Jen-Hsun Huang, president and chief executive officer of Nvidia Corp., speaks during the company’s event at Mobile World Congress Americas in Los Angeles, California, U.S., on Monday, Oct. 21, 2019.
Patrick T. Fallon | Bloomberg | Getty Images
Forget about the debt ceiling. Tech investors are in buy mode.
The Nasdaq Composite closed out its fifth-straight weekly gain on Friday, jumping 2.5% in the past five days, and is now up 24% this year, far outpacing the other major U.S. indexes. The S&P 500 is up 9.5% for the year and the Dow Jones Industrial Average is down slightly.
Excitement surrounding chipmaker Nvidia’s blowout earnings report and its leadership position in artificial intelligence technology drove this week’s rally, but investors also snapped up shares of Microsoft, Meta and Alphabet, each of which have their own AI story to tell.
And with optimism brewing that lawmakers are close to a deal to raise the debt ceiling, and that the Federal Reserve may be slowing its pace of interest rate hikes, this year’s stock market is starting to look less like 2022 and more like the tech-happy decade that preceded it.
“Being concentrated in these mega-cap tech stocks has been where to be in this market,” said Victoria Greene, chief investment officer of G Squared Private Wealth, in an interview on CNBC’s “Worldwide Exchange” Friday morning. “You cannot deny the potential in AI, you cannot deny the earnings prowess that these companies have.”
To start the year, the main theme in tech was layoffs and cost cuts. Many of the biggest companies in the industry, including Meta, Alphabet, Amazon and Microsoft, were eliminating thousands of jobs following a dismal 2022 for revenue growth and stock prices. In earnings reports, they emphasized efficiency and their ability to “do more with less,” a theme that resonates with the Wall Street crowd.
But investors have shifted their focus to AI now that companies are showcasing real-world applications of the long-hyped technology. OpenAI has exploded after releasing the chatbot ChatGPT last year, and its biggest investor, Microsoft, is embedding the core technology in as many products as it can.
The chipmaker, known best for its graphics processing units (GPUs) that power advanced video games, is riding the AI wave. The stock soared 25% this week to a record and lifted the company’s market cap to nearly $1 trillion after first-quarter earnings topped estimates.
Nvidia shares are now up 167% this year, topping all companies in the S&P 500. The next three top gainers in the index are also tech companies: Meta, Advanced Micro Devices and Salesforce.
The story for Nvidia is based on what’s coming, as its revenue in the latest quarter fell 13% from a year earlier because of a 38% drop in the gaming division. But the company’s sales forecast for the current quarter was roughly 50% higher than Wall Street estimates, and CEO Jensen Huang said Nvidia is seeing “surging demand” for its data center products.
Nvidia said cloud vendors and internet companies are buying up GPU chips and using the processors to train and deploy generative AI applications like ChatGPT.
“At this point in the cycle, I think it’s really important to not fight consensus,” said Brent Bracelin, an analyst at Piper Sandler who covers cloud and software companies, in a Friday interview on CNBC’s “Squawk on the Street.”
“The consensus is, on AI, the big get bigger,” Bracelin said. “And I think that’s going to continue to be the best way to play the AI trends.”
Microsoft, which Bracelin recommends buying, rose 4.6% this week and is now up 39% for the year. Meta gained 6.7% for the week and has more than doubled in 2023 after losing almost two-thirds of its value last year. Alphabet rose 1.5% this week, bringing its increase for the year to 41%.
One of the biggest drags on tech stocks last year was the central bank’s consistent interest rate hikes. The increases have continued into 2023, with the fed funds target range climbing to 5%-5.25% in early May. But at the last Fed meeting, some members indicated that they expected a slowdown in economic growth to remove the need for further tightening, according to minutes released on Wednesday.
Less aggressive monetary policy is seen as a bullish sign for tech and other riskier assets, which typically outperform in a more stable rate environment.
Still, some investors are concerned that the tech rally has gone too far given the vulnerabilities that remain in the economy and in government. The divided Congress is making a debt ceiling deal difficult as the Treasury Department’s June 1 deadline approaches. Republican negotiator Rep. Garret Graves of Louisiana told reporters Friday afternoon in the Capitol that, “We continue to have major issues that we have not bridged the gap on.”
Treasury Secretary Janet Yellen said later on Friday that the U.S. will likely have enough reserves to push off a potential debt default until June 5.
Alli McCartney, managing director at UBS Private Wealth Management, told CNBC’s “Squawk on the Street” on Friday that following the recent rebound in tech stocks, “it’s probably time to take some of that off the table.” She said her group has spent a lot of time looking at the venture market and where deals are happening, and they’ve noticed some clear froth.
“You’re either AI or you’re not right now,” McCartney said. “We really have to be ready to see if we don’t get a perfect debt ceiling, if we don’t get a perfect landing, what does that mean, because at these kinds of levels we are definitely pricing in the U.S. hitting the high note on everything and that seems like a terribly precarious place to be given the risks out there.”
Mark Zuckerberg, chief executive officer of Meta Platforms Inc., left, arrives at federal court in San Jose, California, US, on Tuesday, Dec. 20, 2022.
David Paul Morris | Bloomberg | Getty Images
Toward the end of 2022, engineers on Meta’s team combating misinformation were ready to debut a key fact-checking tool that had taken half a year to build. The company needed all the reputational help it could get after a string of crises had badly damaged the credibility of Facebook and Instagram and given regulators additional ammunition to bear down on the platforms.
The new product would let third-party fact-checkers like The Associated Press and Reuters, as well as credible experts, add comments at the top of questionable articles on Facebook as a way to verify their trustworthiness.
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But CEO Mark Zuckerberg’s commitment to make 2023 the “year of efficiency” spelled the end of the ambitious effort, according to three people familiar with the matter who asked not to be named due to confidentiality agreements.
Over multiple rounds of layoffs, Meta announced plans to eliminate roughly 21,000 jobs, a mass downsizing that had an outsized effect on the company’s trust and safety work. The fact-checking tool, which had initial buy-in from executives and was still in a testing phase early this year, was completely dissolved, the sources said.
A Meta spokesperson did not respond to questions related to job cuts in specific areas and said in an emailed statement that “we remain focused on advancing our industry-leading integrity efforts and continue to invest in teams and technologies to protect our community.”
Across the tech industry, as companies tighten their belts and impose hefty layoffs to address macroeconomic pressures and slowing revenue growth, wide swaths of people tasked with protecting the internet’s most-populous playgrounds are being shown the exits. The cuts come at a time of increased cyberbullying, which has been linked to higher rates of adolescent self-harm, and as the spread of misinformation and violent content collides with the exploding use of artificial intelligence.
In their most recent earnings calls, tech executives highlighted their commitment to “do more with less,” boosting productivity with fewer resources. Meta, Alphabet, Amazon and Microsoft have all cut thousands of jobs after staffing up rapidly before and during the Covid pandemic. Microsoft CEO Satya Nadella recently said his company would suspend salary increases for full-time employees.
The slashing of teams tasked with trust and safety and AI ethics is a sign of how far companies are willing to go to meet Wall Street demands for efficiency, even with the 2024 U.S. election season — and the online chaos that’s expected to ensue — just months away from kickoff. AI ethics and trust and safety are different departments within tech companies but are aligned on goals related to limiting real-life harm that can stem from use of their companies’ products and services.
“Abuse actors are usually ahead of the game; it’s cat and mouse,” said Arjun Narayan, who previously served as a trust and safety lead at Google and TikTok parent ByteDance, and is now head of trust and safety at news aggregator app Smart News. “You’re always playing catch-up.”
For now, tech companies seem to view both trust and safety and AI ethics as cost centers.
Twitter effectively disbanded its ethical AI team in November and laid off all but one of its members, along with 15% of its trust and safety department, according to reports. In February, Google cut about one-third of a unit that aims to protect society from misinformation, radicalization, toxicity and censorship. Meta reportedly ended the contracts of about 200 content moderators in early January. It also laid off at least 16 members of Instagram’s well-being group and more than 100 positions related to trust, integrity and responsibility, according to documents filed with the U.S. Department of Labor.
Andy Jassy, chief executive officer of Amazon.Com Inc., during the GeekWire Summit in Seattle, Washington, U.S., on Tuesday, Oct. 5, 2021.
David Ryder | Bloomberg | Getty Images
In March, Amazon downsized its responsible AI team and Microsoft laid off its entire ethics and society team – the second of two layoff rounds that reportedly took the team from 30 members to zero. Amazon didn’t respond to a request for comment, and Microsoft pointed to a blog post regarding its job cuts.
At Amazon’s game streaming unit Twitch, staffers learned of their fate in March from an ill-timed internal post from Amazon CEO Andy Jassy.
Jassy’s announcement that 9,000 jobs would be cut companywide included 400 employees at Twitch. Of those, about 50 were part of the team responsible for monitoring abusive, illegal or harmful behavior, according to people familiar with the matter who spoke on the condition of anonymity because the details were private.
The trust and safety team, or T&S as it’s known internally, was losing about 15% of its staff just as content moderation was seemingly more important than ever.
In an email to employees, Twitch CEO Dan Clancy didn’t call out the T&S department specifically, but he confirmed the broader cuts among his staffers, who had just learned about the layoffs from Jassy’s post on a message board.
“I’m disappointed to share the news this way before we’re able to communicate directly to those who will be impacted,” Clancy wrote in the email, which was viewed by CNBC.
A current member of Twitch’s T&S team said the remaining employees in the unit are feeling “whiplash” and worry about a potential second round of layoffs. The person said the cuts caused a big hit to institutional knowledge, adding that there was a significant reduction in Twitch’s law enforcement response team, which deals with physical threats, violence, terrorism groups and self-harm.
A Twitch spokesperson did not provide a comment for this story, instead directing CNBC to a blog post from March announcing the layoffs. The post didn’t include any mention of trust and safety or content moderation.
Narayan of Smart News said that with a lack of investment in safety at the major platforms, companies lose their ability to scale in a way that keeps pace with malicious activity. As more problematic content spreads, there’s an “erosion of trust,” he said.
“In the long run, it’s really hard to win back consumer trust,” Narayan added.
While layoffs at Meta and Amazon followed demands from investors and a dramatic slump in ad revenue and share prices, Twitter’s cuts resulted from a change in ownership.
Almost immediately after Elon Musk closed his $44 billion purchase of Twitter in October, he began eliminating thousands of jobs. That included all but one member of the company’s 17-person AI ethics team, according to Rumman Chowdhury, who served as director of Twitter’s machine learning ethics, transparency and accountability team. The last remaining person ended up quitting.
The team members learned of their status when their laptops were turned off remotely, Chowdhury said. Hours later, they received email notifications.
“I had just recently gotten head count to build out my AI red team, so these would be the people who would adversarially hack our models from an ethical perspective and try to do that work,” Chowdhury told CNBC. She added, “It really just felt like the rug was pulled as my team was getting into our stride.”
Part of that stride involved working on “algorithmic amplification monitoring,” Chowdhury said, or tracking elections and political parties to see if “content was being amplified in a way that it shouldn’t.”
Chowdhury referenced an initiative in July 2021, when Twitter’s AI ethics team led what was billed as the industry’s first-ever algorithmic bias bounty competition. The company invited outsiders to audit the platform for bias, and made the results public.
Chowdhury said she worries that now Musk “is actively seeking to undo all the work we have done.”
“There is no internal accountability,” she said. “We served two of the product teams to make sure that what’s happening behind the scenes was serving the people on the platform equitably.”
Twitter did not provide a comment for this story.
Advertisers are pulling back in places where they see increased reputational risk.
According to Sensor Tower, six of the top 10 categories of U.S. advertisers on Twitter spent much less in the first quarter of this year compared with a year earlier, with that group collectively slashing its spending by 53%. The site has recently come under fire for allowing the spread of violent images and videos.
The rapid rise in popularity of chatbots is only complicating matters. The types of AI models created by OpenAI, the company behind ChatGPT, and others make it easier to populate fake accounts with content. Researchers from the Allen Institute for AI, Princeton University and Georgia Tech ran tests in ChatGPT’s application programming interface (API), and found up to a sixfold increase in toxicity, depending on which type of functional identity, such as a customer service agent or virtual assistant, a company assigned to the chatbot.
Regulators are paying close attention to AI’s growing influence and the simultaneous downsizing of groups dedicated to AI ethics and trust and safety. Michael Atleson, an attorney at the Federal Trade Commission’s division of advertising practices, called out the paradox in a blog post earlier this month.
“Given these many concerns about the use of new AI tools, it’s perhaps not the best time for firms building or deploying them to remove or fire personnel devoted to ethics and responsibility for AI and engineering,” Atleson wrote. “If the FTC comes calling and you want to convince us that you adequately assessed risks and mitigated harms, these reductions might not be a good look.”
For years, as the tech industry was enjoying an extended bull market and the top internet platforms were flush with cash, Meta was viewed by many experts as a leader in prioritizing ethics and safety.
The company spent years hiring trust and safety workers, including many with academic backgrounds in the social sciences, to help avoid a repeat of the 2016 presidential election cycle, when disinformation campaigns, often operated by foreign actors, ran rampant on Facebook. The embarrassment culminated in the 2018 Cambridge Analytica scandal, which exposed how a third party was illicitly using personal data from Facebook.
But following a brutal 2022 for Meta’s ad business — and its stock price — Zuckerberg went into cutting mode, winning plaudits along the way from investors who had complained of the company’s bloat.
Beyond the fact-checking project, the layoffs hit researchers, engineers, user design experts and others who worked on issues pertaining to societal concerns. The company’s dedicated team focused on combating misinformation suffered numerous losses, four former Meta employees said.
Prior to Meta’s first round of layoffs in November, the company had already taken steps to consolidate members of its integrity team into a single unit. In September, Meta merged its central integrity team, which handles social matters, with its business integrity group tasked with addressing ads and business-related issues like spam and fake accounts, ex-employees said.
In the ensuing months, as broader cuts swept across the company, former trust and safety employees described working under the fear of looming layoffs and for managers who sometimes failed to see how their work affected Meta’s bottom line.
For example, things like improving spam filters that required fewer resources could get clearance over long-term safety projects that would entail policy changes, such as initiatives involving misinformation. Employees felt incentivized to take on more manageable tasks because they could show their results in their six-month performance reviews, ex-staffers said.
Ravi Iyer, a former Meta project manager who left the company before the layoffs, said that the cuts across content moderation are less bothersome than the fact that many of the people he knows who lost their jobs were performing critical roles on design and policy changes.
“I don’t think we should reflexively think that having fewer trust and safety workers means platforms will necessarily be worse,” said Iyer, who’s now the managing director of the Psychology of Technology Institute at University of Southern California’s Neely Center. “However, many of the people I’ve seen laid off are amongst the most thoughtful in rethinking the fundamental designs of these platforms, and if platforms are not going to invest in reconsidering design choices that have been proven to be harmful — then yes, we should all be worried.”
A Meta spokesperson previously downplayed the significance of the job cuts in the misinformation unit, tweeting that the “team has been integrated into the broader content integrity team, which is substantially larger and focused on integrity work across the company.”
Still, sources familiar with the matter said that following the layoffs, the company has fewer people working on misinformation issues.
For those who’ve gained expertise in AI ethics, trust and safety and related content moderation, the employment picture looks grim.
Newly unemployed workers in those fields from across the social media landscape told CNBC that there aren’t many job openings in their area of specialization as companies continue to trim costs. One former Meta employee said that after interviewing for trust and safety roles at Microsoft and Google, those positions were suddenly axed.
An ex-Meta staffer said the company’s retreat from trust and safety is likely to filter down to smaller peers and startups that appear to be “following Meta in terms of their layoff strategy.”
Chowdhury, Twitter’s former AI ethics lead, said these types of jobs are a natural place for cuts because “they’re not seen as driving profit in product.”
“My perspective is that it’s completely the wrong framing,” she said. “But it’s hard to demonstrate value when your value is that you’re not being sued or someone is not being harmed. We don’t have a shiny widget or a fancy model at the end of what we do; what we have is a community that’s safe and protected. That is a long-term financial benefit, but in the quarter over quarter, it’s really hard to measure what that means.”
At Twitch, the T&S team included people who knew where to look to spot dangerous activity, according to a former employee in the group. That’s particularly important in gaming, which is “its own unique beast,” the person said.
Now, there are fewer people checking in on the “dark, scary places” where offenders hide and abusive activity gets groomed, the ex-employee added.
More importantly, nobody knows how bad it can get.
Meta Platforms Inc. has started to execute on its latest round of layoffs, according to reports.
The third round of cuts is part of a plan that Meta META, +3.70%
Chief Executive Mark Zuckerberg announced in March in an effort to further slash costs at the social-media company. He said at the time that Meta would lay off about 10,000 workers while closing roughly 5,000 additional roles for which the company had yet to make hires.
The current rounds of cuts build on at least 11,000 layoffs that were announced last fall.
CNBC reported Wednesday that Meta employees in user experience, marketing and recruiting roles indicated they were affected by the current round of cuts.
Zuckerberg said in a March note to employees, which was also shared as a company blog post, that the company planned to make restructuring moves in its technology groups in late April before making changes to the business groups in late May.
Meta declined to comment in response to a MarketWatch request for confirmation of the latest layoffs.
The company is in the midst of what Zuckerberg has dubbed a “year of efficiency,” which comes in response to investor concern last fall about high spending levels at the company alongside the backdrop of declining revenue. Meta has since become arguably the most aggressive of the largest public technology companies in its cost-cutting efforts.
Shares of Shutterstock Inc. SSTK, +3.46%
rallied 4.4% in premarket trading Tuesday, after the digital media and marketing company announced an agreement to buy GIF and stickers company Giphy Inc. from Meta Platforms Inc. META, -0.29%
for $53 million in cash. Meta shares slipped 0.2% ahead of the open. As part of the deal, Meta has entered into an application programming interface (API) agreement with Shutterstock, to ensure continued access to Giphy’s content across Meta’s social-media platforms. Shutterstock said the deal, which is expected to close in June, should add “minimal revenue” in 2023. The company will fund the deal with cash-on-hand and with its revolving credit facility. The stock has tumbled 28.9% over the past three months through Monday while Meta shares of soared 44.3% and the S&P 500 SPX, -0.39%
has gained 4.5%.
A trader on the floor at the New York Stock Exchange (NYSE) in New York during the opening bell on May 22, 2023.
Angela Weiss | Afp | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
The S&P 500 broke 4,200 last week, its highest since last August. But it could be a case of panic buying and excessive optimism.
U.S. President Joe Biden met House Speaker Kevin McCarthy Monday evening to discuss the debt ceiling. No deal emerged — but McCarthy described the meeting as “productive,” and Biden expressed cautious optimism. Treasury Secretary Yellen warned in a new letter it was “highly likely” the U.S. could default on its debt by June 1. The word “highly” didn’t appear in her last letter.
JPMorgan Chase held its investor day Monday. At the event, we learned the bank aims to generate $84 billion in net interest income this year, $3 billion higher than its April forecast. CEO Jamie Dimon warned that souring commercial real estate loans could trigger another problem for banks, and that everyone should prepare for even higher interest rates.
Pasta prices in Italy jumped 16.5% in April — double the increase in consumer prices, which rose 8.1% year on year in the same month. The situation alarmed the pasta-loving nation so much that the country’s Minister of Economic Development Adolfo Urso convened an emergency meeting, while others called for a “pasta strike.”
PRO Regional bank stocks are being snapped up by insiders — the people who work within the banks themselves, according to a Raymond James analysis. This suggests confidence in the sector, despite the SPDR S&P Regional Banking ETF being 32% lower year to date.
The S&P 500 broke 4,200 last week, its highest since last August. But that’s not necessarily something to celebrate.
Investors are “panic buying,” Morgan Stanley equity strategist Mike Wilson said in a Monday note to clients. “We believe this rally will prove to be a head fake like last summer’s.”
UBS echoed that sentiment, saying markets aren’t pricing in tighter credit conditions and slower economic growth. There’s a “better risk-reward” to be found in bonds and emerging-market stocks, wrote UBS’ Vincent Heaney.
And the direst warning of all: Investors are “braced for Armageddon,” according to Stephen Suttmeier, technical research strategist at Bank of America. Suttmeier cites investors being underexposed to stocks, and funds being “aggressively short.”
Yesterday the S&P was virtually unchanged. While that doesn’t suggest an impending apocalyptic scenario, it does add credence to the theory markets are not entering a sustained rally but reacting haphazardly to day-to-day events.
Meanwhile, yesterday the Dow Jones Industrial Average fell 0.4%, while the Nasdaq Composite added 0.5%, bringing it to its highest close since August as well.
Economic data to watch this week will be the personal consumption expenditures index, due on Friday. It’s the Fed’s preferred measure of inflation because the PCE tracks how consumers are spending their money, and not just the degree of change in consumer prices.
Past PCE reports didn’t move markets much, but the latest might. As UBS notes, markets aren’t pricing in adverse conditions — and that would include a long pause, or even a hike, on interest rates this year. But if the PCE shows inflation is still high, the Fed is likely to take action along those lines, which would thwart markets’ hopes for a rate cut. Stock would fall. It’s not quite Armageddon, but it’d be wise to brace for inflation — and rates — to stay high.
Subscribe here to get this report sent directly to your inbox each morning before markets open.
A trader on the floor at the New York Stock Exchange (NYSE) in New York during the opening bell on May 22, 2023.
Angela Weiss | Afp | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
The S&P 500 broke 4,200 last week, its highest since last August. But it could be a case of panic buying and excessive optimism.
U.S. President Joe Biden met House Speaker Kevin McCarthy Monday evening to discuss the debt ceiling — details on their meeting are still forthcoming, but both expressed cautious optimism on reaching a deal. Treasury Secretary Yellen warned in a new letter it was “highly likely” the U.S. could default on its debt by June 1. The word “highly” didn’t appear in her last letter.
JPMorgan Chase held its investor day Monday. At the event, we learned the bank aims to generate $84 billion in net interest income this year, $3 billion higher than its April forecast. CEO Jamie Dimon warned that souring commercial real estate loans could trigger another problem for banks, and that everyone should prepare for even higher interest rates.
Indeed, Minneapolis Federal Reserve President Neel Kashkari raised the possibility the central bank might increase interest rates in July, even if it keeps rates unchanged in June. “It may be that we have to go north of 6% [on the fed funds rate]”, Kashkari said on CNBC’s “Squawk Box.”
Meta was fined a record 1.2 billion euros ($1.3 billion) by European privacy regulators for transferring data on European Facebook users to the United States, in what could be a landmark decision on data privacy. Meta said it will appeal the decision.
PRO Regional bank stocks are being snapped up by insiders — the people who work within the banks themselves, according to a Raymond James analysis. This suggests confidence in the sector, despite the SPDR S&P Regional Banking ETF being 32% lower year to date.
The S&P 500 broke 4,200 last week, its highest since last August. But that’s not necessarily something to celebrate.
Investors are “panic buying,” Morgan Stanley equity strategist Mike Wilson said in a Monday note to clients. “We believe this rally will prove to be a head fake like last summer’s.”
UBS echoed that sentiment, saying markets aren’t pricing in tighter credit conditions and slower economic growth. There’s a “better risk-reward” to be found in bonds and emerging-market stocks, wrote UBS’ Vincent Heaney.
And the direst warning of all: Investors are “braced for Armageddon,” according to Stephen Suttmeier, technical research strategist at Bank of America. Suttmeier cites investors being underexposed to stocks, and funds being “aggressively short.”
Yesterday the S&P was virtually unchanged. While that doesn’t suggest an impending apocalyptic scenario, it does add credence to the theory markets are not entering a sustained rally but reacting haphazardly to day-to-day events.
Meanwhile, yesterday the Dow Jones Industrial Average fell 0.4%, while the Nasdaq Composite added 0.5%, bringing it to its highest close since August as well.
Economic data to watch this week will be the personal consumption expenditures index, due on Friday. It’s the Fed’s preferred measure of inflation because the PCE tracks how consumers are spending their money, and not just the degree of change in consumer prices.
Past PCE reports didn’t move markets much, but the latest might. As UBS notes, markets aren’t pricing in adverse conditions — and that would include a long pause, or even a hike, on interest rates this year. But if the PCE shows inflation is still high, the Fed is likely to take action along those lines, which would thwart markets’ hopes for a rate cut. Stock would fall. It’s not quite Armageddon, but it’d be wise to brace for inflation — and rates — to stay high.
Subscribe here to get this report sent directly to your inbox each morning before markets open.
What is it about CEOs and their intense — and often oddball — workout routines?
These days, some top corporate honchos take their exercise rituals to extremes. Consider Damola Adamolekun, chief executive officer of restaurant chain P.F. Chang’s, who recently told Fortune magazine that he wakes up each day at 4:30 a.m. and runs seven to eight miles. He explained that the routine stimulates his nervous system and sets the tone for the day ahead. “You’ll feel better the whole day; you’ll be smarter, you’ll be sharper, you’ll be more energetic,” he said.
Adamolekun is in good company when it comes to training hard. Here are how five other executives work up a sweat and aim to stay healthy.
Jack Dorsey, head of Block and co-founder of Twitter, walks an hour and 15 minutes every day.
AFP via Getty Images
Jack Dorsey
The Twitter co-founder, who now heads the tech conglomerate Block SQ, +3.36%, does it all: two-hour meditations, fasting — he has said he eats only once a day during the week and has almost no food on the weekends — and alternating saunas and ice baths. But he’s no gym rat: Dorsey gets his primary exercise by walking an hour and 15 minutes every day. “I might look a little bit more like I’m jogging than I’m walking. It’s refreshing … It’s just this one of those take-back moments where you’re like, ‘Wow, I’m alive!’” he once observed.
Meta’s Mark Zuckerberg takes his dog for frequent runs — good exercise for both him and his pooch.
Getty Images
Mark Zuckerberg
The Meta Platforms META, +1.09%
chief isn’t one to get up at the crack of dawn, according to GQ, but he still runs three mornings a week. “I also try to take my dog running whenever I can, which has the added bonus of being hilarious because that’s basically like seeing a mop run,” he told GQ. As for diet, he once was said to experiment with an eating plan that involved only devouring animals he had killed himself — including chickens, goats and pigs. But he also apparently skips meals — or at least he said as much in a 2021 Facebook post. “Do you ever get so excited about what you’re working on that you forget to eat meals?” he asked.
Richard Branson takes off on another kite-surfing adventure.
Getty Images
Richard Branson
Kite surfing, anyone? The founder of the Virgin Group swears by it as one of his favorite ways to stay fit, according to Men’s Health. He once even kite surfed across the English Channel. His other activities include tennis and biking. He’ll work with a trainer if he’s on the road, but otherwise he likes to exercise outdoors on his private island in the British Virgin Islands. “I just want to be sure that when I’m 150, my body still looks as good as it is today,” said Branson, who is now 72.
Palantir Technologies CEO Alex Karp works out by cross-country skiing — and says the key is to take it as slowly as possible to build your “cardio base.”
Getty Images
Alex Karp
The head of software company Palantir Technologies takes advantage of the fact that he lives near the White Mountains of New Hampshire to have a regular cross-country skiing routine. Key to his approach, he told Axios, is taking it slow on the snow. “To run like a deer, you have to spend 90% of your time running like a snail,” he explained, adding that his unhurried pace “builds a cardio base.” He also includes tai chi and stretching to his routine. But he isn’t too fussy about his diet. “If I’m traveling and someone has a really nice Danish, I enjoy every minute of eating it,” he said.
Martha Stewart is one of the cover models for Sport Illustrated’s new swimsuit issue.
Sports Illustrated
Martha Stewart
The 81-year-old lifestyle entrepreneur and founder of Martha Stewart Living Omnimedia has been in the spotlight for her recent cover appearance on Sports Illustrated’s swimsuit issue. So what does she do to stay in shape for beach season? Stewart swears by Pilates, according to various media reports. And she rides horses. She has also said she doesn’t smoke, eats very well and every morning drinks a glass of “green juice” made with pears, cucumbers, celery stalks, parsley, fresh ginger and two oranges (complete with peels), a recipe she calls “so spectacular.”
Meta has been fined a record-breaking €1.2 billion ($1.3 billion) by European Unionregulators for transferring the personal data of Facebook’s EU users to servers in the United States.
The European Data Protection Board announced the fine in a statement Monday, saying it followed an inquiry into Facebook
(FB) by the Irish Data Protection Commission, the chief regulator overseeing Meta’s operations in Europe.
The fine is the largest ever levied under Europe’s signature data privacy law, known as the General Data Protection Regulation, or GDPR. Meta has also been ordered to cease the processing of personal data of European users in the United States within six months.
Meta’s infringement is “very serious since it concerns transfers that are systematic, repetitive and continuous,” said Andrea Jelinek, chair of the European Data Protection Board.
“Facebook has millions of users in Europe, so the volume of personal data transferred is massive. The unprecedented fine is a strong signal to organizations that serious infringements have far-reaching consequences,” she added.
Meta, which also owns WhatsApp and Instagram, said it would appeal the ruling, including the fine. There would be no immediate disruption to Facebook in Europe, it added.
The company said the root of the issue stemmed from a “conflict of law” between US rules on access to data and the privacy rights of Europeans. EU and US policymakers were on a “clear path” to resolving this conflict under a new transatlantic Data Privacy Framework.
The European Data Protection Board “chose to disregard the clear progress that policymakers are making to resolve this underlying issue,” Nick Clegg, Meta’s president of global affairs, and Jennifer Newstead, the company’s chief legal officer, said in a statement.
“This decision is flawed, unjustified and sets a dangerous precedent for the countless other companies transferring data between the EU and US,” they added.
“The ability for data to be transferred across borders is fundamental to how the global open internet works. Thousands of businesses and other organizations rely on the ability to transfer data between the EU and the US in order to operate and provide services that people use every day.”
Meta Platforms META, -0.49%
was fined a record €1.2 billion ($1.3 billion) by Ireland’s Data Protection Commission, according to reports. The fine was over allegations Facebook didn’t ensure data transfers from Europe to the U.S. had appropriate safeguards. Meta reportedly said it was singled out and has used the same legal mechanisms as thousands of other companies.
Embattled Twitter may soon have a serious rival: Facebook’s Instagram is planning to release a text-based app as a competitor.
Instagram, a property of Meta Platforms Inc. META, -0.49%,
has been testing the service with creators, celebrities and influencers for months, according to people familiar with Meta’s strategy.
“We’re exploring a standalone decentralized social network for sharing text updates. We believe there’s an opportunity for a separate space where creators and public figures can share timely updates about their interests,” a Meta spokesperson told MarketWatch.
The app could debut as early as June, according to Lia Haberman, an adjunct professor at the University of California, Los Angeles, who teaches social and influencer marketing. She published a screenshot of an early description of the app, which may eventually be compatible with rival Twitter apps like Mastodon.
Twitter has hemorrhaged users since Tesla Inc. TSLA, +1.84%
Chief Executive Elon Musk began his chaotic leadership of the company late last year, prompting an exodus by disgruntled customers to alternative services like Mastodon and Bluesky.
Jasmine Enberg, an analyst at Insider Intelligence, said the text-based service has been in the works for months alternately code-named P92 or Barcelona.
“The big picture here is that there is clearly an appetite for Twitter-like services,” Enberg said in an interview. “With Twitter’s problems and so many alternatives, Meta’s new service looks like a mashup of Instagram and Twitter. Meta sees an opportunity to tap into this market, and it has a history of copying other popular apps [like Snap].”
Meta’s stock was flat in Friday’s regular trading session.
Satya Nadella, CEO of Microsoft, appears at the World Economic Forum in Davos, Switzerland, May 24, 2022.
Hollie Adams | Bloomberg | Getty Images
Microsoft will hold off on offering salary increases to full-time employees, CEO Satya Nadella told staffers by email Wednesday.
The move aligns with Microsoft’s efforts to reduce costs as revenue growth slows and clients reel in spending. In January, the software maker said it would cut 10,000 jobs, or just under 5% of its workforce. Alphabet, Amazon, Meta and other tech companies have downsized as well in recent months.
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Last year, as inflation rippled through the economy, Microsoft nearly doubled the budget for merit increases and boosted stock allocations for certain employees. This year, compensation will look more normal.
“We will maintain our bonus and stock award budget again this year, however, we will not overfund to the extent we did last year, bringing it closer to our historical averages,” Nadella wrote in the email. Microsoft did not immediately respond to a request for comment. Insider reported on the message earlier.
Nadella said performance bonuses for Microsoft’s top executives will be down considerably from last year.
In April, Microsoft Chief Financial Officer Amy Hood said year-over-year revenue growth in the current quarter would slow to 6.7% from 7.1% in the first three months of the year. The company also called for operating expenses to grow less than 2%, compared with 7.4% growth in the first quarter.
In addition to his comments on pay, Nadella highlighted Microsoft’s effort to capitalize on a growing artificial intelligence market.
“We are clear that we are helping drive a major platform shift in this new era of Al, and doing so in a dynamic, competitive environment while also facing global macroeconomic uncertainties,” Nadella wrote.
In January, Microsoft announced a multibillion-dollar investment in startup OpenAI, which relies on Microsoft’s Azure cloud to run its viral ChatGPT chatbot and provide large language models such as GPT-4 to power apps from Microsoft and a variety of other companies.
Hood said last month Microsoft’s capital expenditures would increase quarter over quarter because of investment in Azure AI infrastructure.
Twitter CEO Elon Musk announced changes to the platform’s direct messages feature including the introduction of encryption.
STR | Nurphoto | Getty Images
Twitter could launch encrypted direct messages on Wednesday, Elon Musk said, as the CEO outlined plans to boost communication features on the social media service.
Musk said in a tweet late Tuesday that the latest version of the Twitter app contains changes to direct messages or DMs — nonpublic messages users send to one another.
The CEO said users can now reply to any message in a DM thread, not just the most recent, as well as use any emoji to react to a message. Previously, users would only be able to reply to the latest message in a DM thread and only react with specific emojis.
Musk also announced that encrypted DMs “should” be released on Wednesday.
Encryption in messages means that only the sender and receiver are able to see a message. In theory, Twitter and Musk would not be able to see or intercept direct messages between people.
“The acid test is that I could not see your DMs even if there was a gun to my head,” Musk tweeted.
Facebook parent Meta said in January that it was expanding testing for default end-to-end encryption for its Messenger service. WhatsApp, the other messaging app owned by Meta, has had end-to-end encryption for several years.
Encrypted messaging services have grown in popularity in the past few years as users focus more on privacy.
Musk also said that voice and video calls will be added soon to Twitter so users can “talk to people anywhere in the world” without giving them a phone number.
Since Twitter’s inception, the development of the direct messages feature hasn’t got much attention from previous CEOs. But Musk has signaled numerous times his intention to make Twitter into an “everything app” from messaging to financial services.
New Twitter features Musk promises are not always introduced on time. In February, he said Twitter would introduce a feature to share advertising revenue with creators on the platform. That hasn’t happened yet.
Apple reported second-fiscal quarter earnings on Thursday that beat Wall Street’s soft expectations, driven by stronger-than-anticipated iPhones sales. Apple CEO Tim Cook told CNBC that the quarter was “better than we expected.”
However, Apple’s overall sales fell for the second quarter in a row. The tech giant’s shares rose nearly 2% in extended trading, and continued climbing when Apple gave forecast data points about the current quarter.
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Here’s how the company did versus Wall Street expectations per Refinitiv consensus expectations:
EPS: $1.52 per share vs. $1.43 expected
Revenue: $94.84 billion vs. $92.96 billion expected
Gross margin: 44.3% vs. 44.1% expected
Apple reported $24.16 billion in net income during the quarter compared to $25.01 billion in the year-earlier period. Total revenue was off 3% from $97.28 billion in the prior quarter.
Here’s how Apple’s individual product lines did versus StreetAccount consensus expectations:
iPhone revenue: $51.33 billion vs. $48.84 billion expected
Mac revenue: $7.17 billion vs. $7.80 billion expected
iPad revenue: $6.67 billion vs. $6.69 billion expected
Other Products revenue: $8.76 billion vs. $8.43 billion expected
Services revenue: $20.91 billion vs. $20.97 billion expected
Apple didn’t provide formal guidance, continuing its practice that dates back to 2020 and the start of the Covid-19 pandemic. Management typically provides some data points on a call with analysts.
Apple finance chief Luca Maestri said the company expects overall revenue in the current quarter to decline about 3%.
“We expect our June quarter year-over-year revenue performance to be similar to the March quarter assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter,” Maestri said on a call with analysts. He added the company is facing macroeconomic challenges in digital advertising and mobile gaming, which is part of Apple’s services business.
The highlight of Apple’s report was iPhone sales, which grew from the year-ago quarter even as the broader smartphone industry contracted nearly 15% during the same time, according to an IDC estimate.
IPhone revenue increased 2% during the quarter that ended April 1, suggesting that parts shortages and supply chain issues that had hampered the product for the last few years — including an iPhone factory shutdown late last year — had finally abated.
“It was quite a good quarter from an iPhone point of view, particularly relative to the market when you look at the market stats,” Cook told CNBC’s Steve Kovach.
Chief Executive Officer (CEO) of Apple Tim Cook waves to people during the opening of the first Apple Inc. flagship store in Mumbai, India on April 18, 2023.
Imtiyaz Shaikh | Anadolu Agency | Getty Images
Apple’s Mac and iPad businesses didn’t fare as well. The company warned last quarter that both business segments would decline, partially due to parts shortages but they fell further than expected.
Apple’s Mac sales were off more than 31% to just over $7.17 billion. But that’s a difficult comparison from the year-earlier period when Apple was still benefiting from the end of a pandemic boom in PC sales and a shift to its own chips that offer longer laptop battery life.
“There’s really two reasons for that,” Cook said. “One is the macro situation in general. And the other is where we’re still comparing to the very difficult compare of the M1 MacBook Pro 14 and 16-inch from the year-ago quarter.”
Revenue from iPads declined nearly 13% to $6.67 billion.
Apple’s Services business includes monthly subscriptions, revenue from Apple’s App Store, warranties and search-licensing revenue from companies like Google. Apple reported $20.9 billion in services revenue, a 5.5% year-over-year increase, signaling the company’s highest-margin business line continues to grow.
Apple’s wearables division, including Apple Watch and headphones such as AirPods, dropped 1% during the quarter, beating analyst expectations. Last fall, the company released a more expensive Apple Watch, called Ultra.
Apple’s China regional business, which includes the mainland, Taiwan and Hong Kong, reported $17.81 billion in sales, down from last year’s $18.34 billion. Analysts had hoped that China’s demand for electronics would rise in the quarter as the company exits out of Covid-era lockdowns and other restrictions.
While sales shrunk in most regions that Apple monitors, they grew in the Asia Pacific region to $8.11 billion.
Cook was optimistic about Apple’s prospects in India after his visit last month to the country where he opened Apple stores and met with politicians.
“The switcher and first-time buyer metrics look very good there for India,” Cook said. Apple uses the term “switcher” to refer to first-time iPhone buyers who previously had Android devices.
As expected, Apple’s board authorized $90 billion in share repurchases and dividends. Apple said it paid $23 billion in buybacks and dividends in the March quarter. Apple also raised its dividend 4% to 24 cents per share.
Cook also said that Apple was not planning layoffs like those that other big tech companies have started over the past year. “I view that as a last resort and, so, mass layoffs is not something that we’re talking about at this moment,” he said.
It’s what every bride hasnightmares about: A wedding dress disappeared, stained, or — in New Hampshire resident Jesse Moltenbrey’s case — held “hostage.”
A billing dispute between now-bankrupt Bed Bath & Beyond and Houston-based Memories Gown Preservation led the preservation company to hold customers’ gowns until it received payment fromthe troubled retailer.
But as the mammoth retailer ties up its loose ends, one group has been caught in the middle: the customers themselves.
“This is a bride’s worst nightmare,” Moltenbrey initially said in a Facebook post. Her floor length gown — black with white floral design — was trapped somewhere in an unknown facility.
In early March, Moltenbrey said she decided to send her wedding gown to be preserved. After reading good reviews about Houston-based Memories Gown Preservation, she decided to order the $120 kit through Bed Bath & Beyond.
Moltenbrey received the kit on March 16, and said she was charged an additional $25 for insurance once MemoriesGP received the gown on April 3.
“Why, then, on April 24th do I receive this email stating they are holding my dress ransom because of a company that is going BANKRUPT,” Moltenbrey wrote on Facebook.
In the email that Moltenbrey shared on Facebook, MemoriesGP said it began holding all wedding gowns received from Bed Bath & Beyond purchased kits as of March 11, before Moltenbrey said she shipped her dress to them.
“I felt sick to my stomach because of the helplessness,” Moltenbrey said in an interview with CNN.
Her black dress was so unique that the local store didn’t even have a sample, she said, and she’ll never forget the look on her guests’ faces when she walked down the aisle in 2018.
“I knew I wouldn’t look good in a white wedding dress,” she said.
The small business claimed in the email sent to Moltenbrey that Bed Bath & Beyond owed them $42,563.73 and that it hasn’t been paid for kits ordered in the entire past year. MemoriesGPtold Moltenbrey that it contacted the houseware giant five separate times over the past year but hasn’t received its payment yet.
MemoriesGP asked Moltenbrey to call Bed Bath & Beyond’s customer service to request release of payment to the company.
“Once payment has been received to MemoriesGP we will promptly clean, preserve & ship your gown out to you,” the email said. That left Moltenbrey to contact the retail giant for the overdue payment.
“I’m just one person and this is a whole company going bankrupt,” Moltenbrey said.
On Wednesday, Moltenbrey posted MemoriesGP is returning her unpreserved dress after she sent an email to its vice president.
The company asked Moltenbrey pay for the shipping back to her. The $25 she paid for insurance will go toward the cost of shipping.
CNN has not received comment after multiple requests sent to Memories Gown Preservation.
However, in an email to Moltenbrey — which she posted to Facebook — Kyle Nesbit, who is listed on LinkedIn as the company’s former vice president, told her that the company “receives 100+ gowns per day.”
“We have no way of knowing which package has a Bed Bath gown in it before the package is opened in our facility,” he told her.
“The intent of our generic email was to get brides over to Bed Bath as that is who their financial transaction was with (we just provide the service),” Nesbit wrote to Moltenbrey.
In a statement, Bed Bath & Beyond said it’s become a legal matter. The preservation kit is currently unavailable on the website. The MemoriesGP website still advertises Bed Bath & Beyond as an authorized dealer and as a registry option.
“We take concerns raised by our customers very seriously,” Bed Bath & Beyond said. “This is a legal matter that we are working to resolve with a third party. As is our practice, we do not comment on legal matters.”
U.S. stocks ended April higher on Friday, with the Dow Jones Industrial Average booking its best monthly gain since January. Despite renewed focus on stress in the U.S. banking system, major stock indexes were able to post gains on Friday to end the week and month on higher ground, in part as earnings reports from several big technology companies, including Meta Platforms Inc. META were received positively by investors. The Dow DJIA rose about 272 points Friday, or 0.8%, ending near 34,098, according to preliminary FactSet levels. The S&P 500 index SPX posted a 0.8% gain, while the Nasdaq Composite Index COMP advanced…
Major U.S. stock indexes posted big gains on Thursday as Meta and other major technology companies embolden bullish investors with better earnings results than anticipated. The Dow Jones Industrial Average DJIA rose about 524 points, or 1.6%, ending near 33,826, while the S&P 500 index SPX gained 2%, according to preliminary FactSet figures. That marked the best daily percentage gains for both since Jan. 6, according to Dow Jones Market Data. The Nasdaq Composite Index COMP led the charge higher Thursday, jumping 2.4%, its best daily advance since Feb. 2. Meta Platforms Inc.’s META said Wednesday that the company’s profit…
U.S. stocks rose on Thursday, on track for their biggest gain in two weeks, as another batch of strong big-tech earnings reports helped boost the broader market while offsetting signs of slowing economic growth.
How are stocks trading
On Wednesday, the Dow Jones Industrial Average fell 229 points, or 0.68%, to 33,302 as worries about First Republic Bank FRC overshadowed upbeat big-tech earnings.
A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.
New York CNN
—
First Republic Bank has been teetering on the edge for weeks. It may be finally falling.
The San Francisco-based lender could be next in the line to collapse, following in the footsteps of former competitors Silicon Valley Bank and Signature Bank.
It certainly fits the bill: First Republic
(FRC), like SVB, is a mid-sized regional bank with a highly concentrated customer base, outsized amounts of uninsured deposits and loads of unrealized losses on the bonds and treasuries it holds.
Rumors swirled on Wednesday as publications rushed out reports from unnamed sources saying that the bank was looking to cut a deal to sell assets, that the White House wasn’t interested in facilitating a bailout (there were also reports that it is) and that the Federal Deposit Insurance Corporation is considering downgrading the bank’s debt, which would limit its access to essential Federal Reserve loans.
The FDIC, Federal Reserve, White House and First Republic did not respond to requests for comment about those reports. But the damage has been done.
Shares of the stock fell by nearly 30% on Wednesday, after plunging by 49% on Tuesday. The stock’s trading was halted numerous times both days as its rapid decline triggered volatility-triggered timeouts by the New York Stock Exchange.
But what’s actually happening here?
The reality of the situation: What we do know for certain is that First Republic reported on Monday that its total deposits fell 41% in the first quarter of 2023 to $104.5 billion, even after a consortium of banks stepped in with $30 billion to prevent the lender from failing. Without that cash infusion, deposits would have fallen by over 50%.
But, importantly, the bank said that while it saw a sharp drop in deposit activity after the collapse of SVB and Signature Bank last month, activity began to stabilize at the end of March and has since remained steady.
We also know that First Republic’s net interest income, which shows how much money the bank earned from lending and borrowing, was down 19.4% year-over-year at the end of the first quarter.
On top of all that, the bank is vulnerable to liquidity problems.
When the banking crisis erupted in mid-March, about two-thirds of First Republic’s deposits were uninsured with the FDIC. That’s lower than the 94% at Silicon Valley Bank — but at the end of last year, First Republic had an exceptionally high ratio of 111% for loans and long-term investments to deposits, according to S&P Global — meaning it has loaned and invested more money than it has in deposits.
In short: The outlook for the bank is not good.
“It’s becoming clearer each day” that First Republic is “toast,” said Don Bilson at Gordon Haskett, in a note Wednesday. “The only question that really needs to be answered is whether the [Federal Deposit Insurance Corporation] moves in before the weekend or during the weekend, which is when it usually does its thing.”
Possible solutions: We also know that it’s not over until it’s over, and that the bank is still operating. There are still some narrow paths forward.
There’s a small chance that First Republic stays the course and “muddles along as a standalone company,” said David Chiaverini, managing director of equity research at Wedbush Securities.
What’s more likely is that the company will try to sell some of its loans and securities at the same cost they bought them for. In exchange, the buyer would receive a preferred equity interest in the company.
That will be a tough sell since those assets would probably sell for well above market rate. First Republic’s bonds maturing in 2046 are currently trading at just 43 cents on the dollar. But the bank has been lucky before. First Republic has stayed afloat since March largely thanks to a $30 billion bailout from a conglomerate of large US banks and a $70 billion line of credit from JPMorgan.
The third option is the worst for shareholders: the bank could go into receivership. When a struggling bank goes into receivership it means that a regulatory authority or government agency takes control of the bank and its assets, usually with the goal of liquidating those assets to repaythe bank’s creditors.
Investors in First Republic would most likely see their money wiped out in that scenario.
Coming next: First Republic is in a very tricky situation. Investors will be crossing their fingers and holding their breath until Friday at 4 p.m. ET. That’s when newly-collapsed banks have admitted defeat in the past.
Facebook-parent Meta on Wednesday reported that it grew sales by 3% during the first three months of the year, reversing a trend of three consecutive quarters of revenue declines and far exceeding Wall Street analysts’ expectations, reports my colleague Clare Duffy.
Meta shares jumped as much as 12% in after-hours trading following the report, continuing the company’s strong trajectory since CEO MarkZuckerberg announced that 2023 would be a “year of efficiency.”
Another bright spot: user growth was relatively strong compared to recent quarters. The number of monthly active people on Meta’s family of apps grew 5% from the prior year to more than 3.8 billion and Facebook daily active users increased 4% to more than 2 billion.
Still, Meta has a big hill ahead of it. The company also reported that profits declined by nearly a quarter to $5.7 billion compared to the same period in the prior year. Price per advertisement — an indicator of the health of the company’s core digital ad business — also decreased by 17% from the year prior.
Meta has been in the midst of a massive restructuring, as it attempts to recover from a perfect storm of heightened competition, lingering recession fears resulting in fewer ad dollars and a multibillion dollar effort to build a future version of the internet it calls the metaverse.
Meta said in November it would eliminate 11,000 jobs, the single largest round of cuts in its history. And in March, Zuckerberg announced Meta would lay off another 10,000 employees. All told, the cuts will shrink Meta’s workforce by a quarter.
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Big Tech continues its winning streak, but it wasn’t enough to ignite a broader rally in markets because of fears reignited by First Republic.
First Republic Bank has a plan to save itself, CNBC learned from sources. Advisors to First Republic are persuading big U.S. banks to buy bonds from First Republic at above-market prices. Though those big banks will lose money on the purchase, their losses would be much lower than the Federal Deposit Insurance Corp. fees banks would have to pay if First Republic fails.
Meanwhile, First Republic’s stock continued its freefall. It plummeted 29.75% Wednesday to hit an all-time low of $5.69, giving the bank a market value below $1 billion.
Still, the global banking sector looks mostly solid, at least for big banks. Deutsche Bank reported a net profit attributable to shareholders of 1.158 billion euros, which was a 9.2% increase from a year earlier. That’s the 11th straight quarter of profit for the German bank — though it’s joining other companies in laying off workers because of falling revenue.
U.S. stocks ended Wednesday mixed as First Republic’s troubles overshadowed excitement about Big Tech earnings. Asia-Pacific markets traded higher Thursday. Singapore’s Straits Times Index lost 0.39%, weighed down by real estate stocks, as the country increased stamp duties on property purchases.
PRO First-quarter economic growth in the U.S. is likely to hit at least 2% year on year, according to analysts’ projections. Despite that solid number, there are signals that a recession is still coming.
Big Tech continues its winning streak, but it wasn’t enough to ignite a broader rally in markets.
On Wednesday, Microsoft rallied 7.24% on the back of a strong earnings report that was boosted by a jump in revenue from its Intelligent Cloud business segment. The tech company’s stock hit a 52-week high, putting it within a hair’s breadth of $300 per share. Amazon climbed 2.35% as investors hoped the e-commerce giant, which is the market leader in cloud services, would post strong numbers Thursday too.
Still, the tech-heavy Nasdaq Composite finished the day only 0.47% higher. (Meta, which also had an excellent first quarter, posted earnings after markets closed.)
Why didn’t the Nasdaq rise more from Big Tech’s better-than-expected first-quarter results? Probably because tech stocks were already doing so well.
“There was such a rally into their earnings season that I think you needed earnings to really clear a high bar to actually catalyze another leg higher,” said Ross Mayfield, investment strategy analyst at Baird. “That just hasn’t been the case, especially when you have other headwinds pressing down on the market.”
Indeed, fears around First Republic induced losses in other major indexes. The Dow Jones Industrial Average lost 0.68% and the S&P slipped 0.38%.
Banks might not be as exciting as technology companies. But banks are so fundamental to the health of the economy that any sign of weakness in one is enough to send waves of fear throughout investors and make them forget, if only temporarily, the promises of Big Tech. What use is there, after all, in building a skyscraper if the foundation is shaky?
Subscribe here to get this report sent directly to your inbox each morning before markets open.
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Big Tech continues its winning streak, but it wasn’t enough to ignite a broader rally in markets because of fears reignited by First Republic.
First Republic Bank has a plan to save itself, CNBC learned from sources. Advisors to First Republic are persuading big U.S. banks to buy bonds from First Republic at above-market prices. Though those big banks will lose money on the purchase, their losses would be much lower than the Federal Deposit Insurance Corp. fees banks would have to pay if First Republic fails.
Meanwhile, First Republic’s stock continued its freefall. It plummeted 29.75% Wednesday to hit an all-time low of $5.69, giving the bank a market value below $1 billion.
Meta’s first-quarter revenue rose 3% to $28.65 billion from a year earlier, the first time in three quarters that its sales increased. Adding to the good vibes, the company projected that revenue in the second quarter will come in higher than Wall Street’s expectations.
It wasn’t uniformly good news for Meta: Net profit fell 24% to $5.71 billion, year on year, dragged down by the company’s Reality Labs unit — its metaverse division — which recorded an operating loss of $3.99 billion. But that wasn’t enough to dampen investors’ optimism: The company’s stock jumped 11.67% in extended trading.
PRO First-quarter economic growth in the U.S. is likely to hit at least 2% year on year, according to analysts’ projections. Despite that solid number, there are signals that a recession is still coming.
Big Tech continues its winning streak, but it wasn’t enough to ignite a broader rally in markets.
On Wednesday, Microsoft rallied 7.24% on the back of a strong earnings report that was boosted by a jump in revenue from its Intelligent Cloud business segment. The tech company’s stock hit a 52-week high, putting it within a hair’s breadth of $300 per share. Amazon climbed 2.35% as investors hoped the e-commerce giant, which is the market leader in cloud services, would post strong numbers Thursday too.
Still, the tech-heavy Nasdaq Composite finished the day only 0.47% higher. (Meta, which also had an excellent first quarter, posted earnings after markets closed.)
Why didn’t the Nasdaq rise more from Big Tech’s better-than-expected first-quarter results? Probably because tech stocks were already doing so well.
“There was such a rally into their earnings season that I think you needed earnings to really clear a high bar to actually catalyze another leg higher,” said Ross Mayfield, investment strategy analyst at Baird. “That just hasn’t been the case, especially when you have other headwinds pressing down on the market.”
Indeed, fears around First Republic induced losses in other major indexes. The Dow Jones Industrial Average lost 0.68% and the S&P slipped 0.38%.
Banks might not be as exciting as technology companies. Financial institutions don’t constantly push us into the future, doing things like inventing eerily humanlike programs that chat with us. Instead, banks are doing what they’ve been doing for centuries: accepting deposits from, and loaning money to, people and companies.
But it’s that very function that makes banks so fundamental to the health of the economy. Any sign of weakness in a bank is enough to send waves of fear throughout investors and make them forget, if only temporarily, the promises of Big Tech.
Subscribe here to get this report sent directly to your inbox each morning before markets open.
