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Tag: consumer services

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

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

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

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

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

    Microsoft and Alphabet Inc.
    GOOGL,
    +0.69%

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

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

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

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

    This week in earnings

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

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

    The calls to put on your calendar

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

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

    The number to watch

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

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

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

    Emily Bary and Jon Swartz contributed reporting to this story.

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  • Am I being tricked into overtipping when I eat out? Should I tip before or after sales tax is added?

    Am I being tricked into overtipping when I eat out? Should I tip before or after sales tax is added?

    Dear Quentin,

    I’ve read your previous responses to letters on tipping, and my thoughts are simple: Tipping is dependent on the service given. I won’t tip at a deli counter, but I will tip more in a diner. I see no reason to tip a deli counter person on a regular basis. The person who rings up my groceries isn’t allowed to accept tips, and they do a lot more than put a sandwich in a bag.

    As far as restaurants go, 15% is the starting point and I will go up from that as warranted. I do tend to tip a high percentage in diners. The waitstaff there are generally fabulous, deal with lower price points and a varied clientele. I feel they also suffer from customer bias where some people seem to think it’s only a diner not a fancy restaurant.

    “‘Helping others is not always through money. I volunteer my time with several charities and donate blood.’”

    The job is the same whether my meal is $10 or $100. I try to pay in cash to ensure the waitstaff is promptly getting their tip, and to ensure that the money does indeed go to the wait staff. Are we expected to tip on a total that includes credit-card charges? What’s more, helping others is not always through money. I volunteer my time with several charities and donate blood.

    What troubles me is that throughout the New York City metro area, tipping recommendations in restaurants are based on faulty calculations. My friends and I all agree that tips are supposed to be based on the price of the meal — that is the subtotal or pre-tax figure. Restaurants frequently encourage people to tip on the final amount. 

    A Fair Tipper

    Related: I’m sick and tired of tipping 20% every time I eat out. Is it ever OK to tip less? Or am I a cheapskate? 

    Dear Fair,

    Yes, yes, yes, and yes. 

    Yes, wait staff in diners work as hard as any restaurant worker, and they deserve whatever your optimum tip — 15% or 20% — and as much as you would tip in a white-tablecloth restaurant. Yes, consumers should not be expected to tip in a deli — unless you have a good relationship with the staff, and you tip occasionally for goodwill. If you choose to “skip” the charity donation in a pharmacy, that’s OK too. Yes, donations and tips are increasingly being conflated, and that’s not always a good thing. We should be comfortable with the charity and 100% sure that the donation is going to the charity in question. 

    And your main point: Yes, tipping on the subtotal before tax and before credit-card charges is absolutely fair, although a lot of people — especially when calculating the tip among friends — tip on the after-tax total. Why? Perhaps we don’t want to be seen splitting hairs over the tax among friends and/or in front of a service worker who has given us exemplary service. Calculating tips is often done under pressure, and no one likes to be seen as a cheapskate. I almost always tip on the total amount, knowing that the sales tax is included, primarily because I figure that extra $1 or more is going to the person who served my table.

    My colleague, MarketWatch news editor Nicole Pesce, put together a guide for how much you should tip everyone, and who you should NOT tip. She also cited three reasons why tipping has become such a note of contention, and why it appears we are tipping more: people tipped staff more during the pandemic (they were, after all, putting their health and lives at risk with their jobs); 40-year high inflation over the last 12 months has increased the cost of everything and, as such our tips rose in tandem with prices; and, finally, digital tipping appears to be ubiquitous, and people have been suffering from tipping fatigue. 

    “‘You’re not the only one: Americans are souring on tipping.’”

    You’re not the only one with tipping fatigue, though: Americans are generally souring on tipping. A large majority (66%) of U.S. adults have a negative view about tipping, according to a poll released by the personal-finance site Bankrate last month. The bottom line: consumers feel they are being forced to compensate employees for low pay (41%) and they don’t appreciate all that digital guilt tipping (32%) and, as a result, they believe that tipping culture has gotten out of control (30%). Respondents also said they were confused about how much to tip (15%), but a small minority (a paltry 16%) said they would be willing to pay higher prices in lieu of tipping.

    People appear to be less generous with their tipping amounts, and they also appear to be tipping less often. What’s perhaps most surprising from Bankrate’s research is that only 65% of diners actually tip when they eat out (that’s down from 73% last year). After restaurants, people are most likely to tip barbers/hairdressers (53% of those polled) and food-delivery workers (50%). From thereon, only a minority of people say they tip taxi or rideshare drivers (New York City cabs, which give tipping options upon payment, may be an outlier here), hotel housekeepers, baristas and food-delivery workers.

    It’s important that we have this conversation about tipping because expectations and digital tipping methods are evolving all the time. On the one hand, people are facing higher prices and they are understandably feeling under pressure to tip. On the other hand, this conversation naturally overlaps with the working conditions and pay of service workers. Americans are tipping less than they did during the worst days of the pandemic. Service workers — along with medical personnel, bus and train drivers and first responders — were among the heroes of the pandemic. That is something I hope we never forget.

    “The person who rings up my groceries isn’t allowed to accept tips, and they do a lot more than put a sandwich in a bag,” the letter writer says.


    MarketWatch illustration

    Also read:

    ‘I respect every profession equally, but I feel like so many people look down on me for being a waitress’: Americans are tipping less. Should we step up to the plate? 

    ‘We’re very upset!’ We gave a friend $400 concert tickets and $2,000 Rangers seats, but weren’t invited to his wedding. Do we speak up?

    ‘All of these tips add up’: If a restaurant adds a 20% tip, am I obliged to pay? Should tipping not be optional? 

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

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

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

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

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

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

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

    Related coverage:

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

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


    AP

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

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

    A signal for the stock-market’s health


    Getty Images

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

    Other opinions about market sentiment:

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

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

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

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

    A hot vote in Spain

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


    Uncredited

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

    Meta vs. Alphabet

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


    FactSet

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

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

    The Ratings Game

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

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

    Getting there is half the fun.


    Getty Images

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

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

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

    More coverage of the Fed:

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


    MarketWatch illustration/iStockphoto

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

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

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

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

    The World Cup games have started

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


    Getty Images

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

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

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

    More coverage of the World Cup:

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

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  • Recession? White House sees ‘momentum’ that will keep U.S. out of one.

    Recession? White House sees ‘momentum’ that will keep U.S. out of one.

    Recent economic data indicates the U.S. isn’t in a recession, a top White House economist said Tuesday, as he cited what he called momentum to keep the country out of one.

    Jared Bernstein, the chair of the Council of Economic Advisers, told a Washington Post event that indicators like employment and retail sales “are certainly not flashing anything close to recession.”

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

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

    Here are some of the biggest movers of the day:

    Stock gainers:

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

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  • Charles Schwab’s stock on track for biggest one-day gain since March of 2020 after earnings beat

    Charles Schwab’s stock on track for biggest one-day gain since March of 2020 after earnings beat

    Charles Schwab Corp.’s stock soared 12% Tuesday to put it on track for its biggest one-day increase since March of 2020, after the discount brokerage’s second-quarter earnings fell from a year ago but still topped consensus estimates.

    Chief Executive Walt Bettinger acknowledged a “somewhat unsettled backdrop,” but said Schwab gathered $52 billion in core net new assets in the quarter, bringing the year-to-date total to more than $180 billion.

    “While we observed signs of typical tax seasonality, as well as softer investor sentiment at the beginning of the quarter, we still attracted nearly 1 million new brokerage accounts and finished the period serving $8.02 trillion in total client assets across 34 million accounts,” he said in a statement.

    The company
    SCHW,
    +12.57%
    posted net income of $1.294 billion, or 64 cents a share, for the quarter, down from $1.793 billion, or 87 cents a share, in the year-earlier period. Adjusted per-share earnings came to 75 cents, ahead of the 71-cent FactSet consensus.

    Revenue fell 9% to $4.656 billion, ahead of the $4.610 billion FactSet consensus.

    See now: Morgan Stanley’s profit drops but beats expectations as stock rises

    Bank deposits fell to $304.4 billion from $442.0 billion a year ago. The company’s clients have been engaged in a practice called “sorting,” where they are moving cash out of sweep accounts and into higher-paying products. When that process exceeds cash on hand, the company has to borrow from other funding sources that can be more expensive.

    Still, Chief Financial Officer Peter Crawford said the daily outflows that have hurt the company over the last year as clients react to higher interest rates by seeking out better-paying options, began to slow.

    “While anticipated client cash realignment, along with net equity buying during June, pushed cash levels lower, we observed a continued and substantial deceleration in the daily pace of cash outflows versus prior months,” he said.

    Also read: Bank of America’s stock rises after second-quarter earnings and revenue beat expectations

    “The continuation of this trend through the end of the quarter further strengthens our conviction that this realignment activity will inflect before the end of 2023, unlocking growth in client cash held on the balance sheet.”

    On a call with analysts, Crawford said the company has not had to make any short-term borrowings from either CDs or Federal Home Loan Bank loans since late May and can now cover cash needs with organic sources.

    “And as client cash realignment continues to slow and eventually reverses, we’d expect our supplemental funding balances to continue to decline over the next 18 months and be mostly paid off by the end of 2024,” he said, according to a FactSet transcript. “And this means that they should not really be a factor in our earnings picture in 2025 and beyond.”

    Elsewhere, the company’s net interest income fell 10% to $2.3 billion as net interest margins fell 32 basis points from the first quarter to 1.87%.

    Net interest revenue rose to $4.1 billion from $2.7 billion a year ago, while interest expenses jumped to $1.8 billion from $166 million.

    The company also made progress with the conversion of client accounts from TD Ameritrade into Schwab accounts, with about 30% of accounts converted so far, said Bettinger. That comes after a major effort over the Memorial Day holiday weekend.

    Schwab expects to move almost all of the rest over by year-end and to transition the final group in the first half of 2024, he said.

    The stock has fallen 30% in the year to date, while the S&P 500
    SPX,
    +0.71%
    has gained 17.8%.

    Read now: JPMorgan Chase, Wells Fargo, Citi beat earnings targets but uncertainty clouds the economic outlook

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  • ‘I was outraged’: Our restaurant bill was $35 each, but our friend wanted to pay $22 for a gluten-free dish. Who’s right?

    ‘I was outraged’: Our restaurant bill was $35 each, but our friend wanted to pay $22 for a gluten-free dish. Who’s right?

    Dear Quentin,

    I went for dinner with six friends last weekend, and we each ordered entrees and desserts, and some side orders. One of our group only eats gluten-free food, so he ordered two starters. We split the bill, and it worked out at $36 each. But our gluten-free friend cried foul, and asked for a separate check to pay $22 for his gluten-free dish. I was outraged — and almost felt physically sick. I kicked my husband under the table, and said under my breath, “Can you believe that?’

    Can you believe it? Do you think he should have just paid the $35 instead of asking for a separate check? Adding insult to injury, he left the waiter a $10 tip. Why not just pay $35 like everyone else? I told my husband I was never going for dinner with him again. Don’t you think he should have just paid $35 like everyone else? It was a big crowd. If everyone did that, you’d need a forensic accountant to figure out how many breadsticks someone ate. 

    We otherwise had a nice evening, and it was a bring-your-own-bottle restaurant. I work as a teacher and my husband works in tech. We own a home together and have three kids. Our gluten-free friend is a freelance consultant, and is divorced with two kids. He had a very privileged upbringing. I worked hard for everything I have. I’m not saying any of us are rich, but when we go out to eat, we like to share and share alike, and split the bill down the middle. 

    When did eating out become so full of these cringeworthy moments?

    Equal Bill Splitter

    Dear Equal,

    I’m sorry to say that the most cringeworthy moment here happened when you kicked your husband under the table. I’m not a big fan of under-table communication in a group, and while we could debate the pros and cons of asking for a separate check for a $13 difference, I don’t think there’s much of a gray area when it comes to calling someone out at the dinner table, especially when your eye-rolling and disapproval could be picked up by the other guests.

    As far as your friend is concerned, $13 is a lot of money to pay when you did not eat all the food that was ordered by the table. Maybe it doesn’t seem like it to you or anyone reading this column, but your friend is divorced with two kids, and works as a freelancer — so let’s assume his income is not always stable. Could he have just split it down the middle and paid $35 and another 15% or 20% for a tip? Sure. But he has good financial boundaries. I applaud him.

    The real issue here may go back to your respective upbringings, and could explain your dramatic — and I would argue disproportionate reaction — to your friend asking for a separate $22 check. You’ve worked hard, and maybe your friend had an easier start in life, but that doesn’t mean he’s not entitled to pay for what he ate, and watch every dollar. Divorce is like a recession. You can end up struggling to get back on your financial feet for years.

    Perhaps your friend had always intended to pay $22 for his gluten-free dish, and tip the server 50%, or perhaps he has a well-trained side eye and caught your reaction to his paying for his own order, and he decided to pay closer to what everyone else had paid. But ordering separate checks, I suspect, will become more common as prices continue to rise, even at a slower pace, and people feel uncertain about spending money in restaurants. 

    You believe in equality of bill splitting. I suggest you apply that equality to all dinner guests, regardless of upbringing and dietary restrictions, and allow them to make their own choices about what they pay for at dinner. People often have problems — financial or otherwise — that we are not aware of, so try to leave space for that. And if your friend did see your eye-rolling and under-the-table antics? I’d like to think he made space for your behavior too.

    Readers write to me with all sorts of dilemmas. 

    By emailing your questions, you agree to have them published anonymously on MarketWatch. By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.

    The Moneyist regrets he cannot reply to questions individually.

    More from Quentin Fottrell:

    I had a date with a great guy. I didn’t drink, but his wine added $36 to our bill. We split the check evenly. Should I have spoken up?

    ‘I’m living paycheck to paycheck and I feel drained’: My fiancé said he would pay half of the mortgage. Guess what happened next?

    ‘We live in purgatory’: My wife has a multimillion-dollar trust fund, but my mother-in-law controls it. We earn $400,000 and spend beyond our means.

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  • Bank of America, Morgan Stanley, Lockheed, Masimo, Novartis, and More Stock Market Movers

    Bank of America, Morgan Stanley, Lockheed, Masimo, Novartis, and More Stock Market Movers

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

    https://www.barrons.com/articles/stock-market-movers-98396473

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  • Cathie Wood’s ARK funds dump $26 million more in Coinbase stock, shed $13 million more of Tesla shares

    Cathie Wood’s ARK funds dump $26 million more in Coinbase stock, shed $13 million more of Tesla shares

    Funds associated with Cathie Wood’s ARK Investment continued to cull shares of Coinbase Global Inc. and Tesla Inc. on Monday, according to recent trade disclosures.

    The ARK Fintech Innovation ETF
    ARKF,
    +1.58%
    dumped 76,788 Coinbase shares
    COIN,
    +0.23%
    on the day, while the ARK Innovation ETF
    ARKK,
    +2.29%
    sold 127,266 and the ARK Next Generation Internet ETF
    ARKW,
    +2.23%
    sold 44,784 shares.

    Those were worth $26.3 million based on Coinbase’s Monday closing price of $105.55, and the sales follow ARK’s move to dump about $50 million in Coinbase’s stock Friday.

    Coinbase represents 0.78% of the Fintech Innovation ETF, along with 0.15% of the Innovation ETF and 0.30% of the Next Generation Internet ETF. ARK disclosed the transactions and weightings in the daily trade notifications it posts to its website.

    Read: Coinbase’s spectacular stock surge after Ripple ruling sparks fierce debate

    Meanwhile, the ARK Innovation ETF shed 38,329 Tesla shares
    TSLA,
    +3.20%
    on Monday, while the ARK Next Generation Internet ETF sold 6,855. Those shares were worth $13.1 million based on Tesla’s Monday closing level of $290.38. Tesla represents about 0.12% of both funds as they continue to unload shares.

    Don’t miss: Tesla is looking at its best sales quarter ever

    ARK scooped up 455 shares of Meta Platforms Inc.
    META,
    +0.57%
    within its Next Generation Internet ETF and bought up 3,729 shares within the ARK Innovation ETF. That amounted to $1.3 million worth of stock based on Meta’s $310.62 Monday close.

    Two ARK funds bought a combined $790 million in Robinhood Markets Inc.’s stock
    HOOD,
    +0.89%    ,
    with the fintech fund scooping up 25,641 shares and the Next Generation Internet ETF buying 37,630 shares. ARK added 4,608 shares of SoFi Technologies Inc.
    SOFI,
    +4.41%
    to the fintech fund, worth $43,683 based on Monday’s close.

    See also: SoFi’s stock catches another downgrade as analyst says it ‘needs to be valued more like a bank’

    ARK was also active in shares of Twilio Inc.
    TWLO,
    -0.63%    ,
    buying 15,702 within the Fintech Innovation ETF, 133,499 within the Innovation ETF and 22,748 within the Next Generation Internet ETF. That amounted to $11.4 million in Twilio’s stock based on Monday’s $66.47 closing price.

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  • The nation’s biggest banks are gearing up for more consumer struggles ahead

    The nation’s biggest banks are gearing up for more consumer struggles ahead

    JPMorgan Chase & Co. Chief Executive Jamie Dimon on Friday said the U.S. economy was basically doing OK, even if customers were spending “a little more slowly.”

    But with rivals like Bank of America Corp., Goldman Sachs Group Inc. and American Express Co. set to report quarterly results this week, recession agita still prevails.

    For evidence, look no further than JPMorgan’s
    JPM,
    +0.60%
    own quarterly results. The bank’s second-quarter profit blew past expectations, but it set aside $2.9 billion during the second quarter to cover potentially bad loans, amid concerns that more consumers could run into more difficulty paying their bills on time as higher prices manage to stick at stores.

    That figure was well up from $1.1 billion in the same quarter last year, although still far below the billions it stowed away when the pandemic first hit. Similarly, Wells Fargo & Co.
    WFC,
    -0.34%
    on Friday set aside $1.7 billion for loan losses in this year’s second quarter, nearly triple what it was a year ago.

    The figures underscore the anxiety over the second half of this year, when many economists expect the economy to tilt into a recession. However, for the 500 companies in the S&P 500 index, Wall Street analysts still expect profit growth.

    Any downturn could be exacerbated by the pressure investors have put on companies, potentially via more layoffs and money-saving technology, to keep prices high and cut costs to replicate the abnormally large profit-margin gains they put up in 2021 and 2022. Businesses have indeed kept prices high, at least for many basic necessities, in an effort to cover their own higher costs and to pad profits.

    When Bank of America
    BAC,
    -1.89%
    reports this week, the results will narrow the lens on lending and spending in the U.S. Results from Morgan Stanley
    MS,
    -0.50%
    and Goldman Sachs
    GS,
    -0.76%
    will fill in the gaps on trading and deal-making. American Express
    AXP,
    -0.49%
    will give a more detailed breakdown of what consumers are still spending their money on, after Delta Air Lines Inc.
    DAL,
    -2.35%
    — which has a partnership with AmEx — said that travel demand remained “robust.”

    Banks shoveled more money into their reserve stockpiles in 2020 to bulk up against the pandemic’s shutdown of the economy. A year later, they started releasing those funds as the economy reopened and recovered. FactSet expects the broader banking sector to plump up its cash cushion during this year’s second quarter to account for more late loan payments or potential defaults.

    In a report on Friday, FactSet said the 15 banking-industry companies in the S&P 500 Index tracked by the firm were on pace to set aside $9.9 billion to cover losses from souring loans in the second quarter. That’s more than double the amount set aside a year ago. And if that $9.9 billion figure, based on actual and projected financial figures, ends up as the actual figure at the end of the quarter, it would mark the highest since the beginning of the pandemic and the third highest in five years, according to FactSet data.

    “The U.S. economy continues to be resilient,” Dimon said in a statement on Friday. “Consumer balance sheets remain healthy, and consumers are spending, albeit a little more slowly. Labor markets have softened somewhat, but job growth remains strong.”

    However, he noted difficulties in JPMorgan’s investment banking segment. And he said consumer savings were slowly eroding as inflation endures.

    As the nation’s biggest bank, JPMorgan has flexed its financial muscle this year, swallowing up First Republic after that bank got into trouble. But as it consolidates power and influence, building thicker armor against shocks to the economy, its financial results might not always reflect the struggles of its smaller rivals, where difficulties are likely felt more acutely. Analysts at Raymond James said that while JPMorgan remained a “best in breed” bank, its outlook pointed to “heightened challenges for smaller banks.”

    See also: Jamie Dimon says U.S. consumers are in ‘good shape.’ This evidence may prove otherwise.

    This week in earnings

    For the week ahead, 60 S&P 500 companies, including five from the Dow, will report quarterly results, according to FactSet. Two big oil companies, Halliburton Co.
    HAL,
    -2.28%
    and Baker Hughes Co.,
    BKR,
    -0.95%
    will report, as oil prices fall from levels seen last year. Results from two transportation giants — trucking company J.B. Hunt Transport Services
    JBHT,
    -0.42%
    and railroad operator CSX Corp.
    CSX,
    -0.27%
    — will also be a proxy for how much people are buying things and having them shipped. United Airlines Holdings Inc.
    UAL,
    -3.42%
    and American Airlines Group
    AAL,
    -1.68%
    will also report.

    The call to put on your calendar

    Netflix results: Hollywood shutdown, ‘slow-growth’ expectations. Hollywood’s writers — and now its actors — have gone on strike, and Netflix Inc.
    NFLX,
    -1.88%
    reports second-quarter results on Wednesday. The streaming platform will likely face questions over how much content it has left in the tank, as the strike upends studio-production schedules and leaves viewers with vast expanses of reruns. Still, Macquarie analyst Tim Nollen said that the production standstill “may ironically drive even more viewers to streaming services.”

    The writers and actors argue that the studio industry — increasingly consolidated, increasingly publicly traded, increasingly oriented around a handful of film franchises — has profited immensely while skimping on things benefits and streaming residuals. But after a decade-long rise, and a recent shift in investor focus from subscriber growth to profit growth, Netflix has emerged as one of the biggest production powerhouses in the business. And after years of flooding customers with new films and shows, it’s trying to squeeze out sales via more boring ways: things like a password-sharing crackdown and ads.

    Daniel Morgan, senior portfolio at Synovus Trust Co., said Netflix still faced a plenty of streaming competition amid “muted” subscriber growth. But Wedbush analyst Michael Pachter said investors should look at Netflix as a profitable, albeit more mature company.

    “We think Netflix is well-positioned in this murky environment as streamers are shifting strategy, and should be valued as an immensely profitable, slow-growth company,” Pachter said in a research note on Friday.

    “Even while the ad-supported tier is not yet directly accretive (we think it will be accretive over time), the ad-tier should continue to reduce churn and draw new subscribers to the service,” he continued.

    The number to watch

    Tesla sales. Electric-vehicle maker Tesla Inc. also reports second-quarter results on Wednesday. And like streaming, some analysts say the fervor for EVs has faded.

    However, they also said that Tesla
    TSLA,
    +1.25%
    had so far been immune from the malaise. And even though Elon Musk remains preoccupied with Twitter — which now faces competition from Meta Platforms Inc.’s
    META,
    -1.45%
    Threads — Tesla’s second-quarter deliveries were far above expectations. Sales are expected to be big. And one analyst said that price cuts, which Tesla has used to capture more of the auto market in China, were likely “fairly minimal” during the second quarter. But some analysts wondered what the blowout delivery figures would mean for margins. And the industry, broadly, has increasingly tested the patience of profit-minded investors.

    “We’ve now seen a market where demand is constrained, capital has been tighter, and there is less tolerance for EV related losses,” Barclays analysts said in a note last week, adding that there was a “step back from EV euphoria.”

    Claudia Assis contributed reporting.

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  • FTC files appeal, again seeks to block Microsoft-Activision deal

    FTC files appeal, again seeks to block Microsoft-Activision deal

    The Federal Trade Commission on Thursday asked an appeals court to temporarily block Microsoft Corp.’s $69 billion acquisition of Activision Blizzard Inc. while it challenges a ruling earlier this week green-lighting the deal.

    The FTC on Thursday asked U.S. District Judge Jacqueline Scott Corley to postpone her ruling — which she promptly denied — and also appealed to the Ninth U.S. Circuit Court of Appeals in San Francisco to pause the acquisition “to preserve the status quo” while the case is reviewed, claiming it is likely to succeed in its appeal.

    According to the filing, the FTC claims the judge applied the wrong legal standard to its request for a preliminary injunction, and erred in a number of other matters.

    The deal is set to close in the coming days, and letting it happen will “irreparably harm the public interest and the FTC,” regulators said.

    Also see: GOP blasts FTC Chair Khan as a ‘bully’ after agency’s loss in Microsoft case

    In a response filed with the court, Microsoft said the FTC “failed to carry its burden on independent, fact-based grounds” and “dragged its heels” before appealing.

    “The court has already found that it would be inequitable” to order an injunction that could lead to “the potential scuttling of the merger,” Microsoft said, in asking for the FTC’s request to be denied.

    The FTC has claimed the tie-up of a major videogame platform — Microsoft’s
    MSFT,
    +1.62%
     Xbox — with a major videogame publisher — Activision
    ATVI,
    -0.51%
     makes the wildly popular “Call of Duty,” among other titles — would be harmful to the videogame industry and consumers.

    Microsoft has pledged to keep “Call of Duty” available to Sony’s
    SONY,
    +2.82%
     PlayStation console for 10 years, and will make it available for Nintendo’s 
    7974,
    -0.36%
     Switch and some cloud-gaming platforms.

    In her ruling clearing the deal Tuesday, Corley said the FTC did not show “this particular vertical merger in this specific industry may substantially lessen competition.”

    Bloomberg News reported late Thursday that Microsoft and Activision are considering giving up some control of their cloud-gaming business in the U.K. to win approval of British regulators, who — if the U.S. appeals court does not act — are the final hurdle to the deal closing on time.

    FTC Chair Lina Khan testified on Capitol Hill on Thursday, where Republican lawmakers assailed her actions and sharply criticized her agency’s court losses in trying to block the Microsoft-Activision deal and Meta’s
    META,
    +1.32%
    acquisition of a virtual-reality gaming company earlier this year.

    Read more: After Microsoft defeat, ‘toothless’ FTC needs to pick better battles if it wants to rein in Big Tech

    Also: FTC’s probe of OpenAI marks key moment in Khan’s push to rein in Big Tech

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  • S&P 500 ends above 4,500 level for first time in 15 months as stocks gain ahead of bank earnings

    S&P 500 ends above 4,500 level for first time in 15 months as stocks gain ahead of bank earnings

    Stocks rose for a fourth day in a row on Thursday, a day ahead of second-quarter earnings from America’s biggest lenders. The Dow Jones Industrial Average
    DJIA,
    +0.14%
    rose about 46 points, or 0.1%, ending near 34,394, according to preliminary data from FactSet. But the S&P 500 index
    SPX,
    +0.85%
    gained 0.9% to end at 4,509, clearing the 4,500 mark for the first time since April 5, 2022 when it ended at 4,545.86, according to Dow Jones Market Data. The Nasdaq Composite Index
    COMP,
    +1.58%
    scored another blockbuster day, up 1.6%. Investors have been optimistic as inflation pressures ease and as perhaps the best-telegraphed U.S. economic recession in recent history has yet to materialize. The S&P 500 and Nasdaq have been charging higher on buzz about AI technology, with much of this year’s stock-market gains fueled by a small group of stocks. The risk-on tone ahead of earnings from JPMorgan Chase and Co.,
    JPM,
    +0.49%
    Wells Fargo
    WFC,
    +1.04%
    and Citigroup
    C,
    +0.63%    ,
    had the U.S. dollar
    DXY,
    -0.74%
    earlier on pace to end at its lowest level since early April 2022. Treasury yields also continued to fall, with the 10-year
    TMUBMUSD10Y,
    3.768%
    rate back down to 3.759%, after topping 4% in recent weeks. The six biggest banks are expected to issue a deluge of fresh debt after earnings, despite the Federal Reserve having sharply increased rates and borrowing costs for businesses and households to tame inflation.

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  • Delta Air Lines stock surges to 2-year high after earnings beat, raised outlook

    Delta Air Lines stock surges to 2-year high after earnings beat, raised outlook

    Shares of Delta Air Lines Inc. surged toward a more-than two-year high Thursday, after the air carrier reported second-quarter profit and revenue that rose above forecast, and boosted its full-year outlook citing continued “robust” travel demand.

    Delta
    DAL,
    -1.46%
    said net income more than doubled to $1.83 billion, or $2.84 a share, from $735 million, or $1.15 a share, in the year-ago period.

    Excluding nonrecurring items, adjusted earnings per share of $2.68 beat the FactSet consensus of $2.40.

    Revenue grew 12.7% to $15.78 billion, well above the FactSet consensus of $14.44 billion,

    For 2023, the company raised its EPS guidance range to $6 to $7 from $5 to $6, and increased its outlook for free cash flow to $3 billion from $2 billion.

    The stock jumped 3.5% in premarket trading, putting it on track to open at the highest price seen during regular-sessions hours since April 2021.

    “Consumer demand for air travel remains robust,” said Chief Executive Ed Bastian.

    Traffic increased 18.0% to 60.80 billion revenue passenger miles while capacity grew 17.1% to 68.99 billion available seat miles. Load factor improved one percentage point to 88%, to beat the FactSet consensus of 87.2%.

    The stock has run up 42.1% over the past three months through Wednesday, while the U.S. Global Jets exchange-traded fund
    JETS,
    -0.81%
    has climbed 22.1% and the S&P 500 index
    SPX,
    +0.74%
    has gained 9.3%.

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  • As food prices rise in June, analysts warn of a ‘tipping point’ for Americans

    As food prices rise in June, analysts warn of a ‘tipping point’ for Americans

    Food prices grew at a slower pace in June, but economists remain concerned that prices will reach a level where consumers will make dramatic changes in their behavior.

    Food prices rose 3% in June compared to a year ago, according to the latest data from the Bureau of Labor Statistics. After a year of price hikes, consumers continued to see food prices rise, but at a slower rate.

    Grocery prices were 5.7% higher in June compared to a year ago, and dining out was 7.7% more expensive. That’s significantly lower than the 13.5% peak inflation for grocery prices last August and the 8.8% peak inflation for dining out.

    “Overall, there continues to be a similar narrative of extended upward pressure on food prices as we try to discern whether this stress has led to a tipping point where consumers are struggling to buy the foods that they want,” said Jayson Lusk, the head and distinguished professor of Agricultural Economics at Purdue University.

    Reported food insecurity across households of different income levels reached 17% in June, the highest level since March 2022, according to the monthly Consumer Food Insights Report from Purdue University. Although it didn’t deviate too much from the normal range — food insecurity hovered at 14% two months ago — Lusk said the increase is concerning given the amount of pressure on more financially vulnerable consumers. 

    “Reported food insecurity across households of different income levels reached 17% in June, the highest level since March 2022, according to Purdue University. ”

    The pandemic-era expansion of the Supplemental Nutrition Assistance Program ended in March, meaning SNAP recipients are now receiving $90 less on average every month, according to the Center on Budget and Policy Priorities, a progressive policy think tank based in Washington, D.C. 

    The recent rise in food insecurity could be a lag from households adjusting to the policy change, Lusk said. On average, consumers are spending about $120 per week on groceries and $70 per week on dining out or takeout, the report found. 

    Middle-income households earning $50,000 to $100,000 a year and low-income households earning less than $50,000 a year cut weekly spending on groceries and dining out by about $10 a week, Purdue found. The average weekly grocery expenditure for low-income households was $103 in June; for middle-income households, it was $118. Households earning more than $100,000 a year spent $141 a week on groceries in June.

    Around 47% of low-income households — those earning less than $50,000 a year — said they relied on SNAP benefits in May, up from roughly 40% in February, according to a recent Morning Consult report.

    For low-income households, rising food insecurity is often coupled with juggling bills such as utilities and rent, which has also led to rising eviction rates in recent months, according to Propel, an app that aims to help low-income Americans improve their financial health. Propel surveys SNAP users on insecurity around food, finance and their housing situation. 

    Nearly half of the survey respondents said they cannot afford the food they want. “We were unable to pay bills because we had to buy food. We’re about to lose our home,” a South Carolina user named Anna told the Propel survey. 

    The share of surveyed households that paid their utilities late rose 11% from May to June, and only 27% of respondents paid their utility bills on time and in full, according to Propel’s June survey.

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  • ‘This is the best possible jobs report’ — economists react to June employment data

    ‘This is the best possible jobs report’ — economists react to June employment data

    The June jobs report on Friday showed the U.S. economy gained 209,000 jobs last month, with the unemployment rate dipping to 3.6% from 3.7%.

    Economists polled by The Wall Street Journal had expected an addition of 240,000 jobs and an unemployment rate of 3.6%.

    See: Jobs report shows 209,000 gain in June — smallest increase since end of 2020

    Below are some initial reactions from economists and other analysts, including their views on what the jobs report means for the Federal Reserve as the central bank considers how to proceed with interest-rate hikes. The main U.S. stock indexes
    SPX,
    -0.29%

    DJIA,
    -0.55%

    COMP,
    -0.13%
    traded mixed following the data on nonfarm payrolls, also called NFP.

    • “This is actually a great number. This is a number that is something we can sustain. We can’t sustain adding 300,000, 400,000, 500,000 jobs a month. We need to see it slow. It’s doing exactly what it needs. If we’re going to have a soft landing, this is what it looks like. So I don’t think that we should make too much of this number being bad. But I do think that the Fed train is rolling toward another rate hike, but I wouldn’t put my money on a second one yet.” — Betsey Stevenson, economics professor at the University of Michigan and a former Obama White House economist, in a CNBC interview

    Related: July Fed rate hike remains largely priced in, expectations for September or November hike soften somewhat

    • “In a sense, this is the best possible jobs report, then, threading the needle between too strong and too weak. People should be happy to see decent job growth and decent wage growth. The Fed can take pleasure in slowing momentum and wage growth stabilizing rather than rising, while bond traders can breathe a sigh of relief there is no sign of the strength picked up by ADP yesterday. It is win, win, win.” — Chris Low, chief economist at FHN Financial, in a note

    • “The 209,000 rise in non-farm payrolls in June was the weakest gain since December 2020 and suggests labor market conditions are finally beginning to ease more markedly. That said, it is unlikely to stop the Fed from hiking rates again later this month, particularly when the downward trend in wage growth appears to be stalling.” — Andrew Hunter, deputy chief U.S. economist at Capital Economics, in a note

    • “Overall, the cooling in hiring is a welcome development, but the pace is still above growth in the working-age population, and combined with continued wage pressures and the drop in the unemployment rate, this leaves the Fed on track to hike rates by 25 [basis points] in both July and September.” — Katherine Judge, senior economist at CIBC, in a note

    • “Black unemployment went up to 6.0% for June, and is a statistically significant change from 5.0% in March. So while the employment rate is historically high, there is still room for growth. (As always when we’re talking about historical exclusion & discrimination).” — Kate Bahn, economist and research director at WorkRise, which is affiliated with the Urban Institute, in a tweet

    • “The markets maybe made too much of the ADP number, as that has shown to be not always exactly a great indicator. … The labor market is cooling, but marginally. Most importantly, though, the average hourly earnings number suggests still some firming in that space, and that’s where the Fed has been primarily focused. So for me, this is maybe a little lighter, but not a dramatic change in terms outlook and expectations.” — Roger Ferguson, former Fed vice chair, in a CNBC interview

    Now read: Part-time work surged in June as hours cut back, U.S. jobs report says

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  • Big Tech Is Running Out of Steam. These 3 AI Stocks Merit a Look.

    Big Tech Is Running Out of Steam. These 3 AI Stocks Merit a Look.

    Technology stocks reigned supreme in the first half of the year, far outperforming the wider market. But sustaining that rally will be tough, and investors need to look now for tech stocks that are ready to benefit from the growth of artificial intelligence. 

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  • Americans are now being advised to reconsider travel to China

    Americans are now being advised to reconsider travel to China

    BEIJING (AP) — The U.S. recommended Americans reconsider traveling to China because of arbitrary law enforcement and exit bans and the risk of wrongful detentions.

    No specific cases were cited, but the advisory came after a 78-year-old U.S. citizen was sentenced to life in prison on spying charges in May.

    It also followed the passage last week of a sweeping Foreign Relations Law that threatens countermeasures against those seen as harming China’s interests.

    China also recently passed a broadly written counterespionage law that has sent a chill through the foreign business community, with offices being raided, as well as a law to sanction foreign critics.

    “The People’s Republic of China (PRC) government arbitrarily enforces local laws, including issuing exit bans on U.S. citizens and citizens of other countries, without fair and transparent process under the law,” the U.S. advisory said.

    “U.S. citizens traveling or residing in the PRC may be detained without access to U.S. consular services or information about their alleged crime,” it warned.

    “ Similar U.S. advisories issued for the semiautonomous Chinese regions of Hong Kong and Macao.”

    The advisory also said that Chinese authorities “appear to have broad discretion to deem a wide range of documents, data, statistics, or materials as state secrets and to detain and prosecute foreign nationals for alleged espionage.”

    It listed a wide range of potential offenses from taking part in demonstrations to sending electronic messages critical of Chinese policies or even simply conducting research into areas deemed sensitive.

    Exit bans could be used to compel individuals to participate in Chinese government investigations, pressure family members to return from abroad, resolve civil disputes in favor of Chinese citizens and “gain bargaining leverage over foreign governments,” the advisory said.

    Similar advisories were issued for the semiautonomous Chinese regions of Hong Kong and Macao. They were dated Friday and emailed to journalists on Monday.

    The U.S. had issued similar advisories to its citizens in the past, but those in recent years had mainly warned of the dangers of being caught in strict and lengthy lockdowns while China closed its borders for three years under its draconian “zero-COVID” policy.

    China generally responds angrily to what it considers U.S. efforts to impugn its authoritarian Communist Party–led system. It has issued its own travel advisories concerning the U.S., warning of the dangers of crime, anti-Asian discrimination and the high cost of emergency medical assistance.

    From the archives (June 2020): Hong Kong bans insults to China’s national anthem

    Also (August 2021): Biden signs order to allow thousands of Hong Kong residents to stay in the U.S. amid Beijing’s crackdown

    China had no immediate response to the travel advisory on Monday.

    Details of the accusations against the accused spy John Shing-Wan Leung are not available, given China’s authoritarian political system and the ruling Communist Party’s absolute control over legal matters. Leung, who also holds permanent residency in Hong Kong, was detained in the southeastern city of Suzhou on April 15, 2021 — a time when China had closed its borders and tightly restricted movement of people domestically to control the spread of COVID-19.

    The warnings come as U.S.-China relations are at their lowest in years, over trade, technology, Taiwan and human rights, although the sides are taking some steps to improve the situation. U.S. Secretary of State Antony Blinken made a long-delayed visit to Beijing last week and Treasury Secretary Janet Yellen is making a much-anticipated trip to Beijing this week. China also recently appointed a new ambassador to Washington, who presented his credentials in a meeting with President Joe Biden at the White House.

    Other incidents, however, have also pointed to the testiness in the relationship. China formally protested last month after Biden called Chinese leader Xi Jinping a “dictator,” days after Blinken’s visit.

    From the archives (February 2021): Biden says China faces ‘extreme competition’ from U.S. under his administration

    Also see (June 2020): Bolton book adds urgency to Trump bid to depict himself as a China hawk and to paint Biden as a Beijing apologist

    Capitol Report (June 2020): Trump asked China’s Xi to buy U.S. farm products to help him win re-election, Bolton book says

    Biden brushed off the protest, saying his words would have no negative impact on U.S.-China relations and that he still expects to meet with Xi sometime soon. Biden has also drawn rebukes from Beijing by explicitly saying the U.S. would defend self-governing Taiwan if China, which claims the island as its own territory, were to attack it.

    The White House’s John Kirby discusses President Joe Biden’s priorities when it comes to Ukraine, China and other national-security matters. Kirby, who will be interviewed by MarketWatch’s Victor Reklaitis, is the strategic-communications coordinator for Biden’s National Security Council.

    Biden said his blunt statements regarding China are “just not something I’m going to change very much.”

    See: Biden says he plans to meet with China’s Xi even after calling him a dictator

    Also: ‘Extremely absurd and irresponsible’: China fires back after Biden labels Xi a dictator

    From the archives (March 2023): Xi says U.S. is trying to hinder China in its quest for global influence

    The administration is also under pressure from both parties to take a tough line on China, making it one of the few issues on which most Democrats and Republicans agree.

    Along with several detained Americans, two Chinese-Australians, Cheng Lei, who formerly worked for China’s state broadcaster, and writer Yang Jun, have been held since 2020 and 2019, respectively, without word on their sentencing.

    Perhaps the most notorious case of arbitrary detention involved two Canadians, Michael Kovrig and Michael Spavor, who were detained in China in 2018, shortly after Canada arrested Meng Wanzhou, Huawei Technologies’ chief financial officer and the daughter of the tech powerhouse’s founder, on a U.S. extradition request.

    They were charged with national-security crimes that were never explained and released three years later after the U.S. settled fraud charges against Meng. Many countries labeled China’s action “hostage politics.”

    Read on (May 2023): Biden national-security adviser tells Chinese diplomat that U.S. seeks to move beyond spy-balloon episode

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  • Casino Receives Offers to Strengthen Capital Base

    Casino Receives Offers to Strengthen Capital Base

    By Mauro Orru

    Casino Guichard-Perrachon said it has received two proposals to strengthen its capital base, a day after the group warned it could default on part of its debt.

    The French grocer said Tuesday that one proposal came from EP Global Commerce and Fimalac, and the second from 3F Holding. Casino said it would analyze the two proposals and put them to creditors on Wednesday, when it expects to disclose details of the offers.

    Casino has for months been grappling with high debt and has entered talks with creditors to ensure it has enough funding available. Last week, the group said it was seeking to raise at least 900 million euros ($982.2 million) to deliver its midterm targets.

    “Casino’s governance bodies will not take any decision relating to such proposals until they have been presented and discussed with the creditors under the aegis of the conciliators,” the group said in a statement.

    On Monday, the company said it had fully drawn its revolving credit line at the end of June, with the ratio of gross secured debt to earnings before interest, taxes, depreciation, and amortization after lease payments expected to exceed a cap that is closely watched by investors.

    The company warned it could be in default under its revolving credit line by the end of August, “which would result in a cross-default in respect of a part of its financial debt at the level of its operating subsidiaries.”

    Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94

    

    


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  • 
		
		
    
			
    The Supreme Court blocked student-loan cancellation. Here’s what happens next for your loans.
    
			
    The Supreme Court blocked student-loan cancellation. Here’s what happens next for your loans.
    
			
    

    Student-loan payments are poised to resume this fall without smaller balances now that the U.S. Supreme Court has blocked President Joe Biden’s loan cancellation plan.
    

    The Biden administration’s loan forgiveness initiative would have canceled up to $10,000 of debt for eligible borrowers, and in some cases up to $20,000.
    

    

    But the Supreme Court’s conservative majority ruled on Friday that the executive branch overstepped its authority by trying to wipe out billions in student loan debt on its own.
    

    “Six States sued, arguing that the HEROES Act does not authorize the loan cancellation plan. We agree,” Chief Judge John Roberts said, writing for the 6-3 majority. 
    

    Now it’s time for more than 40 million borrowers with federal student loans to figure out their next move. They are staring at more than $1.6 trillion in student loan debt. Add on private student loans, and the number climbs to $1.7 trillion.  
    

    Federal student loan payments have been on hold since March 2020. 
    

    On Friday, the Department of Education filed notice saying it would embark on a regulatory process that would seek an alternative pathway to student-debt relief. Activists have focused on a provision in the Higher Education Act, allowing the Department of Education to “compromise, waive, or release,” any right to collect on student loans. 
    

    Approximately 26 million people had either applied for loan forgiveness or were already eligible for the relief as of late last year, the  White House said.
    

    Here’s what to know.
    

    When do student-loan payments restart?
    

    In October, according to the Department of Education. Expect more specifics soon on those payments. “We will notify borrowers well before payments restart,” the department said.
    

    While payments start coming in October, interest starts accumulating on the loans in September. Loan balances have not been accumulating interest since the payment pause started in March 2020, during the pandemic’s early days.
    

    “We will also be in direct touch with borrowers and ramping up our communications with servicers well before repayment resumes to ensure borrowers and their families are receiving accurate and timely information about the return to repayment,” an Education Department spokesperson said.
    

    There’s a range of estimates on how much student-loan borrowers typically pay each month on their loans.
    

    According to Bank of America data, $180 was the median monthly student-loan payment as of January 2020. Federal Reserve research before the pause said the average monthly payment was $393, while the median payment was $222.
    

    Can I lower my payments?
    

    Possibly yes, with a range of income-driven repayment plans through the Education Department. These plans are supposed to make repaying loans more affordable by letting borrowers modify their monthly payments based on their income.
    

    While these plans already exist, the department is reworking them. As a result, more monthly income will be shielded from the calculations on what a person could repay for student loans each month, meaning payments will become more affordable. While the revised plans are not in effect yet, the existing plans are up and running. 
    

    Many people will likely struggle to fit a student-loan bill back into their budget — the question is how far that financial hardship will go. Student-loan payments would be hitting at a time when car loan and credit-card delinquencies are already rising from their pandemic lows, according to the Federal Reserve Bank of New York.
    

    Part of the Biden administration’s Supreme Court arguments pointed to the possible economic consequences of resuming student-loan payments without canceling some of the debt.
    

    Without cancellation, there will be a “surge” of loan defaults and delinquencies once payments resume, Solicitor General Elizabeth Prelogar told the justices during oral arguments earlier this year.
    

    Analysts at Bank of America agree more delinquencies are coming once student loan payments resume.  
    

    What if I miss my first payment?
    

    When deciding which debts have to get paid first, a student-loan bill might fall behind other monthly debts like a mortgage or a credit-card bill.
    

    Anywhere from roughly one-third to three-quarters of borrowers could miss their first student-loan bill when payments resume, according to projections from the credit score company VantageScore.
    

    A missed first payment — in theory — could eventually lead to an average 49- to 82-point reduction in a credit score ranging from 350 to 850, VantageScore researchers said.
    

    However, President Biden on Friday announced a temporary “ramp-up” — a 12-month grace period for borrowers who miss student-loan payments. If borrowers miss payments during this time, they won’t be reported to any of three main credit bureaus — Equifax 
    
        EFX,
    
        +0.37%    ,
    
       TransUnion 
    
        TRU,
    
        +1.06%
    
       and Experian
    
        EXPGF,
    
        +0.80%
    
       — and they won’t go into default.
    

    The ramp-up will run from Oct. 1, 2023 through Sept. 30, 2024. 
    

    “This is not the same as the student-loan pause, but during this period — if you miss payments — this ‘on ramp’ will temporarily remove the threat of default or having your credit harmed,” Biden wrote in a tweet Friday.
    

    Prior to the payment pause and Biden’s ramp-up announcement, loan servicers waited for a borrower to miss three straight payments before they reported it to the credit reporting bureaus, according to Scott Buchanan, executive director of the Student Loan Servicing Alliance.
    

    In the meantime, brace for potentially long call hold times, curtailed hours and loan servicer glitches, borrower advocates say. It stems back to Congressional cuts on the funding for vendor contracts that handle the day-to-day details of student-loan repayments.
    

    


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  • 
		
		
    
			
    Supreme Court knocks down Biden’s student-debt forgiveness plan
    
			
    Supreme Court knocks down Biden’s student-debt forgiveness plan
    
			
    

    

    The Supreme Court knocked down the Biden administration’s plan to cancel up to $20,000 in student debt for a wide swath of borrowers, the court announced Friday. 
    

    The decision means that the White House won’t move forward with the plan for now, though it’s possible officials could try to launch a new version of the debt-forgiveness initiative using a different legal authority. Roughly 26 million borrowers applied for or were automatically eligible for debt relief under the Biden administration’s plan, which canceled up to $10,000 in student debt for borrowers earning less than $125,000 and up to $20,000 in federal loans for borrowers who met that criteria and also used a Pell grant in college. 
    

    

    Americans owe $1.7 trillion of student loans and the White House had estimated that more than 40 million borrowers would benefit from the initiative. But almost as soon as the Biden administration announced the debt-forgiveness plan last year, opponents looked for ways to challenge it legally. Ultimately, two cases made it to the high court. 
    

    In one case, two student-loan borrowers sued over the debt-relief plan in part because the Department of Education didn’t submit it for public comment. That, they said, resulted in an initiative that arbitrarily left out or limited the amount of relief available to some student loan borrowers, like themselves. The suit filed by the borrowers was backed by the Job Creators Network, a conservative advocacy organization co-founded by Bernard Marcus, the co-founder of Home Depot, who also supported former President Donald Trump. 
    

    Six Republican-led states brought the other case on the basis that canceling debt could harm their state coffers. 
    

    The court considered two issues in these cases. The first is whether the plaintiffs had standing, or the ability to bring a lawsuit because they’ve been directly harmed by the policy. The second is whether the Biden administration overstepped in its executive authority when issuing the policy. In order for the justices to reach the second issue, or the merits of the case, they had to find that the plaintiffs had standing to sue. 
    

    Legal experts, including some who believed the Biden administration didn’t have the authority to authorize the debt-relief plan, were skeptical of the notion that the parties bringing the cases had standing to sue. During oral arguments in February, the court’s three liberal justices also questioned whether the parties who challenged debt forgiveness were actually injured by the policy. 
    

    In addition, one of the members of the court’s conservative wing, Justice Amy Coney Barrett, asked pointed questions about the six states’ argument that they had standing to sue in part because the debt-relief plan would injure the state of Missouri. That claim surrounded the Missouri Higher Education Loan Authority, or MOHELA, a state-affiliated organization that services federal student loans. The states had argued if MOHELA lost accounts due to the debt-relief plan, its revenue would decline and that loss would hurt Missouri because of MOHELA’s ties to the state. 
    

    Despite these questions, Barrett agreed with the court’s five other conservative judges and found that the states have standing to sue. The three liberal justices dissented. 
    

    “MOHELA is, by law and function, an instrumentality of Missouri,” Chief Justice John Roberts wrote in the majority opinion. “It was created by the State, is supervised by the State, and serves a public function. The harm to MOHELA in the performance of its public function is necessarily a direct injury to Missouri itself.”
    

    The court’s decision in the states’ suit allowed the justices to get to the merits of the case. The parties challenging the debt-relief plan argued that the Department of Education went beyond the authority Congress delegated it in discharging student debt. Solicitor General Elizabeth Prelogar argued to the justices that in canceling student debt, the Secretary of Education acted “within the heartland” of the authority Congress provided to him under the HEROES Act, a 2003 law that aims to ensure student-loan borrowers aren’t left worse off by a national emergency. 
    

    The court’s conservative majority sided with the states, with a 6-3 decision, striking down the debt-relief plan in its current form. 
    

    “The HEROES Act allows the Secretary to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, but does not allow the Secretary to rewrite that statute to the extent of canceling $430 billion of student loan principal,” Roberts wrote. 
    

    In the months leading up to the court’s decision, White House officials said there was no backup plan for if the Supreme Court knocked down the debt-forgiveness initiative. Advocates and activists have said that student-loan repayments shouldn’t resume until the Biden administration fulfills its promise to cancel some student debt.
    

    The bill President Joe Biden signed in June to raise the nation’s debt limit requires that the Department of Education end the pause on federal student loan, interest payments and collections 60 days after June 30, 2023.  Interest on federal student loans will resume starting September 1 and payments will start to come due in October, according to the Department’s website.   
    

    Advocates and activists have said for years that the Higher Education Act provides the Secretary of Education with the authority to discharge student loans. In ruling that the HEROES Act didn’t authorize the Biden administration’s debt-relief plan, the court left the option open for the Biden administration to create a loan-forgiveness program authorized under the HEA. 
    

    The court’s decision marks the latest development in a more-than-decade-long push to get the government to cancel student debt en masse. The idea, which has its origins in the Occupy Wall Street movement, made it to the presidential campaign stage during the 2020 cycle and was adopted by the White House last year.    
    

    Proponents of student debt cancellation and the Biden administration, have expressed concern that without some kind of relief a large swath of borrowers could slip into delinquency and default with the return of student loan payments later this year.  
    

    

    


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