] are setting up for a green light for tech stocks.”

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  • Facebook-parent Meta plans to lay off another 10,000 employees | CNN Business

    Facebook-parent Meta plans to lay off another 10,000 employees | CNN Business

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    CNN
     — 

    Facebook-parent Meta plans to lay off another 10,000 workers, marking the second round of significant job cuts announced by the tech giant in four months.

    The latest layoffs, announced on Tuesday, come after Meta said in November that it was eliminating approximately 13% of its workforce, or 11,000 jobs, in the single largest round of cuts in the company’s history.

    In a Facebook post Tuesday, CEO Mark Zuckerberg said the job cuts will take place “over the next couple of months.”

    “We expect to announce restructurings and layoffs in our tech groups in late April, and then our business groups in late May,” he wrote. In a “small number of cases, it may take through the end of the year to complete these changes.”

    “Overall, we expect to reduce our team size by around 10,000 people and to close around 5,000 additional open roles that we haven’t yet hired,” Zuckerberg said.

    As of September 2022, Meta reported a headcount of 87,314, per a securities filings. With 11,000 job cuts announced in November and the 10,000 announced Tuesday, that would bring Meta’s headcount down to around 66,000.

    Meta is far from the only Big Tech company to undergo layoffs amid higher inflation, recession fears and a whiplash in pandemic-induced demand. In the first months of this year, Amazon, Google-parent Alphabet and Microsoft have all confirmed major job cuts impacting tens of thousands of tech workers.

    Shares of Meta rose more than 4% in early trading Tuesday following the announcement.

    When the first round of job cuts was announced in November, Zuckerberg blamed himself at the time for the company’s over-hiring earlier in the pandemic. Meta  nearly doubled its headcount between March 2020 and September of last year, as the Covid-19 crisis led to a surge in demand for digital services.

    But the situation changed radically for the social media giant and other tech companies last year as pandemic restrictions eased and people returned to their offline lives. Meta’s core business was also hit by privacy changes implemented by Apple and advertisers tightening budgets amid recession fears.

    In its most-recent quarterly earnings report, Meta posted a sharp drop in profits and reported its third straight quarterly decline in revenue. But during the earnings call, Zuckerberg promised investors that 2023 would be the “year of efficiency” for the company, following years of heavy investment in growth and a more immersive version of the internet called the metaverse.

    On that call, Zuckerberg also suggested that more job cuts could be coming.

    “We closed last year with some difficult layoffs and restructuring some teams. When we did this, I said clearly that this was the beginning of our focus on efficiency and not the end,” Zuckerberg said during the earnings call in early February. He added that the company would be focused on “flattening” its org structure and “removing some layers of middle management to make decisions faster.”

    “As part of this, we’re going to be more proactive about cutting projects that aren’t performing or may no longer be as crucial, but my main focus is on increasing the efficiency of how we execute our top priorities,” Zuckerberg said.

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  • Credit Suisse delays annual report after ‘late call’ from the SEC | CNN Business

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

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    London
    CNN
     — 

    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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  • $30 million of Funko Pop! toys will be thrown in the trash | CNN Business

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

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    New York
    CNN
     — 

    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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