Tag: E-commerce

Here’s an easy way to make a more concentrated play on the ‘Magnificent Seven’ stocks

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Investors in index funds have been well rewarded by a high concentration in the largest technology companies over the past decade. But there are also continuing warnings about the risk of such heavy concentrations, even in index funds that track the S&P 500. Solutions are offered to limit this risk, but if you expect Big Tech to continue to drive the broad market returns over the coming years, why not make an even more focused bet?

Comparisons of three index-fund approaches highlight how successful concentration in the “Magnificent Seven” has been.

The Magnificent Seven are Apple Inc.
AAPL,
+0.16%,
Microsoft Corp.
MSFT,
+0.72%,
Nvidia Corp.
NVDA,
-2.03%,
Amazon.com Inc.
AMZN,
+2.17%,
Alphabet Inc.
GOOGL,
-0.27%

GOOG,
-0.32%,
Tesla Inc.
TSLA,
+9.37%
and Meta Platforms Inc.
META,
+1.67%.
We have listed them in the order of their concentration within the Invesco S&P 500 ETF Trust
SPY,
which tracks the S&P 500
SPX.
The U.S. benchmark index is weighted by market capitalization, as is the Nasdaq Composite Index
COMP
and the Russell indexes.

SPY is 27.6% concentrated in the Magnificent Seven. One way to play the same group of 500 stocks but eliminate concentration risk is to take an equal-weighted approach to the index, which has worked well for certain long periods. But here, we’re focusing on how well the concentrated strategy has worked.

Let’s take a look at the group’s concentration in three popular index approaches, then look at long-term performance and consider what happened in 2022 as rising interest rates helped crush the tech sector.

Here are the portfolio weightings for the Magnificent Seven in SPY, along with those of the Invesco QQQ Trust
QQQ,
which tracks the Nasdaq-100 Index
NDX
and the Invesco S&P 500 Top 50 ETF
XLG
:

Company	Ticker	% of SPY	% of QQQ	% of XLG
Apple Inc.	AAPL, +0.16%	7.05%	10.85%	12.46%
Microsoft Cor.	MSFT, +0.72%	6.65%	9.53%	11.76%
Amazon.com Inc.	AMZN, +2.17%	3.30%	5.50%	5.84%
Nvidia Corp.	NVDA, -2.03%	3.02%	4.44%	5.33%
Alphabet Inc. Class A	GOOGL, -0.27%	2.17%	3.12%	3.83%
Alphabet Inc. Class C	GOOG, -0.32%	1.88%	3.11%	3.32%
Tesla Inc.	TSLA, +9.37%	1.79%	3.10%	3.17%
Meta Platforms Inc. Class A	META, +1.67%	1.77%	3.60%	3.12%
Totals		27.63%	43.25%	48.83%
Sources: Invesco Ltd., State Street Corp.

The same group of seven companies (eight stocks with two common share classes for Alphabet) is at the top of each exchange-traded fund’s portfolio, although the top seven for QQQ aren’t in the same order as those for SPY and XLG. QQQ’s weighting was changed recently as the underlying Nasdaq-100 underwent a “special rebalancing” last month.

Here’s a five-year chart comparing the performance of the three approaches. All returns in this article include reinvested dividends.

FactSet

QQQ has been the clear winner for five years, but it is also worth noting how well XLG has performed when compared with SPY. This “top 50” approach to the S&P 500 incorporates many stocks that aren’t listed on the Nasdaq and therefore cannot be included in QQQ, which itself is made up of the largest 100 nonfinancial companies in the full Nasdaq Composite Index
COMP,
+0.45%.

Examples of stocks held by XLG that aren’t held by QQQ include such non-tech stalwarts as Berkshire Hathaway Inc.
BRK.B,
+0.77%,
Johnson & Johnson
JNJ,
+0.79%,
Procter & Gamble Co.
PG,
+0.94%,
Home Depot Inc.
HD,
-0.12%
and Nike Inc.
NKE,
-0.42%.

Now let’s go deeper into long-term performance. First, here are the total returns for various time periods:

ETF	3 Years	5 Years	10 Years	15 Years	20 Years
SPDR S&P 500 ETF Trust SPY	40%	69%	223%	370%	531%
Invesco QQQ Trust QQQ	41%	113%	430%	882%	1,158%
Invesco S&P 500 Top 50 ETF XLG	41%	85%	262%	404%	N/A
Source: FactSet

Click on the tickers for more about each ETF, company or index.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

There is no 20-year return for XLG because this ETF was established in 2005.

For five years and longer, QQQ has been the runaway leader, but for 5, 10 and 15 years, XLG has also beaten SPY handily, with broader industry exposure.

Something else to consider is that during 2022, when SPY was down 18.2%, XLG fell 24.3% and QQQ dropped 32.6%.

For disciplined long-term investors, the tech pain of 2022 may not seem to have been a small price to pay for outperformance. And it may have been easier to take the pounding when holding SPY or even XLG that year.

Here’s a look at the average annual returns for the three ETFs:

ETF	3 years	5 years	10 years	15 years	20 years
SPDR S&P 500 ETF Trust SPY	11.8%	11.0%	12.4%	10.9%	9.6%
Invesco QQQ Trust QQQ	12.0%	16.3%	18.2%	16.4%	13.5%
Invesco S&P 500 Top 50 ETF XLG	12.2%	13.1%	13.7%	11.4%	N/A
Source: FactSet

So the question remains — do you believe that the largest technology companies will continue to lead the stock market for the next decade at least? If so, a more concentrated index approach may be for you, provided you can withstand the urge to sell into a declining market, such as the one we experienced last year.

Here is something else to keep in mind. In a note to clients on Monday, Doug Peta, the chief U.S. investment strategist at BCA, made a fascinating point: “The only novel development is that all the heaviest hitters now hail from Tech and Tech-adjacent sectors and are therefore more prone to move together than they were at the end of 2004, when the seven largest stocks came from six different sectors. “

Nothing lasts forever. Peta continued by suggesting that investors who are tired of big tech taking all the glory “need only wait.”

“[I]f history is any guide, their time at the top of the capitalization scale will be short,” he wrote.

Don’t miss: These four Dow stocks take top prizes for dividend growth

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September 11, 2023

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

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

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

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

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

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

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

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

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

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

Moody’s Analytics

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

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

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

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

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

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

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

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August 31, 2023
Shopify Is Offering Amazon’s ‘Buy With Prime.’ 3 Benefits From the Deal.

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Shopify

unveiled a deal that permits merchants on its platform to offer shoppers the choice to buy items using

Amazon

Prime perks. Analysts anticipate a boost in merchant usage, among other benefits for the tech firms involved.

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August 31, 2023
XPeng Stock Surges on Plan to Buy DiDi’s Smart Vehicle Unit
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This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

https://www.barrons.com/articles/xpeng-hong-kong-stock-price-didi-evs-ca20a71d
Updated Aug. 28, 2023 9:00 am ET / Original Aug. 28, 2023 6:36 am ET

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A lot is going on inside

XPeng

these days. Investors have appeared to like it all.
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August 28, 2023
‘Magnificent Seven’ stocks are losing some of their shine, but their bonds are doing fine

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

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

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

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

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

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

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

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

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

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

Outstanding Magnificent Seven debt by maturity bucket.

Source: BondCliQ Media Services

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

Magnificent Seven debt trading volumes (last 10 days).

Source: BondCliQ Media Services

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

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

Source: BondCliQ Media Services

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

Historical spread performance of Magnificent Seven debt.

Source: BondCliQ Media Services

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

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

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August 18, 2023
LI distributor acquires e-commerce company | Long Island Business News

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Farmingdale-based MSG Distributors has completed its acquisition of e-commerce firm Boxed.com.

Terms of the deal were not disclosed.

Founded in 2003, MSG is a regional distributor of consumables and household items, specializing in natural foods and sports nutrition products. The company services business-to-business through its distribution and fulfillment centers across New York, Florida, Texas and California.

The acquisition of Boxed.com gives MSG an additional outlet to market its products and brands to bulk wholesale customers.

“This acquisition strengthens our inorganic growth strategy and diversifies our distribution models nationwide,” MSG President Mark Gadayev said in a company statement. “The loyalty and trust that customers and brands have in Boxed is priceless, and we are committed to continue this model of offering bulk-sized products to customers at wholesale prices.”

MSG’s acquisition will provide Boxed.com customers with faster and next-day delivery and an expanded catalog of brands and products, according to the statement.

“In synergy with this acquisition, MSG will further enhance its capacity for processing and distribution to Boxed customers nationwide,” Gadayev said in the statement. “In conjunction with our growing operations and patented innovations for distribution and warehouse management, the future of Boxed.com is bright, and the team at MSG is committed to ensuring that Boxed.com remains the go-to destination for customers seeking quality brands, and exceptional customer service.”

Yuabov Law Group PLLC served as legal advisor to MSG, and Potter Anderson & Corroon LLP served as legal advisor to Boxed, with Hilco Streambank overseeing the sale, according to the statement.

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August 18, 2023
JD.com Earnings Beat. Stock Can’t Escape China Gloom.

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JD.com Posts Earnings Beat. But the Stock Can’t Shake the China Gloom.

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August 16, 2023
Alibaba Smashes Estimates. Here’s The Bad News.

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Alibaba Stock Jumps as Earnings Smash Estimates. But There’s a Case for Caution.

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August 10, 2023
Alibaba’s stock advances after earnings beat

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Shares of Alibaba Group Holding Ltd. were rallying more than 2% in Thursday’s premarket trading after the Chinese e-commerce giant topped expectations with its latest revenue and earnings.

The company notched fiscal first-quarter net income of RMB34.3 billion ($4.6 billion), or RMB13.30 per American depositary share, compared with net income of RMB22.7 billion, or RMB8.51 per ADS, in the year-before period.

On an adjusted basis, Alibaba
BABA,
+0.67%
earned RMB17.37 per ADS, while the FactSet consensus was RMB14.59 per share. Revenue rose to RMB234.2 billion from RMB205.6 billion, where analysts had been modeling RMB224.7 billion.

Chief Executive Daniel Zhang said the company’s reorganization was “beginning to unleash new energy across our businesses.” Alibaba recently realigned into six units with their own CEOs and boards of directors, and the ability to pursue independent fundraising.

“Through this self-driven transformation, we aim to catalyze innovation, promote vitality in our organization and enable businesses to focus on long-term growth,” Zhang continued. “We look forward to positive impacts on our business, including strengthening competitiveness, sustainable growth and shareholder value creation.”

See also (from June): Alibaba’s Zhang to step down as CEO, chairman amid business shakeup

Overall revenue for the company’s Taobao and Tmall Group, which represents the company’s core e-commerce marketplaces in China, rose to RMB115.0 billion from RMB102.5 billion.

Within that group, customer management revenue was up 10% to RMB79.7 billion, “primarily due to the increase in merchant’s willingness to invest in advertising” and an increase in the volume of online physical goods generated on the platforms.

The company’s cloud group saw revenue increase to RMB25.1 billion from RMB24.1 billion. Alibaba previously announced plans to spin out that business.

Alibaba bought back $3.1 billion worth of ADRs during the June quarter, “which is supported by our continuous generation of strong free cash flow,” Chief Financial Officer Toby Xu said in the release. Free cash flow was RMB39.1 billion in the quarter, up 76% from a year earlier.

U.S.-listed shares of Alibaba are up about 8% so far this year.

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August 10, 2023
Earnings have beaten Wall Street estimates by more than usual in 2nd quarter, but 3rd quarter isn’t looking great

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Online retail giant Amazon.com Inc.’s
AMZN,
+8.27%
second-quarter results and third-quarter forecast sales last week were a bet that more consumers would start buying more things, but Wall Street’s expectations for the third quarter overall have only grown dimmer.

With most of the 500 companies that make up the S&P 500 Index
SPX
already through the second-quarter earnings reporting season, slightly more than normal have reported per-share profit that beat Wall Street’s estimates, according to FactSet.

For the third quarter though, analysts now expect a mere 0.2% increase in per-share profit growth overall, according to a FactSet report on Friday, or slightly lower than the 0.4% growth that was expected for the third quarter on June 30,

And with some two months still left in the third quarter, and with that forecast likely to come down as the period progresses, Wall Street’s profit expectations are getting ever closer to turning negative.

Wall Street analysts overall still expect a bigger rebound for the fourth quarter, the FactSet report said. And they expect 2023 overall to eke out a per-share profit gain of 0.8%.

Worries of a U.S. recession emerging at some point during the back half of this year have started to fade at least a little after many economists fixated on the possibility earlier this year when the Federal Reserve was raising interest rates to combat a jump in inflation in 2022 . Some analysts now say savings fatigue could prompt more shoppers to splurge this year, after relentlessly tightening their budgets due to rising prices.

Federal Reserve Chair Jerome Powell last month said policymakers at the central bank had also shucked off their worries of a downturn.

See: Fed no longer foresees a U.S. recession — and other things we learned from Powell’s press conference

“The staff now has a noticeable slowdown in growth starting later this year in the forecast. But given the resilience of the economy recently, they are no longer forecasting a recession,” he said last month.

Not everyone is convinced that a downturn has vanished from the horizon though. Sheraz Mian, director of research at Zacks, told MarketWatch last month that more bearish analysts had kept pushing out their recession forecasts, after being defied by the actual, and more positive, economic data. Some economists continue to push out those forecasts.

“We still expect a recession, but now we are looking for it to begin in Q1 2024 rather than Q3 2023,” Thomas Simons, U.S. economist at Jefferies, said in a research note on Friday.

He said that interest rate hikes from the Federal Reserve were only just starting to affect customer behavior. Households were trying to rebuild their savings, after spending through whatever they had built up during the pandemic. Student-loan payments were returning, he said, and corporate margins were thinning.

“Corporate profit margins are narrowing, and businesses will look to cut costs through layoffs,” he said.

This week in earnings

Among S&P 500 index companies, 34 report results during the week ahead, including one from the Dow Jones Industrial Average, according to FactSet.

Results from Walt Disney Co.
DIS,
+0.95%
will likely gobble up more media attention, but earnings from Paramount Global Inc
PARA,
+3.58%
— which oversees CBS, Showtime, Comedy Central and other channels — will offer more detail about how studios are positioning themselves with Hollywood actors on strike. Lions Gate Entertainment Corp.
LGF.A,
-2.44%
also reports.

Results from Tyson Foods Inc.
TSN,
+0.34%
will give investors and customers a brief look at the state of the grocery aisle where higher food prices over the past year have strained spending on other things. Beyond Meat Inc.
BYND,
-1.38%,
which also reports during the week, will be hoping new product launches of plant-based meat-like alternatives can overtake analyst skepticism, amid competition with fake meat and real meat alike.

Elsewhere, ride-hailing platform Lyft Inc.
LYFT,
-5.73%,
online dating service Bumble Inc.
BMBL,
-3.86%
and video-game maker Take-Two Interactive Software Inc.
TTWO,
-2.45%
also report during the week. And Canadian pot producer Canopy Growth Corp.
CGC,
-3.47%
will get another chance to pick up the pieces, after over-expanding and now trying to hold onto its cash.

The call to put on your calendar

Disney drama: One way or another, people on both coasts are mad at Disney
DIS,
+0.95%
Chief Executive Bob Iger right now, as his company prepares to report quarterly results on Wednesday. Shares of Disney are down slightly this year. The company is currently fighting with Florida Gov. Ron DeSantis, who is trying to stamp out Disney World’s self-governing privileges after the company criticized the state’s restrictions on classroom discussion of gender identity. When Iger accused striking actors and writers in Hollywood of not being “realistic,” the actors and writers shot back, noting his hefty executive compensation plan.

While the friction in Florida hasn’t hurt Disney’s parks attendance, the Hollywood shutdown has threatened Disney’s massive film and TV show operations, as Disney+ subscribers fall and investors more aggressively seek profits from studios’ streaming operations. Elsewhere, Rich Greenfield, an analyst at LightShed Partners, said “Pixar and Disney Animation have not had a breakout hit that impacted children’s play patterns and both Marvel and Lucasfilm feel increasingly tired from overuse.”

The sense is growing that more time is needed for Iger to fix Disney’s problems. On Wednesday, analysts may get a deeper sense of how much more, with the chance of more drama between Disney and its home state and the writers and actors the company depends on.

The number to watch

UPS and the Teamsters deal: United Parcel Service Inc. reports quarterly results on Tuesday, as rank-and-file Teamsters vote on a tentative labor agreement struck with the package deliverer in an effort to avert a strike. The deal, if approved, would raise worker pay and give the economy and businesses a breather, after threats of strikes or work stoppages at the nation’s ports and railways were averted over the past year.

Local Teamsters unions have voted overwhelmingly to at least endorse the agreement, between UPS
UPS,
-0.31%
and the Teamsters union, which represents 340,000 UPS workers, but not everyone was happy with the deal. Some part-timers felt the Teamsters could have used their leverage to wrest more from UPS, following a profit windfall at the company. And investors have held out for more detail from UPS executives themselves on what the deal might mean for the bottom line and for shipping prices.

Analysts will be dissecting the impact of the agreement as shipping demand lags, trucking company Yellow Corp.
YELL,
-0.83%
reportedly shuts down and FedEx Corp.
FDX,
-0.20%
tries to slash costs.

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August 6, 2023
The ‘stabilization’ of AWS may have been the most significant number for Amazon’s earnings

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For weeks, Wall Street had been closely eyeing the performance of Amazon Web Services: Would it rise more than 10% in year-over-year sales?

It did, and then some, on Thursday when Amazon.com Inc.
AMZN,
+0.55%
announced its quarterly results, boosting company shares more than 9% in after-hours trading.

Read more: Amazon beats expectations on domestic e-commerce sales, AWS; stock jumps

Sales for Amazon’s market-leading AWS jumped 12%, to $22.1 billion, offering proof of its “stabilization” after several rough quarters, Jefferies analyst Brent Thill told CNBC late Thursday. More important, it signals healthier days — for now — in the cloud market amid a stampede for generative-AI services and concerns about Amazon’s place in it.

“I am bullish on AWS’s growth,” Amazon Chief Executive Andy Jassy said in a conference call with analysts late Thursday, in which he predicted AWS would become a $100 billion business within several years.

Last week, Microsoft Corp.
MSFT,
-0.26%
said it expected revenue growth from Azure and other cloud services to continue cooling in the current quarter. Meanwhile, Alphabet Inc.’s
GOOGL,
+0.05%

GOOG,
+0.10%
Google Cloud revenue grew 28%, topping Wall Street estimates.

Maribel Lopez, founder and principal analyst at Lopez Research, called Amazon’s cloud revenue “surprising” and resilient despite cost optimization among enterprise buyers. “Upcoming AI workloads should keep [Amazon] in a similar top-line growth trajectory, but the challenge will be keeping the cost to serve down,” she said in an email. “The new chipsets will assist with cost containment. Overall, the AI business will provide a bright light in the cloud market.”

Although Thill and other analysts openly wonder how AWS will adapt in the age of AI, the company’s second-quarter sales figures heartened Amazon’s top boss, who knows a thing or two about the cloud-computing industry.

“Our AWS growth stabilized as customers started shifting from cost optimization to new workload deployment, and AWS has continued to add to its meaningful leadership position in the cloud with a slew of generative AI releases that make it much easier and more cost-effective for companies to train and run models,” the embattled Jassy, who previously ran AWS, said in a statement Thursday, announcing the results.

Underscoring the importance of AWS, it was mentioned 49 times in Amazon’s second-quarter earnings release, mostly cited in customer use cases.

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August 3, 2023
Amazon and Apple to headline Q2 earnings this week

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

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

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

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

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

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

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

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

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

This week in earnings

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

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

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

The call to put on your calendar

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

The number to watch

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

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

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July 30, 2023
China-Founded Rivals Ramp Up War for American Shoppers

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China-Founded Rivals Ramp Up War for American Shoppers

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July 29, 2023
Chinese e-retailer Temu files lawsuit in US against rival Shein, alleging antitrust violations

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HONG KONG — Chinese e-commerce retailer Temu has filed a lawsuit in Massachusetts accusing its rival Shein of violating U.S. antitrust law by preventing garment makers from working with it.

Temu, which is owned by popular Chinese e-commerce site Pinduoduo Inc., is alleging that Shein has compelled clothing manufacturers to submit to unfair supply chain arrangements preventing them from working with Temu after it entered the U.S. market in 2022.

Shein (SHE-in) and Temu (TEE-mu) are fast-rising online shopping platforms. Shein has grabbed the largest share of the fast fashion market in the U.S., at over 50%, according to Temu’s complaint. Temu is the most downloaded app in the U.S., according to the website data.ai, formerly App Annie, which tracks app rankings. It offers everything from apparel to household goods at similarly competitive prices.

“Shein has engaged in a campaign of threats, intimidation, false assertions of infringement, and attempts to impose baseless punitive fines and has forced exclusive dealing arrangements on clothing manufacturers,” according to the complaint Temu filed on July 14 with the U.S. District Court for the District of Massachusetts.

In an emailed statement, Temu said that Shein also punished merchants that worked with Temu by imposing “extrajudicial fines” and forced retailers to assign their intellectual property rights to Shein, which could then seek to enforce these rights against those who also operate on Temu.

“For a long time, we have exercised significant restraint and refrained from pursuing legal actions. However, Shein’s escalating attacks leave us no choice but to take legal measures to defend our rights and the rights of those merchants doing business on Temu, as well as the consumers’ rights to a wide variety of affordable products,” the retailer said in the statement.

Shein did not immediately respond to AP with a comment, though it previously said that the case was “without merit” and that the firm would defend itself against the allegations.

Earlier, Shein sued Temu in Illinois, asserting that it engaged in deceptive business practices and created impostor pages that violated copyrights and trademarks.

China’s regulators have cracked down on the widespread practice by internet firms there of forcing retailers, brands and suppliers to work exclusively with them.

Both Shein and Temu have gained attention as imports to the U.S. via their platforms have surged.

Just days ago, a filing in California by three U.S. fashion designers accused Shein of copyright infringement so aggressive that it amounts to racketeering. The filing alleges the company has violated the Racketeer Influenced and Corrupt Organizations Act, better known as RICO, a law originally crafted to prosecute organized crime.

A Congressional report published last month questioned both companies’ compliance with efforts to prevent goods made by forced labor from being sold on their platforms.

An anonymous coalition of brands and human rights advocates called “Shut Down Shein” has been lobbying lawmakers seeking to increase scrutiny on the fast fashion site.

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July 19, 2023
Court Rules Against Uber. It’s a Victory for Drivers.
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Updated July 18, 2023 12:39 pm ET / Original July 18, 2023 5:22 am ET

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July 18, 2023
The Next Challengers Joining Nvidia in the AI Chip Revolution

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What to Read Next

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July 10, 2023
Why Amazon clicks with shoppers — on Prime Day or any day

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Some time ago, I was standing in the vitamin aisle of my local pharmacy, struggling to locate a specific bottle of pills that my doctor had recommended. It was seemingly nowhere to be found. And based on my experience at this particular store, I knew that even if I was able to track down an employee for help, I wasn’t likely to receive much in the way of assistance.

Then, a solution to my dilemma suddenly dawned on me: Amazon
AMZN,
-2.17%
! I looked up said bottle, found it within almost no time and ordered it. By the next day, it had arrived. And it probably cost me a couple of dollars less than what I would have spent at the pharmacy — if I had ever located it there.

Of course, you don’t need to be in search of a hard-to-find item to appreciate the wonders of the online retail giant that Jeff Bezos founded from his garage in 1994. Millions of us are likely to be on the site this week for Amazon’s annual Prime Day event running July 11 and 12 this year, which is a sales extravaganza that one bargain-mad colleague likened to “basically my Super Bowl.” To take advantage of the deals, you’ll naturally have to be an Amazon Prime member, which carries an annual fee of $139. But it’s not like that’s a small number of folks: Amazon says there are now more than 200 million such members worldwide.

Read more: 5 hacks to get the best deals on Amazon Prime Day — and other summer sales

And: What not to buy on Amazon Prime Day — and why discounts may be even bigger this year

I’ve been one of those Prime people for years — if nothing else, for the free two-day shipping it offers. But even before I signed on for Prime, I ordered plenty from Amazon. My purchases over the past decade have ranged from a super-hot horseradish to a pair of armrest slipcovers to a folding exercise bike. Actually, I ordered the three items I just mentioned during the first couple of months of the pandemic, when Amazon became a kind of lifeline given the health risks of shopping in person. But if I go back in time, I find countless purchases for books (Amazon’s original specialty), clothes and margarita mix (there’s a brand I like that I often can’t find at the supermarket).

“At this point, Amazon isn’t just a company. It’s an institution woven into the fabric of our lives.”

And yet, I know there are plenty of people, including some of my friends and relatives, who boycott Amazon. They point to the oft-cited criticisms of the company, such as the treatment of its workers (in 2019, the company’s employees were injured on the job far more than the national average in the warehousing and storage sector) to the broader notion that online retailers hurt the brick-and-mortar stores that have been a traditional bedrock of our communities.

Criticizing Amazon has become almost a sport unto itself. There are books devoted to the subject, such as Alex MacGillis’ “Fulfillment: Winning and Losing in One-Click America” (ironically, I purchased my copy of it on Amazon). Heck, there’s even a whole Wikipedia page detailing the criticisms.

I get the issues that many people have. And it’s not like Amazon doesn’t recognize them, either: The company has acknowledged the injury situation, for example, but has also pledged to cut incidents in half by 2025, according to The Wall Street Journal.

When I reached out to Amazon for this column and cited the various criticisms made of the company, Amazon responded with a statement that, among other things, said it works “hard to be a good neighbor…with communities across the country” and that it creates “good jobs with competitive pay and benefits, including health care from the first day, up to 20 weeks paid parental leave, and full college tuition.” Amazon also cited some of its philanthropic initiatives, including its Amazon Housing Equity Fund, a $2 billion program to build or preserve affordable homes.

All of this is what you expect from a giant corporation trying to defend itself. I’m not going to get into the weeds about the particular criticisms and whether Amazon makes a successful case for itself or not. But I will say that people vote with their wallets. And they’re reelecting Amazon on a daily, if not hourly, basis with all their purchases.

“People vote with their wallets. And they’re reelecting Amazon on a daily, if not hourly, basis with all their purchases.”

Ultimately, Amazon is about convenience combined with competitive pricing — a formula that’s hard to beat. It launched the era of online retailing, and it has mastered the art of it to this day. When I hear people bemoan the fates of all those brick-and-mortar stores, I admit to thinking to myself, “OK, but do you still want your mail delivered by the Pony Express?” Or, “Do you still want to do your shopping at ye olde general store?”

The point is that we evolve as a society and new forms of commerce and communication take over. Yes, there are prices to be paid for that. I admit to missing some of the brick-and-mortar stores and chains that were part of my youth — I’m 59 years old, and remember spending practically entire days in neighborhood bookshops long gone. For that matter, I don’t condone bad behavior by large multinational companies; though, like I said, I’ll let others debate some of the specifics regarding Amazon.

But let’s face it: At this point, Amazon isn’t just a company. It’s an institution woven into the fabric of our lives — and for good reason, I’d argue. I don’t care about shopping on Prime Day, though I know there are a few deals to be had. Mostly, I just increasingly rely on Amazon to make my life easier by selling me any number of things I need on a daily basis, including household staples (yes, you can buy toilet paper on Amazon — the company even sells its own brand). And that’s to say nothing of the services the company offers, including its Prime Video streaming (you can thank Amazon for the truly marvelous — and Emmy-winning — “The Marvelous Mrs. Maisel” series, for example).

Could someone come along and invent a better version of Amazon, one that might not be as widely criticized? Perhaps, but that’s probably years, if not centuries, down the road. In the meanwhile, we have the Amazon that we have. Now, let me see if I’m out of toilet paper…

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July 10, 2023
‘This is a game changer’: Ahead of Amazon Prime Day, a new law makes it harder for online sellers to hawk fake or stolen products

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Shopping online has just gotten safer.

The INFORM Consumers Act, which went into effect Tuesday, aims to limit the sales of stolen and counterfeit products on e-commerce platforms.

The measure, which requires e-commerce sites to verify and disclose information about their high-volume third-party sellers, was passed into law following a lobbying campaign to address counterfeit products after being left out of the bipartisan Chips and Science Act last year.

All online marketplaces, including eBay, Etsy, Poshmark and Amazon’s third-party sales platform, will now be required to collect information from high-volume sellers, defined as those selling 200 items or more totaling at least $5,000 over the previous 12 months. These third-party sellers must submit information such as a government-issued ID, a bank-account number, a working email address and phone number, and a taxpayer identification number.

Customers will also be able to find the verified contact information for bigger third-party sellers — those with sales of over $20,000 a year — and to get in touch with them outside of the e-commerce platform. In the past, consumers often had to engage within the platform operator in order to communicate with a seller.

Those bigger sellers will also have their full names and physical addresses listed on their product pages in addition to their contact information, according to the Federal Trade Commission’s business guide.

“This is a game changer,” said Teresa Murray, director of the consumer watchdog office at U.S. PIRG, a nonprofit that lobbies on behalf of the public interest. “For bad guys, stealing items has generally been the difficult part. Selling things online once you’ve stolen them is easy. We hope that with the INFORM Act, it’s not nearly as easy in the future.”

“‘The only people opposing this may be thieves.’”

— Teresa Murray, U.S. PIRG

The act goes into effect just weeks before Amazon Prime Day, when the world’s biggest e-commerce site rolls out discounts for Prime members. This year, Prime Day will be held over two days, on July 11 and 12.

Picks: Amazon Prime Day is July 11-12. You’ll need the $139-a-year Prime membership to access the deals, but is it actually worth it?

Also see: Amazon sued by FTC, which alleges people were ‘tricked and trapped’ into Prime subscriptions

Several e-commerce platforms, including Amazon and eBay, supported the INFORM Consumers Act. TechNet, a national network of technology CEOs and senior executives representing what it calls the innovation economy, wrote to leaders in Congress last December, saying the law would improve consumer safety and increase transparency.

In a statement provided to MarketWatch, eBay
EBAY,
+2.32%
said it “fully supports transparency and is committed to a safe selling and buying experience for our customers. We were proud to support” the law “to protect consumers from bad actors who seek to misuse online marketplaces, while also ensuring important protections for sellers. We are fully prepared to comply with the new law.”

Etsy
ETSY,
+3.45%
said it “has long been supportive of the INFORM Act passing into law, as a balanced and thoughtful approach to make the ecommerce landscape safer for both consumers and sellers.” In a statement provided to MarketWatch, the company said, “We are taking appropriate steps to comply with the INFORM Act requirements.”

Amazon
AMZN,
+1.45%
and Poshmark, owned by South Korea–based Naver Corp.
035420,
-0.59%,
did not immediately respond to MarketWatch requests for comment.

Some analysts, however, said the new law lacks stronger protections that were included the SHOP SAFE Act, an earlier bill that did not get passed by Congress. The INFORM Act, they noted, does not hold online platforms liable when a third party sells harmful counterfeit products or when the platform has not followed certain best practices.

“Notably, the legislation is supported by Amazon and other marketplaces as it’s seen as a watered-down bill that would head off more stringent legislation like the SHOP SAFE Act,” Ben Koltun, director of research at Beacon Policy Advisors, wrote in a note last year.

So how can consumers spot counterfeit or stolen items? A guide from PIRG has tips, such as keeping an eye out for products with suspiciously low prices or featuring misspellings or mislabeling or low-quality, photoshopped photos in their listings.

PIRG also cautions consumers about purchasing medications online. Always check the legitimacy of online pharmacies, it says.

“Many online marketplaces haven’t been doing enough to protect consumers from sellers who appear to be peddling stolen or counterfeit goods,” Murray said. “The only people opposing this [new law] may be thieves.”

Victor Reklaitis contributed.

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June 27, 2023
How hard has it been to cancel Amazon Prime? Start by navigating 4 pages, 6 clicks and 15 options.

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Signing up for Amazon Prime is as easy as 1-2-3. Canceling it, not so much.

For years, up until this past April, the online retail giant made customers trying to quit its signature service navigate an odyssey through a labyrinthine system called the “Iliad Flow” named after the epically long and complex masterwork by the Greek poet Homer.

According to a civil lawsuit filed Wednesday by the Federal Trade Commission, Amazon customers were required to make their way through a four-page, six-click, 15-option process to stop paying for the service. One wrong click, and they were sent back to the beginning, the lawsuit said.

The FTC noted that Amazon
AMZN,
+3.69%
maintained the multistep process even though new subscribers in the U.S. to $14.99-a-month or $139-a-year Prime accounts needed only one or two clicks. And even though subscribers could sign up on a multitude of devices, they could only cancel using their desktop computer or mobile phone or by calling customer service.

The FTC suit also accused Amazon of manipulating millions of customers into inadvertently signing up for Prime and then hitting them with automatic renewals without warning.

Amazon has dismissed the charges as misguided, adding that the lawsuit is legally and factually inaccurate. It has vowed to fight the FTC.

The FTC said in court papers that Amazon created the complex “Iliad Flow” exit strategy in 2016 and kept it in place until April of this year, when it caught wind that the agency was preparing to file a lawsuit about the practice.

During that time frame, Amazon quadrupled the number of global Prime subscribers from around 50 million to more than 200 million. The program brings around $25 billion into Amazon’s coffers every year.

The suit described an allegedly maddening process for a customer to actually cancel a subscription.

To start, a subscriber first had to find the “Iliad Flow,” which was not made easy, the FTC suit said. A customer had to select the “accounts and list” dropdown menu, navigate to the third column and then select the eleventh option there: Prime Membership.

That would bring the customer to the Prime Central page. There, one would have to click the “manage membership” button to trigger options that finally included an “end membership” button. But that was only the beginning.

Only after clicking “end membership” would the customer enter the “Iliad Flow” process. From there, a customer would need to navigate three more pages, each with a multitude of options, to finally complete canceling the subscription.

This is one of several web pages a Prime customer would need to navigate in order to cancel the service, the FTC said.

Federal Trade Commission

On the first page, customers were forced to “take a look back at [their] journey with Prime” — a kind of greatest-hits reel of Prime services used over the years. The page was also loaded with marketing material for a multitude of Prime services, with links reading: “Start shopping today’s deals!” and “You can start watching videos by clicking here!” or “Start listening now!”

One wrong click would knock the subscriber out of the “Iliad Flow.”

If the subscriber managed to navigate to the bottom of the page, he or she would finally find a “continue to cancel” button. That would take them to Page 2.

According to the FTC, that page would present the customer with a number of discount options, such as switching from monthly to annual payments, or taking advantage of student discounts or discounts for people on government assistance. The page also included warning icons and links stating: “Items tied to your Prime membership will be affected if you cancel your membership,” and “By canceling, you will no longer be eligible for your unclaimed Prime exclusive offers.”

Clicking on any of those would take the subscriber out of the “Iliad Flow.”

At the bottom of that page was another “continue to cancel” button, which would take the user to Page 3.

If you managed to get to this page, you were only six options away from actually being able to quit Amazon’s Prime service, the FTC suit said.

Federal Trade Commission

On this final page, a customer was presented with five options, only the last of which — “end now” — would actually allow the subscription to be canceled. The other options included pausing the subscription or canceling its auto-renewal function. Pressing any of the four other choices would bring the user out of the “Iliad Flow.” They would have to start over if they wanted to continue.

Only after successfully navigating this maze of web pages would the customer be allowed to actually cancel the service.

The suit said this process caused cancellations to drop significantly.

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June 22, 2023
Alibaba, Dice, Arcellx, Avis, PayPal, and More Stock Market Movers
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https://www.barrons.com/articles/stock-market-movers-fb3791aa
Updated June 20, 2023 9:56 am ET / Original June 20, 2023 4:49 am ET

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June 20, 2023