ReportWire

Tag: securities trading

  • Hong Kong finds 90-year-old cardinal guilty over pro-democracy protest fund | CNN

    Hong Kong finds 90-year-old cardinal guilty over pro-democracy protest fund | CNN

    [ad_1]


    Hong Kong
    CNN
     — 

    A 90-year-old former bishop and outspoken critic of China’s ruling Communist Party was found guilty Friday on a charge relating to his role in a relief fund for Hong Kong’s pro-democracy protests in 2019.

    Cardinal Joseph Zen and five others, including the Cantopop singer Denise Ho, contravened the Societies Ordinance by failing to register the now-defunct “612 Humanitarian Relief Fund” that was partly used to pay protesters’ legal and medical fees, the West Kowloon Magistrates’ Courts ruled.

    The silver-haired cardinal, who appeared in court with a walking stick, and his co-defendants had all denied the charge.

    The case is considered a marker of political freedom in Hong Kong during an ongoing crackdown on the pro-democracy movement, and comes at a sensitive time for the Vatican, which is preparing to renew a controversial deal with Beijing over the appointment of bishops in China.

    Outside the court, Zen told reporters that he hoped people wouldn’t link his conviction to religious freedom.

    “I saw many people overseas are concerned about a cardinal being arrested. It is not related to religious freedom. I am part of the fund. (Hong Kong) has not seen damage (to) its religious freedom,” Zen said.

    Zen and four other trustees of the fund – singer Ho, barrister Margaret Ng, scholar Hui Po Keung, and politician Cyd Ho – were sentenced to fines of HK$4,000 ($510) each.

    A sixth defendant, Sze Ching-wee, who was the fund’s secretary, was fined HK$2,500 ($320).

    All had initially been charged under the controversial Beijing-backed national security law for colluding with foreign forces, which carries a maximum penalty of life imprisonment. Those charges were dropped and they instead faced a lesser charge under the Societies Ordinance, a century-old colonial-era law punishable with fines of up to HK$10,000 ($1,274) but not jail time for first-time offenders.

    The court heard in September that the legal fund raised the equivalent of $34.4 million through 100,000 deposits.

    In addition to providing financial aid to protesters, the fund was also used to sponsor pro-democracy rallies, such as paying for audio equipment used in 2019 during street protests to resist Beijing’s tightening grip.

    Although Zen and the other five defendants were spared from being charged under the national security law, the legislation imposed by Beijing over Hong Kong in June 2020 in a bid to quell the protests has repeatedly been used to curb dissent.

    Since the imposition of the law, most of the city’s prominent pro-democracy figures have either been arrested or gone into exile, while several independent media outlets and non-government organizations have been shuttered.

    The Hong Kong government has repeatedly denied criticism that the law – which criminalizes acts of secession, subversion, terrorism, and collusion with foreign forces – has stifled freedoms, claiming instead it has restored order in the city after the 2019 protest movement.

    Hong Kong’s prosecution of one of Asia’s most senior clergyman has cast the relationship between Beijing and the Holy See into sharp focus.

    Zen has strongly opposed a controversial agreement struck in 2018 between the Vatican and China over the appointment of bishops. Previously both sides had demanded the final say on bishop appointments in mainland China, where religious activities are heavily monitored and sometimes banned.

    Born to Catholic parents in Shanghai in 1932, Zen fled to Hong Kong with his family to escape looming Communist rule as a teenager. He was ordained as a priest in 1961 and made Bishop of Hong Kong in 2002, before retiring in 2009.

    Known as the “conscience of Hong Kong” among his supporters, Zen has long been a prominent advocate for democracy, human rights and religious freedom. He has been on the front lines of some of the city’s most important protests, from the mass rally against national security legislation in 2003 to the “Umbrella Movement” demanding universal suffrage in 2014.

    [ad_2]

    Source link

  • The Fed offers more clues about rate hikes | CNN Business

    The Fed offers more clues about rate hikes | CNN Business

    [ad_1]


    New York
    CNN Business
     — 

    Americans are getting ready for food, family and football on Thursday, but investors were still holding off until Wednesday afternoon before starting to give thanks.

    That’s because the Federal Reserve released the minutes from its latest meeting at 2pm ET Wednesday, which provided more clues about the central bank’s thinking on inflation and interest rate hikes.

    At its November 2 meeting the Fed raised rates by three-quarters of a percentage point — its fourth straight hike of such a large magnitude. But Fed chair Jerome Powell suggested at a press conference that the Fed may soon begin to slow the pace of hikes.

    The minutes from that meeting showed that several other Fed policymakers agreed with Powell’s assessment.

    “A number of participants observed that, as monetary policy approached a stance that was sufficiently restrictive to achieve the Committee’s goals, it would become appropriate to slow the pace of increase in the target range for the federal funds rate,” the Fed said in the minutes.

    The Fed added that “a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate.”

    Stocks, which were relatively flat and meandering before the minutes came out, popped after their release. The Dow ended the day up more than 95 points, or 0.3%. The S&P 500 jumped 0.6% and the Nasdaq rose 1%.

    Other Fed members, most notably vice chair Lael Brainard, had also hinted n recent speeches at a slower pace of hikes. Yet there have been confusing signals from other Fed officials, who have continued to stress that inflation isn’t going away and must be brought under control.

    To that end, the Fed said in the minutes that inflation remains “stubbornly high” and “more persistent than anticipated.”

    With that in mind, traders are now pricing in a more than 75% chance that the Fed will raise rates by only a half-point at its December 14 meeting, according to futures contracts on the CME. That’s up from odds of 52% for a half-point hike a month ago, but lower than an 85% likelihood of a half-point increase that was priced in just last week.

    A recent batch of inflation reports seem to suggest that the pace of runaway price increases is finally starting to slow to more manageable levels. The job market remains relatively healthy as well, although the most recent jobless claims figures ticked up from a week ago.

    But as long as the labor market remains firm and inflation pressures continue to ebb, the Fed will likely pull back on the magnitude of its rate hikes.

    Some experts are growing concerned that if the Fed goes too far with rates, the increases could eventually slow the economy too much and potentially lead to much higher unemployment, job losses and even a recession.

    The Fed’s rate hikes have had a clear impact on the housing market, with surging mortgage rates helping to put a dent into home sales.

    Still, Wall Street is growing more confident that the Fed might be able to pull off a so-called soft landing. The Dow soared 14% in October, its best month since January 1976. The Dow is up another 4.5% in November and is now only down 6% this year.

    The S&P 500 and Nasdaq also have rebounded significantly since October, but both of those broader market indexes remain down more sharply for the year than the Dow.

    [ad_2]

    Source link

  • Fed officials crushed investors’ hopes this week | CNN Business

    Fed officials crushed investors’ hopes this week | CNN Business

    [ad_1]


    New York
    CNN Business
     — 

    Investors sleuthing for clues about what the Federal Reserve will decide during its December policy meeting got quite a few this week. But those hints about the future of monetary policy point to an outcome they won’t be very happy about.

    What’s happening: Federal Reserve officials made a series of speeches this week indicating that aggressive interest rate hikes to fight inflation would continue, souring investors’ hopes for a forthcoming central bank policy shift. On Thursday, St. Louis Federal Reserve President James Bullard said the central bank still has a lot of work to do before it brings inflation under control, sending the S&P 500 down more than 1% in early trading. It later pared losses.

    Bullard, a voting member on the rate-setting Federal Open Market Committee (FOMC), said that the moves the Fed has made so far to fight inflation haven’t been sufficient. “To attain a sufficiently restrictive level, the policy rate will need to be increased further,” he said.

    Those comments come a day after Kansas City Fed President Esther George, a voting member of the FOMC, said to The Wall Street Journal that she’s “looking at a labor market that is so tight, I don’t know how you continue to bring this level of inflation down without having some real slowing, and maybe we even have contraction in the economy to get there.”

    San Francisco Fed President Mary Daly added on Wednesday that a pause in rate hikes was “off the table.”

    A numbers game: Fed officials should increase interest rates to somewhere between 5% and 7% to tamp inflation, Bullard said Thursday. Those numbers shocked investors, as they would require a series of significant and economically painful hikes which increase the chance of a hard landing.

    The current interest rate sits between 3.75% and 4% and the median FOMC participant projected a peak funds rate of 4.5-4.75% in September. If those numbers hold steady, Fed members would only raise rates by another three-quarters of a percentage point.

    But Fed Chair Powell said at the November meeting that the projections are likely to rise in December and if Bullard is correct, that means investors can expect another one to three percentage points in rate hikes.

    Dreams of a pivot: October’s softer-than-expected CPI and producer price reading bolstered investors’ hopes that the Fed might ease its aggressive rate hikes and sent markets soaring to their best day since 2020 last week.

    But messaging from Fed officials this week has brought Wall Street back down to earth.

    That’s because market rallies help to expand the economy, said Liz Ann Sonders, Managing Director and Chief Investment Strategist at Charles Schwab, which is the opposite of what the Fed is trying to do with its tightening policy. Fed officials could be attempting to do some “jawboning” via excessively hawkish speeches in order to bring markets down, she said.

    The bottom line: Investors listen closely to Bullard’s comments because he’s known for having looser lips than other Fed officials, Peter Boockvar, chief investment officer of Bleakley Financial Group, wrote in a note Thursday. But his hawkish predictions may have been “overboard,” especially since he won’t be a voting member of the FOMC next year.

    Still, Wall Street analysts are listening. Goldman Sachs raised its peak fed funds rate forecast on Thursday to 5-5.25%, up from 4.75-5%.

    A series of high-profile layoffs have rattled Big Tech this month.

    Amazon confirmed that layoffs had begun at the company and would continue into next year, just days after multiple outlets reported the e-commerce giant planned to cut around 10,000 employees. Facebook-parent Meta recently announced 11,000 job cuts, the largest in the company’s history. Twitter also announced widespread job cuts after Elon Musk bought the company for $44 billion.

    The series of high-profile layoff announcements prompted fears that the labor market was weakening and that a recession could be around the corner.

    Those fears aren’t unwarranted: The Federal Reserve is actively working to slow economic growth and tighten financial conditions to rebalance the white-hot labor market. Further layoffs in both tech and other industries are likely inevitable as the Fed continues to raise interest rates.

    But this wave of layoffs isn’t as significant as headlines might lead Americans to believe. Thursday’s weekly jobless claims actually fell by 4,000 to 222,000 in spite of the surge in tech job cuts.

    In a note on Thursday Goldman Sachs analysts outlined three reasons why the layoffs may not point to a looming recession in the US.

    First off, the tech industry accounts for a small share of aggregate employment in the US. While information technology companies account for 26% of the S&P 500 market cap, it accounts for less than 0.3% of total employment.

    Second, tech job openings remain well above their pre-pandemic level, so laid-off tech workers should have good chances of finding new jobs.

    Finally, tech worker layoffs have frequently spiked in the past without a corresponding increase in total layoffs and have not historically been a leading indicator of broader labor market deterioration, Goldman analysts found.

    “The main problem in the labor market is still that labor demand is too strong, not too weak,” they concluded.

    Mortgage rates dropped sharply last week following a series of economic reports that indicated inflation may finally be easing, reports my colleague Anna Bahney

    The 30-year fixed-rate mortgage averaged 6.61% in the week ending November 17, down from 7.08% the week before, according to Freddie Mac, the largest weekly drop since 1981.

    But that’s still significantly higher than a year ago when the 30-year fixed rate stood at 3.10%.

    “While the decline in mortgage rates is welcome news, there is still a long road ahead for the housing market,” said Sam Khater, Freddie Mac’s chief economist. “Inflation remains elevated, the Federal Reserve is likely to keep interest rates high and consumers will continue to feel the impact.”

    Affording a home remains a challenge for many home buyers. Mortgage rates are expected to remain volatile for the rest of the year. And prices remain elevated in many areas, especially where there is a very limited inventory of available homes for sale.

    Meanwhile, inflation and rising interest rates mean many would-be buyers are also facing tightened budgets.

    [ad_2]

    Source link

  • Global investors are bullish again on China as Beijing switches to damage control | CNN Business

    Global investors are bullish again on China as Beijing switches to damage control | CNN Business

    [ad_1]


    Hong Kong
    CNN Business
     — 

    Market sentiment on Chinese stocks hit rock bottom just weeks ago after President Xi Jinping secured a historic third term in power and stacked his top team with loyalists in a clean sweep not seen since the Mao era.

    But in the past week, a series of unexpected steps by Beijing — the easing of draconian zero-Covid restrictions, moves to salvage the ailing property sector and Xi’s personal return to the world stage -— have triggered a huge rally.

    Hong Kong’s benchmark Hang Seng

    (HSI)     Index has gained 14% since last Friday, putting it squarely into bull market territory, or more than 20% above its recent low. A key index of Chinese stocks in New York jumped 15% during the same period.

    On the tightly controlled mainland markets, Shanghai and Shenzhen stocks have also advanced more than 2%.

    “China continued to see a barrage of upside activity… as reopening measures are a clear buy signal,” said Stephen Innes, managing partner for SPI Asset Management. “We are in a sea change after China’s more progressive policy evolution arrived unexpectedly.”

    Investors now have a “tactically constructive” view on China after key concerns were addressed by credible policy actions, according to Bank of America’s monthly survey of Asian fund managers released on Wednesday.

    Some investment banks even upgraded their China growth forecasts following the policy changes. On Wednesday, ANZ Research hiked its China GDP forecast to 5.4% for 2023 from 4.2% previously.

    “The changes reflect the party leadership’s intention to stop losses. They want to correct the market’s perception of China’s economic outlook, as President Xi Jinping interacts with global leaders at G20,” it said.

    Investors sold off China stocks in October due to fears that Xi’s tightening grip on power would lead to the continuation of existing policies, such as zero-Covid and the common prosperity campaign, that have dragged down the economy and battered financial markets.

    A leadership team loyal to Xi also suggested that China may continue to prioritize ideology over the kind of pragmatic decision-making that had enabled the country’s swift economic rise over the past four decades.

    But the latest policy shifts, although not a full-throated economic opening, have been enough to excite investors and analysts waiting for any sign of China easing its rules.

    From Bali to Bangkok, Xi returned to the world stage after a near three-year absence. There were encouraging signs, in particular, coming from the historic meeting between Xi and US President Joe Biden on Monday, which fueled expectations for stronger economic ties between the two major world powers.

    “The US’s willingness to set a ‘floor’ on US-China relations likely means the US is keen to find common ground with China to prevent extreme outcomes,” said Jefferies analysts in a research note earlier this week.

    Chinese companies on Wall Street have been hammered by delisting risks since last year because of a simmering spat between the two countries over audits. In December, US regulators finalized rules to ban trading in shares of Chinese companies if they can’t access their audit papers, a request that had been denied by Beijing on national security grounds.

    “We believe the Xi-Biden meeting could reduce the risk of Chinese ADRs being delisted,” the Jefferies analysts added.

    In August, the two countries reached an agreement to allow US officials to inspect the audit papers of those firms, taking a first step toward resolving the dispute.

    Reuters also reported Wednesday that US regulators gained “good access” in their review of auditing work done on New York-listed Chinese firms during a seven-week inspection in Hong Kong.

    Despite this week’s rally, some analysts remain cautious. Qi Wang, CEO of MegaTrust Investment in Hong Kong, said the recovery may be driven by a lot of buying to close out previous short positions and money chasing quick returns.

    “I don’t think the long-term appetite for China and Hong Kong shares will return so quickly. Right or wrong, there were some fatal blows to global investor confidence earlier this year,” Wang said.

    “There is some good news recently, but the big institutional money still need time to assess the situation, including the economic prospect for next year,” he added.

    Including the recent surge, the Hang Seng index is still down 23% this year, making it one of the world’s worst performing indices. The Nasdaq Golden China Index, a popular index tracking Chinese companies in New York, has plunged more than 33% so far in 2022.

    “This week’s rally is a strong over-reaction to mildly positive news,” said Brock Silvers, Hong Kong-based chief investment officer at Kaiyuan Capital, a private equity investment firm. “The market was desperate for good news, but it’s foolish to think that once Covid is behind us we’ll return to the go-go days of high octane growth.”

    Silvers added that the economic factors and political risks that made China “uninvestable” a month ago are still prevalent and are likely to reassert themselves before long.

    China is still dealing with Covid outbreaks and remains firmly committed to measures long abandoned by most other nations. Even more serious is the real estate crisis and the risks that poses for the banking sector, he said, adding that the 16-point rescue plan Beijing announced last Friday did not go far enough.

    Hao Hong, chief economist for Grow Investment Group, described the rally as sentiment-driven and technical in nature, because the market was previously oversold to an epic level.

    But as winter is coming, Covid cases are set to rise.

    “Whether we could deal with the resurgence with adequate medical facilities and without panic remains to be seen,” he said, adding it also remains uncertain how effective the new property support measures are and whether the developers can “rise from ashes.”

    If China re-tightens Covid restrictions or US-China tension flares up again, market sentiment could plummet once more, he said.

    [ad_2]

    Source link

  • Stocks have been clobbered this year, but people are still contributing to their retirement accounts | CNN Business

    Stocks have been clobbered this year, but people are still contributing to their retirement accounts | CNN Business

    [ad_1]

    Stocks and bonds have been turning in volatile, bearish performances this year in an economy marked by high inflation and rising interest rates. But that hasn’t deterred most retirement savers, especially the youngest ones.

    401(k) participants have held relatively steady in their savings contribution rates and in their portfolio allocations, according to new third quarter data from Fidelity Investments. And GenZers have actually increased their contributions.

    By the end of the third quarter, the S&P 500 was down 25% for the year. The Nasdaq had fallen 33%. And the S&P US aggregate bond index was off about 13%.

    So it’s not surprising that the average 401(k) account balance fell to $97,200 in the third quarter, according to Fidelity, one of the country’s leading providers of workplace retirement plans. That’s down 6% from the second quarter and 23% from a year earlier.

    But the average savings rate among 401(k) participants, meanwhile, held relatively steady at 13.8%, which includes both employee and employer contributions. That’s only down a fraction from the 13.9% recorded in the second quarter and the 14% recorded in the first quarter.

    Meanwhile GenZers in the workplace – those roughly ages 22 to 25 – increased their savings levels from 10% to 10.3%. That may account for why the youngest generation of today’s employees actually saw their account balances increase 1.2% relative to the second quarter, despite terrible market performance.

    In terms of gender differences, men saved a bit more than women (14.5% versus 13.5%). And age wise, Boomers on the cusp of retirement saved the most (16.5%).

    Allocations also held fairly steady, Fidelity found, with only 4.5% of 401(k) and 403(b) plan participants opting to make a change in the third quarter. The majority of those who did made just one change, and only 29% of them opted for a more conservative investment.

    Despite the volatility in the markets and the economy this year, “Retirement savers have wisely chosen to avoid the drama and continue making smart choices for the long-term,” said Kevin Barry, president of Workplace Investing at Fidelity Investments.

    [ad_2]

    Source link

  • Target warns of a weak holiday season. Shares are tumbling | CNN Business

    Target warns of a weak holiday season. Shares are tumbling | CNN Business

    [ad_1]


    New York
    CNN Business
     — 

    Target’s profit plunged 52% in the third quarter and the retailer warned of a sluggish holiday.

    Target blamed inflation and a deteriorating economic outlook for its miserable quarter — and also lowered its outlook for the rest of the year. That sent shares down more than 12% in premarket trading.

    CEO Brian Cornell said that in recent weeks that “sales and profit trends softened meaningfully, with guests’ shopping behavior increasingly impacted by inflation, rising interest rates and economic uncertainty.”

    Still, it wasn’t all bleak: Sales of necessities were strong, including food and house essentials. Similar to Walmart, Target said sales in “discretionary categories” like electronics and clothing hampered its bottom line.

    Target

    (TGT)     plans to reduce costs by $3 billion over the next three years in an effort to “simplify and gain efficiencies across its business with a focus on reducing complexities and lowering costs,” it said.

    Looking forward to the busy holiday shopping season, Cornell said the “rapidly evolving consumer environment means we’re planning the balance of the year more conservatively.” Target forecasts a low-single digit percentage decline in sales at stores open at least a year.

    “This quarter confirms that the middle-class consumer has been hit hard by inflation and is changing the way they spend by trading down, buying more value-priced goods, and shifting to white label products,” said Hilding Anderson, head of retail strategy at digital consultancy Publicis Sapient, in an email. “It suggests continued headwinds for the non-value players in big box retail during the balance of this holiday season.”

    Earlier this year, Target’s inventory glut forced the company to hold massive discounts on big-ticket items to alleviate the problem. It marked down prices on some discretionary purchases that consumers have pulled back on and canceled pending orders from suppliers.

    Target shares are down more than 20% for the year.

    [ad_2]

    Source link

  • This oil refiner is cutting 1,100 jobs — and giving billions of dollars to its shareholders | CNN Business

    This oil refiner is cutting 1,100 jobs — and giving billions of dollars to its shareholders | CNN Business

    [ad_1]


    New York
    CNN
     — 

    Phillips 66 is cutting at least 1,100 jobs by the end of this year as the refining giant seeks to slash costs and steer a larger chunk of its soaring profits to shareholders.

    At its investor day meeting in New York Wednesday, Phillips 66 detailed plans to slim down in a bid to save about $1 billion in annual costs.

    In a presentation to shareholders, the refiner projected a workforce of under 12,900 people by the end of this year, down from 14,000 last year and 14,300 in 2020.

    Phillips 66 spokesperson Bernardo Fallas said the smaller workforce was driven by a combination of attrition and eliminated positions.

    Most of the job cuts have already taken place and were communicated to employees in late October, the spokesperson said, adding that recent attrition levels significantly lowered the number of employees impacted.

    The layoffs come despite the fact that Phillips 66, one of the nation’s largest refiners, has raked in $9.1 billion in profit so far this year, up from just $44 million a year ago. The company’s share price has soared 45% so far this year, easily outperforming the 20% decline for the broader S&P 500.

    “Phillips 66 is undergoing a company-wide effort to optimize its cost structure and reimagine its operating model to enable sustainable savings,” the spokesperson said.

    Houston-based Phillips 66 said the cost-cutting moves, along with other steps, will give the company more financial firepower to boost stock buybacks and dividends.

    Phillips 66 said it plans to return an additional $10 billion to $12 billion to shareholders between mid-2022 and the end of 2024.

    “We are announcing a number of priorities designed to reward shareholders,” Phillips 66 CEO Mark Lashier said in a statement.

    [ad_2]

    Source link

  • What midterm elections could mean for the US economy | CNN Business

    What midterm elections could mean for the US economy | CNN Business

    [ad_1]

    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 Business
     — 

    Tuesday’s midterm elections come at a time of economic vulnerability for the United States. Recession predictions have largely turned to “when” not “if” and inflation remains stubbornly elevated. Americans are feeling the pain of rising interest rates and are facing a winter filled with geopolitical tension.

    The results of Tuesday’s election will determine the makeup of a Congressional body that holds the potential to enact policies that will fundamentally change the fiscal landscape.

    Here’s a look at what policy issues investors will pay particular attention to as they digest election results.

    Tax changes: Last week, President Joe Biden suggested he may impose a windfall tax on Big Oil companies after they recorded record profits on high gas prices. Republicans would be less likely to approve that windfall tax on oil company profits and also are generally not in favor of tax hikes on the wealthy, reports my colleague Paul R. La Monica.

    “What do midterms mean for the markets? If Republicans get the House, tax hikes are dead in the water,” said David Wagner, a portfolio manager with Aptus Capital Advisors.

    What about tax cuts? If Republicans do take control of Congress, it would be difficult to enact any major tax reductions without some backing from Democrats or President Biden, meaning there could be grandstanding without much action.

    Debt limit: The federal debt ceiling was last lifted in December 2021 and will likely be hit by the Treasury at some point next year. That means it will need to be raised again in order to ensure that America can borrow the money it needs to run its government and ensure the smooth operation of the market for US Treasuries, totaling roughly $24 trillion.

    A fight seems to be brewing between Democrats and Republicans. House Republicans indicate that they may ask for steep spending cuts in exchange for boosting the ceiling.

    If the government ends up divided and brinkmanship continues, there could be bad news for markets. The last time such gridlock occurred, under the Obama administration in 2011, the United States lost its perfect AAA credit rating from Standard & Poor and stocks dropped more than 5%.

    Spending: Democrats have indicated that they intend to focus on parts of the fiscal agenda proposed by President Biden in 2021 that have not yet become law, including expanding health coverage and child care tax credits. A Republican win or gridlock could table that. Goldman Sachs economists also note that a Democratic victory could likely increase the federal fiscal response in the event of recession, while Republicans would be more likely to avoid costly relief packages.

    Social Security: Popular programs like Social Security and Medicare face solvency issues long-term and the topic has become a hot-button issue on both sides of the aisle. The topic is so closely watched that even debating changes could impact consumer confidence, say analysts.

    Democratic Senator Joe Manchin said last week that spending changes must be made to shore up Social Security and other programs which he said were “going bankrupt.” He said at a Fortune CEO conference that he was in favor of bipartisan legislation within the next two years to confront entitlement programs that are facing “tremendous problems.” Republican Senator Rick Scott has proposed subjecting almost all federal spending programs to a renewal vote every five years. Analysts say that could make Social Security and Medicare more vulnerable to cuts.

    The Federal Reserve: Lawmakers have been increasingly speaking out against the pace of the Federal Reserve’s interest rate hikes meant to fight inflation. Democratic Senators Elizabeth Warren, alongside Banking Chair Sherrod Brown, John Hickenlooper and others have called on Fed Chair Jerome Powell to slow the pace of hikes.

    Now, Republicans are getting involved. Senator Pat Toomey, the top Republican on the Banking Committee, asked Powell last week to resist buying government debt if market conditions remain subdued. Expect more scrutiny from both parties after the elections.

    The stock market under President Biden started with a boom, but as we head into midterm elections, markets are going bust, reports my colleague Matt Egan.

    As of Monday, the S&P 500 has fallen by 1.2% since Biden took office in January 2021. That marks the second-worst performance during a president’s first 656 calendar days in office since former President Jimmy Carter, according to CFRA Research.

    Out of the 13 presidents since 1953, Biden ranks ninth in terms of stock market performance through this point in office, besting only former Presidents George W. Bush (-32.8%), Carter (-8.9%), Richard Nixon (-17.2%) and John F. Kennedy (-2.1%), according to CFRA.

    By contrast, Biden’s two immediate predecessors headed into their first midterm election with stock markets surging. The S&P 500 climbed 52.2% during the first 656 calendar days in office for former President Barack Obama and 23.9% under former President Donald Trump, according to CFRA.

    American consumers borrowed another $25 billion in September, according to newly released Federal Reserve data, as higher costs led to further dependence on credit cards and other loans, reports my colleague Alicia Wallace.

    In normal economic times, that would be a concerningly large jump, said Matthew Schulz, chief credit analyst for LendingTree, wrote in a tweet. “However, it is actually the second-smallest increase in the past year.” Economists were anticipating monthly growth of $30 billion, according to Refinitiv consensus estimates.

    The data is not adjusted for inflation, which is at decade highs and weighing heavily on Americans, outpacing wage gains and forcing consumers to rely more heavily on credit cards and their savings.

    In the second quarter of this year, credit card balances saw their largest year-over-year increases in more than two decades, according to separate data from the New York Federal Reserve. The third-quarter household debt and credit report is set to be released Nov. 15.

    Correction: A previous version of this article incorrectly stated the number of calendar days in the analysis as well as the stock market performance under various US presidents during that period.

    [ad_2]

    Source link

  • Amazon stock falls 14% on light holiday quarter sales forecast | CNN Business

    Amazon stock falls 14% on light holiday quarter sales forecast | CNN Business

    [ad_1]



    CNN Business
     — 

    Amazon

    (AMZN)     stock fell some 14% in after-hours trading Thursday after the company forecast its holiday quarter sales would be lighter than analysts had expected.

    The e-commerce giant said it expects revenue for the final three months of the year to be between $140 billion to $148 billion, significantly below the $155 billion analysts surveyed by Refinitiv had expected. The weaker forecast comes as rising inflation and looming recession fears weigh on consumer purchasing decisions.

    Amazon reported revenue of $127.1 billion for its third-quarter, a 15% increase from the prior year but just missing Wall Street estimates.

    “There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets,” Amazon CEO Andy Jassy said in a statement accompanying the earnings release.

    The company reported its Amazon Web Services segment sales increased 27% year-over-year to $20.5 billion – representing a slower pace of growth for a closely-watched business unit than Wall Street had expected.

    But Amazon’s cloud computing division continues to be a strong profit driver for the company. Amazon posted a $2.9 billion profit for the three-month period, much improved from the prior quarter when it posted $2 billion net loss largely due to its investment in electric vehicle maker Rivian.

    The latest results comes at a precarious time for the e-commerce giant. Amazon initially saw its business boom during the pandemic, as more consumers relied on online shopping. This year, however, the company is confronting a shift back to in-person shopping as well as a souring economic outlook has hampered consumers’ demand.

    Jesse Cohen, a senior analyst at Investing.com, said Amazon’s earnings report “proves it’s not immune to the challenges facing the tech industry at large as it struggles in the face of worsening macroeconomic headwinds, such as soaring inflation and worries about a possible recession.”

    [ad_2]

    Source link

  • Google’s core business is slowing down amid recession fears | CNN Business

    Google’s core business is slowing down amid recession fears | CNN Business

    [ad_1]


    New York
    CNN Business
     — 

    Google may be the giant in the digital advertising world, but even it is not immune to the impact that the economic downturn and recession fears are having on the online ad market.

    Google parent company Alphabet

    (GOOGL)     on Tuesday reported earnings results for the third quarter that fell short of Wall Street analysts’ estimates for both sales and profits, due in large part to a sharp slowdown in the growth of its core advertising business.

    It reported revenue of nearly $69.1 billion, up just 6% from the same period in the prior year. Google’s advertising revenues grew just 2.5% year-over-year, compared to the 43% growth it posted a year ago. YouTube’s ad business, which competes with TikTok, was especially hard hit, with revenue declining nearly 2% from the year-ago quarter.

    Google’s net income, meanwhile, came in at $13.9 billion, down more than 26% from the year prior and well below the $16.6 billion analysts had projected.

    The company’s shares fell 6% in after-hours trading Tuesday following the report.

    Sundar Pichai, CEO of Alphabet and Google, nodded to the tougher economic climate in a statement included with the results.

    “We’re sharpening our focus on a clear set of product and business priorities,” Pichai said. “We are focused on both investing responsibly for the long term and being responsive to the economic environment.”

    Tech companies, including Google, reported that they’d started to feel the impact of declining online ad spending in the prior quarter. High inflation, looming recession fears and the ongoing war in Ukraine have all continued to weigh on the industry.

    Growth in other areas of Google’s business also appear to be slowing. Google Cloud revenue grew 37% year-over year, a deceleration from the nearly 45% growth it posted in the year-ago quarter, and the segment’s net loss increased to $699 million from $644 million during the same quarter last year.

    Net loss from Google’s “Other Bets” segment, which includes business efforts such as its self-driving car unit Waymo, also accelerated year-over-year during the quarter to $1.6 billion.

    “Google delivered a disappointing quarter with the search giant underperforming our expectations across almost all business units, most importantly its core ad search segment,” said Investing.com Senior Analyst Jesse Cohen.

    During a call with analysts Tuesday, Pichai said the company has begun “realigning resources to invest in our biggest growth opportunities.”

    “Over the past quarter, we have made several shifts away from lower priority efforts to fuel highest growth priorities,” Pichai said, adding that the company plans to cut back on headcount additions during the final three months of the year.

    Google CFO Ruth Porat said on the call that strong growth in the fourth quarter of 2021 will make year-over-year ad revenue growth comparisons to the current quarter difficult, and that the strength of the US dollar is expected to increasingly weigh on the company’s results. The company did not provide detailed financial outlook for the current quarter.

    [ad_2]

    Source link

  • Analysis: Elon Musk owning Twitter should give everyone pause | CNN Business

    Analysis: Elon Musk owning Twitter should give everyone pause | CNN Business

    [ad_1]



    CNN Business
     — 

    In late May, something unusual happened at Twitter. Shareholders voted to approve two proposals to change how the company operates — and did so against Twitter’s recommendations.

    While shareholder votes are often nonbinding for management, these nonetheless pushed for good corporate governance practices. The first proposal required Twitter to compile a report on the risks of using concealment clauses, such as nondisclosure agreements, to ensure greater accountability for the company and protections for staff. The second proposal required Twitter to disclose its spending on elections.

    The developments, however, were overshadowed by something else unusual happening at the company. Elon Musk, the mercurial billionaire, had agreed to buy Twitter for $44 billion the month before only to begin raising doubts about the deal soon after. The deal to take Twitter private, which was finally completed this week, likely renders the votes moot; Musk will have final say, not shareholders, a power he wields over numerous entities.

    In the tech industry, and especially in the social media sector, annual shareholder meetings have long been something of a farce that captures the broader power imbalance in Silicon Valley. Rather than hold management accountable, shareholders typically run into an unbreachable wall of opposition from founders like Meta’s Mark Zuckerberg, Snap’s Evan Spiegel, and Google’s Larry Page and Sergey Brin, who control a majority of voting shares at their respective companies.

    Twitter was different. The company billed itself as a “town square,” and also operated in a more democratic fashion than many of its peers, sometimes to its detriment. The company’s CEOs, of which there have been several over the years, clashed with the board and left or were pushed out. Twitter was vulnerable to an activist investor, shareholder proposals and ultimately a takeover from the world’s richest man. It was messy, sure. Zuckerberg once allegedly described Twitter as a “clown car.” But at least it was a clown car that partly belonged to the public.

    Now, Musk joins the list of rich, white men who single-handedly control social platforms that collectively reach and shape the lives of billions of people around the world. And Musk, who will reportedly have “absolute control over Twitter” according to a shareholders’ agreement, promises to be uniquely disruptive.

    In an effort to support his maximalist vision of “free speech,” the Tesla CEO plans to rethink Twitter’s content moderation policies and permanent bans for users who previously violated the platform’s policies, including former President Donald Trump. He also reportedly wants to gut Twitter’s staff. and has already fired several top executives.

    Each of these moves has the potential to undo the work of employees who have labored to make Twitter a better platform with “healthy” conversations after years of complaints from users about harassment and toxic discourse. These moves could also upend the many corners of society shaped to some degree by Twitter. While it is barely a tenth the size of Facebook, Twitter has always had an outsized influence over the worlds of media, politics and tech.

    That influence now belongs to Musk. There are two vastly diverging views of the billionaire. Many think of him as a generational figure who is a hybrid of Thomas Edison, Steve Jobs and the fictional Tony Stark — an innovative spirit who defies skeptics to build big businesses that better the world. The others can’t look past his history of false promises, erratic behavior and incendiary remarks.

    To those in the first camp, Musk serving as the sole decider at Twitter may be cause for celebration. To those in the second, quite the opposite. But both camps have cause for concern.

    More than any other figure, Musk has become the embodiment of a level of concentration of power and wealth that would have seemed almost unthinkable just a couple of decades ago.

    The world’s richest man, worth more than the GDPs of many countries, is now in control of one of the world’s most influential social networks. One individual now owns or oversees businesses that are shaping the automotive and space industries, rethinking core infrastructure with freight tunnels and satellite internet, building humanoid robots and brain-interface machines and determining how millions connect with each other and find news.

    Musk, prone to self-aggrandizement, insists his interest is to aid humanity, but he also insists that he knows best how to do so at each turn and does not seem to take criticism very well. He and his supporters have been known to lash out at detractors on Twitter, where he spends an unusual amount of time for someone running multiple companies. And now, rather than take his ball and going home when countless users criticize him for, say, offering unsolicited advice on how to end Russia’s war in Ukraine, he is buying the whole field for $44 billion.

    In 2022, many people may be accustomed to the tremendous power wielded by tech founders. Jeff Bezos, a fellow billionaire and Musk’s rival, also owns a rocket company and used his vast wealth to acquire The Washington Post. But Musk isn’t buying a newspaper, he’s buying the news, or at least one of the key platforms that shape it.

    It’s a level of unimpeachable power perhaps only rivaled by Zuckerberg, and there have been clear downsides in this sphere. Zuckerberg, whether he was being truthful or not, tried to downplay his platforms’ influence in the 2016 US presidential election only to spend years trying to extinguish scandals related to it. Facebook has since tried to push off its most difficult decisions to an independent oversight board, but the buck still stops with Zuckerberg. The same will go for Musk.

    Elon Musk is a conglomerate, and each arm of his empire potentially gives him more leverage, real or imagined, in advocating for the others. Before lawmakers choose to speak out about concerns with Tesla, for example, some may also weigh whether Musk might discontinue offering his Starlink broadband internet system in Ukraine, or whether he might put his thumb on the scale to promote certain content on Twitter that may disadvantage them.

    More immediately, however, owning a social network ensures Musk a different kind of personal power increasingly sought by other controversial billionaires, including Trump (with Truth Social) and Musk’s friend Ye (with a proposed deal to buy Parler). It is the power of knowing that, no matter what he says and no matter how offensive it may be, he can never be turned off.

    [ad_2]

    Source link

  • Microsoft earnings hit by personal computing slowdown | CNN Business

    Microsoft earnings hit by personal computing slowdown | CNN Business

    [ad_1]



    CNN Business
     — 

    Microsoft posted a double-digit profit decline in the three-month period ending in September as the company confronted a slowdown in the personal computing industry and a broader economic downturn.

    The tech giant on Tuesday reported net income of $17.6 billion for the quarter, a decrease of 14% from the year prior. Microsoft

    (MSFT)    ’s revenue, meanwhile, grew a modest 11% to $50.1 billion. Both results were better than analysts had expected.

    Microsoft’s Azure cloud services unit saw revenue increase by 35% from the prior year, but the growth was slower than some analysts had hoped for a division that has been one of the company’s biggest bright spots in recent years.

    Other parts of Microsoft’s business declined. Microsoft said revenue from its Windows OEM operations fell 15% from the year prior, which comes as demand for personal computers has fallen sharply on the heels of a pandemic-fueled boom. Consulting firm Gartner reported earlier this month that worldwide PC shipments declined 19.5% in the third quarter of 2022, compared to the same period last year. This marks the steepest market decline since Gartner began tracking the PC market in the mid-1990s.

    Microsoft also said revenue from Xbox content and services declined by 3%. The company reportedly recently laid off employees in its Xbox division, among other parts of the company, as it — like many other tech companies right now — looks to cut costs.

    Shares of Microsoft fell 2% in after-hours trading Tuesday following the earnings report.

    Microsoft’s stock has fallen more than 25% since the beginning of the year, amid a broader market downturn as rising inflation, geopolitical uncertainty from the war in Ukraine and more macroeconomic headwinds continue to wreak havoc on the tech industry.

    “In this environment, we’re focused on helping our customers do more with less, while investing in secular growth areas and managing our cost structure in a disciplined way,” Satya Nadella, CEO of Microsoft, said in a statement Tuesday announcing the quarterly earnings.

    Haris Anwar, senior analyst at Investing.com, called Microsoft’s earnings report a “mixed bag” in a commentary after the results were released on Tuesday.

    “It shows that Microsoft is weathering the economic storm better than other technology players and its diversified business model is playing a big role in doing so,” Anwar said. But he added that the slowing cloud computing growth was cause for concern.

    “If this growth deceleration continues, it could harm an investment case in the company’s stock which is considered a safe-haven amid the market turmoil, with these concerns reflected in the company’s shares being down in extended trading,” Anwar said.

    [ad_2]

    Source link

  • Meta’s stock falls 17% as its quarterly profit is cut in half | CNN Business

    Meta’s stock falls 17% as its quarterly profit is cut in half | CNN Business

    [ad_1]


    New York
    CNN Business
     — 

    Meta on Wednesday posted the second quarterly revenue decline in its history since going public and warned that it is making “significant changes” aimed at cutting costs ahead of 2023, as it confronts an economic downturn that is hitting its core online advertising business.

    For the three months ended in September, Meta

    (FB)     posted revenue of $27.7 billion, down 4% year-over-year and slightly above Wall Street analysts’ expectations. The Facebook parent company posted its first-ever quarterly revenue decline during the June quarter.

    The company reported net income of nearly $4.4 billion — less than half the amount it made during the same period in the prior year and below analysts’ projections.

    “We’re approaching 2023 with a focus on prioritization and efficiency that will help us navigate the current environment and emerge an even stronger company,” Mark Zuckerberg, Meta’s founder and CEO, said in a statement.

    Meta’s stock fell almost 17% in after-hours trading Wednesday following the results.

    Demand for online advertising has declined in recent months amid rising inflation and fears of a looming recession. Tech companies like Google and Snap have also seen hits to their ad revenues. Meta CFO David Wehner said on a call with analysts following the report that the average price per ad across Meta’s platforms fell 18% during the quarter.

    At the same time, Meta’s user growth is slowing amid heightened competition from rivals like TikTok. Meta reported having 2.96 billion monthly active users on its core Facebook app at the end of the quarter, up 2% year-over-year. That’s down from the 6% growth rate it posted in the year-ago quarter. Daily active users on Meta’s family of apps grew 4% to 2.93 billion, down from the 11% increase it posted the year prior.

    Zuckerberg noted on the call that Instagram now has more than 2 billion monthly active users and WhatsApp has more than 2 billion daily active users.

    These challenges to its core business come as Meta is funneling billions of dollars into an ambitious new bet to build a future version of the internet called the metaverse that likely remains years away.

    Wehner said operating losses from the company’s metaverse ambitions, which are categorized under its Reality Labs unit, are expected to “grow significantly year-over-year” in 2023. Reality Labs lost nearly $3.7 billion in the September quarter, and has cost the company a total of $9.4 billion so far this year. Revenue from the Reality Labs unit also fell by nearly 50% year-over-year in the September quarter.

    Altimeter Capital, a Meta sharehoder, last week wrote an open letter calling on the company to reduce its headcount expenses by at least 20% and its annual capital expenditure by at least $5 billion, and to limit its investment in the metaverse to no more than $5 billion per year.

    In Wednesday’s report, Wehner said the company is “making significant changes across the board to operate more efficiently.” Executives said the company expects headcount at the end of 2023 will be roughly in line with or slightly smaller than the 87,314 it reported as of the end of September (an increase of 28% from the year prior).

    “We are holding some teams at in terms of headcount, shrinking others and investing headcount growth only in our highest priorities,” Wehner said. He also hinted that the company could shrink its physical office footprint.

    Zuckerberg said on the call that the three key areas of investment for the company in the coming year are its AI discovery engine that’s powering Reels and other recommendations, ads and business messaging, and its future vision for the metaverse. Meta earlier this month unveiled its newest virtual-reality headset, the Meta Quest Pro, and touted its potential for business customers.

    In the final three months of the year, Meta expects quarterly revenue between $30 billion and $32.5 billion. On the high end, the projection would mark a 3.5% year-over-year decline from the same period in the prior year.

    [ad_2]

    Source link

  • Stock picking isn’t dead. But for most investors it might as well be | CNN Business

    Stock picking isn’t dead. But for most investors it might as well be | CNN Business

    [ad_1]


    New York
    CNN Business
     — 

    What’s the best way to invest? Plenty of active traders are out there trying to make a quick buck on meme stocks like AMC and GameStop, fads like Snap and Peloton or bitcoin and other cryptocurrencies. Professional money managers try to identify stocks that can beat the broader market over the long haul.

    But for most individual investors, a strategy of buying and holding so-called passive funds that track top indexes like the S&P 500 and Nasdaq 100 makes the most sense if you want to accumulate wealth for retirement. It’s like that popular old rotisserie chicken infomercial slogan: Set it and forget it.

    Index funds tend to be cheaper. New data from S&P Dow Jones Indices showed that investors saved more than $400 billion in fees with index funds over the past quarter of a century.

    Obviously, index provider S&P Global

    (SPGI)     has a vested interest in promoting passive funds backed to various benchmark indexes.

    The company, along with competitors like iShares owner BlackRock

    (BLK)     and index provider MSCI

    (MSCI)    , offers many options for investors looking to get exposure to the broader market without trying to pick individual winners and losers.

    Even legendary investing guru Warren Buffett of Berkshire Hathaway

    (BRKB)     has extolled the virtues of index funds for average investors. That’s because Buffett, despite being one of the most successful stock pickers ever, doesn’t believe most active investment managers can beat the broader market.

    The 92-year-old Oracle of Omaha famously wrote in Berkshire’s 2014 annual shareholder letter that his advice for the trustee of his estate is to “put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund” for his wife. (Buffett suggested one from Vanguard.)

    “I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers,” he wrote.

    And given how some high-profile active investors have lagged the market lately, there is something to be said for conservative investors with a long-term horizon betting on the S&P 500 over a handful of stocks.

    Just look at Cathie Wood at Ark, who has made big, high profile bets on companies like Tesla

    (TSLA)    , Zoom

    (ZM)    , Roku

    (ROKU)     and Teladoc

    (TDOC)    . Ark’s flagship Innovation ETF has plunged 60% this year, compared to “just” a 20% drop for the S&P 500.

    “Actively managed funds have failed to survive and beat their benchmarks, especially over longer time horizons,” said Bryan Armour, director of passive strategies research for North America at Morningstar, in a report last month. He noted that just one of every four active funds beat their passive benchmarks over the ten years ending in June.

    Of course, buying index funds is no guarantee of investing success either…especially not in the short-term. After all, the S&P 500 has plunged this year, too.

    “Diversified portfolios do okay usually, but they’ve been hit hard lately by the rise in rates,” said Shamik Dhar, chief economist at BNY Mellon Investment Management, in an interview with CNN Business.

    Even the vaunted 60/40 asset allocation recommendation for investors, i.e. owning 60% stocks and 40% bonds, has so far failed to beat the market in 2022.

    “This year, it seems like there has been a broad-based source of fear. It’s shock therapy. There is slowing growth and inflation. That is disorienting investors,” said Adam Hetts, global head of portfolio construction and strategy at Janus Henderson Investors, in an interview with CNN Business.

    Along those lines, any investor with decent exposure to bonds, hoping that they’d hold up better as stocks tanked, has gotten a rude awakening. The iShares 20+ Year Treasury Bond ETF

    (TLT)    , a top proxy for long-term bonds, has done even worse than the stock market, plunging more than 35% this year.

    That’s why some investors aren’t singing a funeral dirge for active stock picking – just yet.

    “A 10-year ‘secular bear market’ is underway,” said Stifel chief equity strategist Barry Bannister in a recent report, who predicts that the market may be stuck in a narrow range throughout the rest of the decade.

    “We believe this environment favors the following approach: active (not broad passive) management,” he said.

    [ad_2]

    Source link

  • Hong Kong stocks plunge 6% as fears about Xi’s third term trump China GDP data | CNN Business

    Hong Kong stocks plunge 6% as fears about Xi’s third term trump China GDP data | CNN Business

    [ad_1]


    Hong Kong
    CNN Business
     — 

    Hong Kong stocks had their worst day since the 2008 global financial crisis, just a day after Chinese leader Xi Jinping secured his iron grip on power at a major political gathering.

    Foreign investors spooked by the outcome of the Communist Party’s leadership reshuffle dumped Chinese equities and the yuan despite the release of stronger-than-expected GDP data. They’re worried that Xi’s tightening grip on power will lead to the continuation of Beijing’s existing policies and further dent the economy.

    Hong Kong’s benchmark Hang Seng

    (HSI)     Index plunged 6.4% on Monday, marking its biggest daily drop since November 2008. The index closed at its lowest level since April 2009.

    The Chinese yuan weakened sharply, hitting a fresh 14-year low against the US dollar on the onshore market. On the offshore market, where it can trade more freely, the currency tumbled 0.8%, hovering near its weakest level on record, even as the Chinese economy grew 3.9% in the third quarter from a year ago, according to the National Bureau of Statistics. Economists polled by Reuters had expected growth of 3.4%.

    The sharp sell-off came one day after the ruling Communist Party unveiled its new leadership for the next five years. In addition to securing an unprecedented third term as party chief, Xi packed his new leadership team with staunch loyalists.

    A number of senior officials who have backed market reforms and opening up the economy were missing from the new top team, stirring concerns about the future direction of the country and its relations with the United States. Those pushed aside included Premier Li Keqiang, Vice Premier Liu He, and central bank governor Yi Gang.

    “It appears that the leadership reshuffle spooked foreign investors to offload their Chinese investment, sparking heavy sell-offs in Hong Kong-listed Chinese equities,” said Ken Cheung, chief Asian forex strategist at Mizuho bank.

    The GDP data marked a pick-up from the 0.4% increase in the second quarter, when China’s economy was battered by widespread Covid lockdowns. Shanghai, the nation’s financial center and a key global trade hub, was shut down for two months in April and May. But the growth rate was still below the annual official target that the government set earlier this year.

    “The outlook remains gloomy,” said Julian Evans-Pritchard, senior China economist for Capital Economics, in a research report on Monday.

    “There is no prospect of China lifting its zero-Covid policy in the near future, and we don’t expect any meaningful relaxation before 2024,” he added.

    Coupled with a further weakening in the global economy and a persistent slump in China’s real estate, all the headwinds will continue to pressure the Chinese economy, he said.

    Evans-Pritchard expected China’s official GDP to grow by only 2.5% this year and by 3.5% in 2023.

    Monday’s GDP data were initially scheduled for release on October 18 during the Chinese Communist Party’s congress, but were postponed without explanation.

    The possibility that policies such as zero-Covid, which has resulted in sweeping lockdowns to contain the virus, and “Common Prosperity” — Xi’s bid to redistribute wealth — could be escalated was causing concern, Cheung said.

    “With the Politburo Standing Committee composed of President Xi’s close allies, market participants read the implications as President Xi’s power consolidation and the policy continuation,” he added.

    Mitul Kotecha, head of emerging markets strategy at TD Securities, also pointed out that the disappearance of pro-reform officials from the new leadership bodes ill for the future of China’s private sector.

    “The departure of perceived pro-stimulus officials and reformers from the Politburo Standing Committee and replacement with allies of Xi, suggests that ‘Common Prosperity’ will be the overriding push of officials,” Kotecha said.

    Under the banner of the “Common Prosperity” campaign, Beijing launched a sweeping crackdown on the country’s private enterprise, which shook almost every industry to its core.

    “The [market] reaction in our view is consistent with the reduced prospects of significant stimulus or changes to zero-Covid policy. Overall, prospects of a re-acceleration of growth are limited,” Kotecha said.

    On the tightly controlled domestic market in China, the benchmark Shanghai Composite Index dropped 2%. The tech-heavy Shenzhen Component Index lost 2.1%.

    The Hang Seng Tech Index, which tracks the 30 largest technology firms listed in Hong Kong, plunged 9.7%.

    Shares of Alibaba

    (BABA)     and Tencent

    (TCEHY)     — the crown jewels of China’s technology sector — both plummeted more than 11%, wiping a combined $54 billion off their stock market value.

    The sell-off spilled over into the United States as well. Shares of Alibaba and several other leading Chinese stocks trading in New York, such as EV companies Nio

    (NIO)     and Xpeng, Alibaba rivals JD.com

    (JD)     and Pinduoduo

    (PDD)     and search engine Baidu

    (BIDU)    , were all down sharply Thursday afternoon.

    [ad_2]

    Source link

  • Twitter stock falls after report says Biden admin weighing security review of Musk ventures | CNN Business

    Twitter stock falls after report says Biden admin weighing security review of Musk ventures | CNN Business

    [ad_1]


    New York
    CNN Business
     — 

    Shares of Twitter dropped as much as 8% in pre-market trading Friday as investors braced for some last-minute uncertainty around Elon Musk’s $44 billion deal to buy the company.

    The stock reaction, which rebounded somewhat later in the morning, followed a Bloomberg report that Biden administration officials are in early discussions about possibly subjecting some of Musk’s ventures to national security reviews, including the planned Twitter

    (TWTR)     takeover. Asked by CNN, the administration pushed back on the report, which cited people familiar with the matter.

    “We do not know of any such conversations,” National Security Council Spokesperson Adrienne Watson said in a statement. A Treasury spokesperson said that the Committee on Foreign Investment in the United States “does not publicly comment on transactions that it may or may not be reviewing” by law and practice.

    Among the equity investors who committed to provide financing to help Musk fund the deal are several foreign entities, including the Qatar sovereign wealth fund and Saudi Arabian Prince Alwaleed bin Talal, who was already one of Twitter’s largest investors prior to Musk’s proposed takeover.

    In response to a tweet about the Bloomberg report, one user wrote: “It would be hysterical if the government stopped Elon from over paying for Twitter.” Musk responded to that tweet with a “100” emoji, which typically indicates emphatic agreement, and a crying laughing face emoji.

    It’s unclear what, if any, impact the reported security review could have on completing a deal that has already been subject to months of uncertainty. Musk has one week remaining to close the deal or face a rescheduled trial in the Delaware Court of Chancery that could result in him being forced to acquire the social media firm.

    Twitter declined to comment on the report about the possible review; representatives for Musk did not immediately respond to a request for comment.

    By other accounts, the deal appears to be moving toward completion. In a separate report Thursday evening, Bloomberg said that bankers and lawyers for both Twitter and Musk are preparing the paperwork needed to complete the deal. Bloomberg also last week reported that the company had frozen employees’ stock accounts in anticipation of the deal’s completion.

    On a conference call this week to discuss Tesla’s earnings results, Musk said he was “excited” about the Twitter deal, but also admitted that he is “obviously overpaying” for it. “The long-term potential for Twitter, in my view, is an order of magnitude greater than its current value,” he said.

    The Washington Post on Thursday reported that Musk told prospective investors in the deal that he planned to get rid of nearly 75% of the company’s staff, and that Twitter had already planned massive layoffs even if the deal did not go through, citing internal documents and interviews with people familiar with the matter. Neither Twitter nor representatives for Musk responded to requests for comment regarding layoff plans.

    Following the Washington Post report, Twitter General Counsel Sean Edgett sent a memo to staff saying the company does “not have any confirmation of the buyer’s plans following close and recommend not following rumors or leaked documents but rather wait for facts from us and the buyer directly,” according to a report from Bloomberg. A Twitter spokesperson confirmed to CNN the authenticity of the memo.

    Musk had previously discussed dramatically reducing Twitter’s workforce in personal text messages with friends about the deal, which were revealed in court filings, and didn’t dismiss the potential for layoffs in a call with Twitter employees in June.

    – CNN’s Matt Egan contributed to this report.

    [ad_2]

    Source link

  • Snap stock falls nearly 25% after revenue hit by shrinking advertiser budgets | CNN Business

    Snap stock falls nearly 25% after revenue hit by shrinking advertiser budgets | CNN Business

    [ad_1]



    CNN
     — 

    Snap’s bad year continues.

    Snap on Thursday reported revenue of $1.13 billion for the three months ending in September, a slight 6% increase from the year prior and less than Wall Street had expected, as the company confronts tightening advertiser budgets in an uncertain economy.

    In a letter to investors, Snapchat’s parent company said its revenue growth was slowed by several factors, including growing competition and jitters from the advertisers who make up its core business.

    “We are finding that our advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven cost pressures, and rising costs,” the company said in the letter.

    Shares of Snap fell nearly 25% in after hours trading following the earnings report.

    Snap’s report kicks off what is expected to be a sobering tech earnings period, as layoff announcements, hiring freezes and other cost-cutting measures have become increasingly common in the industry amid fears of a looming recession.

    Snap helped set off a wave of anxiety among tech investors when it warned in May that the economy had worsened faster than it expected, cutting into its revenue and profit forecast for the quarter. In late August, Snap announced plans to lay off some 20% of its more than 6,400 global employees, or more than 1,200 staffers.

    Like other tech companies, Snap has had to confront headwinds from rising inflation, a stronger dollar and broader economic jitters that are leading some advertisers and consumers to rethink their spending in the United States and abroad.

    Snap has also faced increasing competition from fast-growing competitors like TikTok, and is still navigating its digital ads business in the wake of privacy changes implemented by Apple that have made it more difficult for marketers to target users with ads.

    There were some glimmers of hope in Snap’s report, including that the number of daily active users grew 19% year-over-year to reach 363 million in the third quarter. Its net loss was also smaller than Wall Street had expected, but the company nonetheless lost $360 million in the quarter, compared to a loss of $72 million in the year prior. Much of that loss ($155 million) came from restructuring charges related to layoffs.

    Snap declined to provide financial guidance for the final three months of the year. In its letter to investors, the company said: “We expect that the operating environment will continue to be challenging in the months ahead and believe the actions we are taking provide a clear path forward for Snap.”

    [ad_2]

    Source link

  • The Fed only cares about inflation. That’s bad news for you | CNN Business

    The Fed only cares about inflation. That’s bad news for you | CNN Business

    [ad_1]


    New York
    CNN Business
     — 

    Jerome Powell and other members of the Federal Reserve are obsessed with choking off inflation once and for all, even if the Fed’s series of aggressive rate hikes slow the economy to a crawl. That could be bad news for consumers, investors and Corporate America.

    What’s more, many market experts and economists note that the rate of inflation, while still uncomfortably high, is falling and should continue to decline – but there is a noted lag effect. Fed vice chair Lael Brainard admitted as much in a speech Monday, saying that “policy actions to date will have their full effect on activity in coming quarters.”

    Still, the Fed isn’t done raising rates. Investors are pricing in the strong probability of a fourth consecutive three-quarters of a percentage point hike at the Fed’s next meeting on November 2. And the chances of a fifth straight hike of that magnitude at the Fed’s December 14 meeting are also on the rise.

    It seems that Powell wants to atone for his mistake of repeatedly calling inflation “transitory” for much of last year. So the Fed is going to keep raising rates to prove that it is taking inflation seriously, even if that leads to a bigger pullback in stocks…and tipping the economy into a recession.

    Needless to say, that’s a problem. Especially since the Fed has two mandates: price stability and maximum employment. That means the jobs market might get hit due to the Fed’s laser-like focus on inflation.

    “My concern is that the Fed is tightening so quickly and so significantly without knowing what it means for the economy,” said Brian Levitt, global market strategist with Invesco.

    Keep in mind that the Fed’s series of rate hikes are unprecedented in the “modern” era of central banking, i.e. after Alan Greenspan became Fed chair in 1987 and the Fed became far more transparent.

    The Fed was far more opaque before Greenspan, and the market didn’t pick apart every speech, policy move and economic forecast the way Wall Street does now. Inflation in the 1970s and early 1980s was also a much different animal, due largely to an oil price shock that lasted years because of a supply shortage.

    The current inflation crisis stems from more temporary (we won’t say transitory) supply chain issues tied to the pandemic as well as the rapid reopening of the global economy following a brief recession.

    But the economy is now showing cracks. Long-term bond yields have surged, and mortgage rates have popped, cooling off the housing market. The stock market has deflated as well, wringing even more excess from the economy.

    “We’re more cautious because the Fed is tightening into a weakening economy,” said Keith Lerner, co-chief investment officer and chief market strategist with Truist Advisory Services. “These supersized hikes are the most aggressive in decades. But the Fed has scar tissue from inflation.”

    As painful this current bout of inflation is for Americans, it’s nothing compared to what people lived through in the early 1980s before then Fed chair Paul Volcker squashed inflation with a series of massive rate hikes.

    Unless pricing pressures pick up again, it appears the year-over-year increase for the consumer price index (CPI) peaked at 9% in June. That’s a big move from about 2.3% in February 2020 just before the pandemic shutdown. But 9% is still a far cry from the CPI high during the Volcker years of 14.6% in early 1980.

    And with consumer and wholesale prices already edging lower, some experts worry that the continued uber-hawkish stance by the Fed will do more harm than good for the economy.

    “The speed at which the Fed is increasing rates will certainly have some unintended consequences,” said Michael Weisz, president of Yieldstreet, an investment firm that specializes in so-called alternative assets such as real estate, private equity, venture capital and art.

    Weisz said the surge in interest rates could lead to a “consumer credit crunch being more pronounced,” in which loans beyond mortgages might become more expensive and harder to get.

    Rate hikes raise the costs for companies to pay down their debt, increasing the possibility of corporate bankruptcies and defaults on commercial loans. It may even potentially lead to stagflation…the double whopper of stagnant growth and continued inflation. In other words, prices may remain high and the job market will probably be worse.

    “The Fed runs a real risk of over-tightening, as the impacts of the restrictive policy may not flow through inflation and unemployment data until it’s too late,” Weisz added.

    As long as inflation remains the bigger issue for the economy, the Fed is going to focus more on getting prices under control. After all, the unemployment rate is at 3.5%, a half-century low.

    “The Fed has made it clear their number one priority right now is price stability,” said Dustin Thackeray, chief investment officer of Crewe Advisors. “Until the Fed sees sustained evidence their monetary policy is having a material impact on…the job market, they will maintain their persistent efforts in reining in inflationary pressures.”

    [ad_2]

    Source link

  • White-collar workers are feeling the brunt of the Fed’s rate hikes. Here’s why | CNN Business

    White-collar workers are feeling the brunt of the Fed’s rate hikes. Here’s why | CNN Business

    [ad_1]

    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 Business
     — 

    September’s hotly anticipated jobs data ended up cooling markets on Friday. Stocks fell sharply as investors evaluated the report, which showed more jobs than expected were added to the US economy and indicated that more pain-inflicting interest rate hikes from the Federal Reserve lie ahead.

    But a breakdown of the numbers shows that the Fed’s plans to weaken the labor market to fight persistent inflation may already be working, just not for everybody.

    White-collar office workers appear to be feeling the brunt of the Fed’s actions: The financial and business sector saw a large decline in employment last month. Legal and advertising services also experienced drops. Service and construction workers, meanwhile, are still thriving.

    What’s happening: The US economy added 263,000 jobs in September, higher than analyst estimates of 250,000. The unemployment rate came in at 3.5%, down from 3.7% in August.

    Leading the gain in jobs was the leisure and hospitality industry, which added 83,000 jobs in September — and employment in food services and drinking places made up 60,000 of those jobs alone. Manufacturing and construction also came in hot, adding 22,000 and 19,000 jobs, respectively.

    The largest non-governmental losses in jobs came from the financial industry, which shed 8,000 between August and September. Large banks hire in cycles, extending offers to recent graduates in the early fall months. That makes this September’s drop particularly significant.

    Business support services — such as telemarketing, accounting and administrative and clerical jobs — are also bleeding jobs. The sector lost 12,000 in September. Meanwhile, legal services lost 5,000 jobs, and advertising services also dropped 5,000 jobs.

    What it means: The Federal Reserve’s hawkish policy appears to be cooling certain parts of the economy, but not others. Finance workers are likely beginning to worry as their industry depends on stock and lending markets which have been particularly hard hit by Fed actions.

    Friday’s numbers indicate that we’re beginning to see that impact in the employment data.

    What remains to be seen is whether the Fed can cool the economy just by loosening employment in white-collar industries or if these losses will trickle down to other industries, hurting lower-income workers.

    Coming up: Earnings season begins in earnest this week with big banks like JPMorgan, Citigroup

    (C)    , Morgan Stanley

    (MS)     and BlackRock

    (BLK)     reporting. Investors will be watching closely for any guidance on hiring and layoff plans.

    Two key inflation indicators, PPI and CPI are also set to be released. Expect markets to react poorly if inflation comes in hot.

    A panel of top US economists just released its economic outlook for the next year, and it’s not great.

    The panel of 45 forecasters, led by the National Association for Business Economics (NABE), said they expected slower growth, higher inflation, higher interest rates, and weakening employment in both 2022 and 2023 than they previously expected.

    Most of the worries come down to the Federal Reserve’s interest rate policy.

    “More than three-quarters of respondents believe the odds are 50-50 or less that the economy will achieve a ‘soft landing’,” said NABE Vice President Julia Coronado. “More than half the panelists indicate that the greatest downside risk to the U.S. economic outlook is too much monetary tightness.”

    NABE panelists downgraded their median forecast for real GDP for the fourth quarter of 2022 to a 0.1% increase, compared to a 1.8% increase in the May 2022 survey. The vast majority of respondents placed more than a 25% probability of a recession occurring in 2023, with the most likely start date in the first quarter.

    The latest report comes as a growing number of economists are predicting that recession is imminent. Former US Treasury Secretary Larry Summers told CNN on Thursday that it’s “more likely than not” the US will enter a recession, calling it a consequence of the “excesses the economy has been through.”

    Friday’s jobs report showed that the share of workers telecommuting or working from home because of the pandemic ticked lower — falling to just 5.2% in September from 6.5% in August.

    Fully remote work in the United States, which many predicted would remain the norm long after the pandemic, appears to be edging away, especially as the job market loosens for white collar workers and employees have less leverage.

    Last week, a KPMG survey of US-based CEOs found that two-thirds believed in-office work would be the norm within the next three years.

    Still, it may not be enough to help an ailing commercial real estate market, where the outlook is dire. New York City office properties declined by nearly 45% in value in 2020 and are forecast to remain 39% below their pre-pandemic levels long-term as hybrid policies continue, according to a recent study from the National Bureau of Economic Research.

    Looking forward: The Bureau of Labor Statistics has noted that while hybrid work may still be popular, Covid-19 is no longer fueling work from home trends. The October report will rephrase its telework questions to remove references to the pandemic.

    Since May 2020, each jobs report has asked: “At any time in the last four weeks, did you telework or work at home for pay because of the Coronavirus pandemic?”

    In May 2020, 35.4% answered yes.

    Starting next month, the question will be revised. “At any time in the last week did you telework or work at home for pay?” it will ask, limiting the timeline and eliminating any reference to the pandemic.

    The US bond market is closed for Columbus Day/Indigenous Peoples’ Day.

    Coming later this week:

    ▸ Third quarter earnings season begins. Expect reports from big banks like JPMorgan Chase

    (JPM)    , Wells Fargo

    (WFC)    , Citigroup

    (C)    , Morgan Stanley

    (MS)    , PNC

    (PNC)     and US Bancorp

    (USB)     and consumer staples like Pepsi

    (PEP)    , Walgreen

    (WBA)    s and Domino’s

    (DMPZF)    . 

    ▸ CPI and PPI, two closely watched measures of inflation in the US are also due to be released. 

    [ad_2]

    Source link

  • Elon Musk’s bumpy road to possibly owning Twitter: A timeline | CNN Business

    Elon Musk’s bumpy road to possibly owning Twitter: A timeline | CNN Business

    [ad_1]



    CNN Business
     — 

    A board seat accepted and then rejected. A stunning $44 billion takeover offer with uncertain financing. And a surprise early morning tweet putting the deal on hold, temporarily.

    Even by the standards of Twitter, a company that has known plenty of chaos and dysfunction in its history, the weeks-long effort by billionaire Elon Musk to buy the company has proven to be uniquely tumultuous – and there’s no clear end in sight.

    Should the deal go through, it would place the world’s richest man in charge of one of the world’s most influential social media platforms. The acquisition has the potential to upend not just Twitter itself but politics, media and the tech industry. The Tesla and SpaceX CEO has repeatedly stressed that his goal is to bolster what he calls “free speech” on the platform, by which he means all legal speech that complies with local laws in the markets where Twitter operates. He has also said he would reverse Twitter’s ban of former President Donald Trump.

    But the attempt by Musk, a wildly successful entrepreneur with a history of erratic behavior, to buy Twitter has been viewed with some skepticism from the start. On the day he made his offer, Musk said: “I’m not sure I’ll actually be able to acquire it.” Some have questioned how he would finance the deal, especially as shares of Tesla

    (TSLA)    , which he’s partially using to back his financing of the Twitter deal, and the broader tech sector have declined in the weeks since.

    After Musk recently said he was temporarily pausing the deal so he could assess the amount of spam and fake accounts, it prompted speculation that the billionaire might be looking to renegotiate the deal – or back out of it entirely. His actions in the days that followed only reinforced that thinking.

    Here is a look back at the many twists and turns in one of the most high-profile tech deals in recent memory.

    Musk starts quietly buying up Twitter shares, building his stake in the company. But it would be months before he disclosed this fact to the public.

    Musk’s stake in Twitter tops 5%, but that fact is not disclosed until the following month. Musk was obligated to disclose his stake within 10 days of crossing the 5% threshold, but waited 21 days to do so. During that time, he continued building up his stake.

    The billionaire begins to make pointed statements about the platform from his account. “Twitter algorithm should be open source,” he wrote, with a poll for users to vote “yes” or “no.”

    The following day, Musk tweets out another poll to his followers: “Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?”

    Musk reaches out to Twitter cofounder and former CEO Jack Dorsey to “discuss the future direction of social media,” according to a company filing later put out by the company. The two tech founders are known to have a bit of a billionaire bromance on and off Twitter.

    Twitter’s board and some of its leadership team meet with representatives from Wilson Sonsini, a law firm, and J.P. Morgan to discuss the possibility of Musk joining the company’s board, according a later securities filing. Dorsey is said to have told the board that “he and Mr. Musk were friends,” according to the filing.

    In the meeting, the Twitter board discussed wanting Musk to agree to “‘standstill’ provisions”,” according to the filing. This would effectively “limit his public statements regarding Twitter, including the making of unsolicited public proposals to acquire Twitter (but not private proposals) without the prior consent of the Twitter Board.”

    Musk is revealed to be Twitter’s largest individual shareholder, with a more than 9% stake in the company.

    News of the purchase sends shares of the social media company soaring more than 20% in early trading and kicks off a wave of speculation about how Musk might push for changes on the platform.

    Twitter CEO Parag Agrawal announces Musk will join Twitter’s board of directors. “Through conversations with Elon in recent weeks, it became clear to us that he would bring great value to our Board,” Agrawal says in a post on Twitter.

    As part of the appointment, Musk agrees not to acquire more than 14.9% of the company’s shares while he remains on the board. His term on the board is set to go through 2024, according to a regulatory filing.

    Twitter CEO Parag Agrawal (left) and former CEO Jack Dorsey in an undated photo.

    Agrawal announces that Musk has decided not to join the board after all. “I believe this is for the best,” Agrawal writes in a letter to the Twitter team.

    The reversal opens the door for Musk to pursue a greater stake in the company – and frees him to tweet his many thoughts about the company.

    Musk stuns the industry by making an offer to acquire all the shares in Twitter he does not own at a valuation of $41.4 billion. The cash offer represents a 38% premium over the company’s closing price on April 1, the last trading day before Musk disclosed that he had become the company’s biggest shareholder.

    “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy. However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company,” Musk writes in his offer letter. “Twitter has extraordinary potential. I will unlock it.”

    Twitter’s board of directors adopts a “poison pill” provision, a limited-term shareholder rights plan that potentially makes it harder for Musk to acquire the company.

    Tesla CEO Elon Musk speaks during the official opening of the new Tesla electric car manufacturing plant on March 22, 2022 near Gruenheide, Germany.

    Musk lines up $46.5 billion in financing for the deal, including two debt commitment letters from Morgan Stanley and other unnamed financial institutions and one equity commitment letter from himself, according to a regulatory filing.

    The billionaire also reveals that he has not received a formal response from Twitter a week after his acquisition offer. He said he is “seeking to negotiate” a definite acquisition agreement and “is prepared to begin such negotiations immediately” — an apparent reversal from his statement in his acquisition offer letter that it would be his “best and final” offer.

    Although he is the richest person in the world, much of Musk’s wealth is tied up in Tesla stock, and some followers of the company speculate that it could be challenging for Musk to raise debt against the historically volatile stock.

    Twitter announces that it has agreed to sell itself to Musk in a deal valued at around $44 billion. At a conference later in the day, Musk describes his offer to buy Twitter in characteristically sweeping terms as being about “the future of civilization,” not just making money.

    At an all-hands meeting that afternoon, Twitter employees raise questions about everything from what the deal would mean for their compensation to whether former US President Donald Trump would be let back on the platform.

    Filings reveal Musk sold $8.5 billion of his Tesla stock in the three days after Twitter board agreed to the sale for an average of $883.09 per share. The filings did not disclose the reason for the sale, but Musk appeared to be raising funds to buy Twitter.

    Tesla cars sit in a dealership lot on March 28, 2022 in Chicago, Illinois.

    Musk raises another $7 billion in financing for the deal. The new investors include Oracle founder Larry Ellison, cryptocurrency platform Binance and venture capital firm Sequoia Capital, according to a filing.

    Musk aims to increase Twitter’s annual revenue to $26.4 billion by 2028, up from $5 billion last year, according to a New York Times report, citing Musk’s pitch deck presented to investors. To achieve that lofty goal, Musk intends to bolster Twitter’s subscription revenue and build up a payments business while decreasing the company’s reliance on advertising sales, according to the report.

    Musk confirms what many have assumed for weeks: he would reverse Twitter’s Trump ban if his deal to buy the company is completed.

    “I do think it was not correct to ban Donald Trump, I think that was a mistake,” Musk said. “I would reverse the perma-ban. … Banning Trump from Twitter didn’t end Trump’s voice, it will amplify it among the right and this is why it’s morally wrong and flat out stupid.”

    Former President Donald Trump looks at his phone during a roundtable with governors on the reopening of America's small businesses, in the State Dining Room of the White House in Washington, June 18, 2020.

    Twitter confirms to CNN Business that the platform is pausing most hiring and backfills, except for “business critical” roles, and pulling back on other non-labor costs ahead of the acquisition. In addition, Twitter says general manager of consumer, Kayvon Beykpour, and revenue product lead, Bruce Falck, are leaving the company.

    Musk tweets that the deal is on hold, linking to a Reuters report from nearly two weeks earlier, about Twitter’s most recent disclosure about its amount of spam and fake accounts. The figure cited in the report, however, is in line with prior quarterly disclosures.

    “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk tweeted.

    Shares of the social media site plummet after Musk’s announcement, dropping more than 10% at market open. Two hours after announcing the hold, Musk says he remains set on purchasing Twitter. “Still committed to acquisition,” he wrote.

    Later in the day, Musk says his team is testing Twitter’s numbers and “picked 100 as the sample size number, because that is what Twitter uses to calculate

    Musk tweets out that Twitter’s legal team accused him of breaking a nondisclosure agreement when the billionaire revealed the platform’s sample size for automated user checks is allegedly just 100 users.

    “Twitter legal just called to complain that I violated their NDA by revealing the bot check sample size is 100! This actually happened,” wrote Musk.

    The standoff over bot accounts continues as Musk exchanges a series of tweets with Agrawal over the issue. After Agrawal carefully explains how Twitter attempts to combat and measure spam accounts, Musk responds with a poop emoji.

    Musk follows up with a somewhat more thoughtful question. “So how do advertisers know what they’re getting for their money?” Musk asked. “This is fundamental to the financial health of Twitter,” he added.

    Musk announces that his acquisition of Twitter “cannot move forward” until he sees more information about the prevalence of spam accounts, claiming that the social media platform falsified numbers in filings. Without citing a source, he claims in a tweet that Twitter is “20% fake/spam accounts” and suggests Twitter’s previous filings with the SEC were misleading.

    Later in the day, Musk posts a poll to his Twitter followers: “Twitter claims that >95% of daily active users are real, unique humans. Does anyone have that experience?” before calling on the SEC to evaluate the platform’s numbers. “Hello @SECGov, anyone home?” Musk tweets, in an apparent attempt to get the regulator to look into the matter.

    In a statement, Twitter says it remains “committed to completing the transaction on the agreed price and terms as promptly as practicable.” Later, the company says it intends to “enforce the merger agreement.”

    In a letter to Twitter’s head of legal, Musk threatens to walk away from his purchase of the platform, alleging that Twitter is “actively resisting and thwarting his information rights” as outlined by the deal.

    In the letter, an attorney for Musk accuses the social media company of breaching the merger agreement by not providing the data he has requested on Twitter spam bots, stating that the lack of information gives him a right “not to consummate the transaction” and “to terminate the merger agreement.”

    Musk moved to terminate the acquisition agreement. A lawyer representing him claimed in a letter to Twitter’s top lawyer that the company is “in material breach of multiple provisions” of the deal over its alleged failure to provide all the data Musk says he needs to evaluate the number of spam and fake accounts on the platform.

    “For nearly two months, Mr. Musk has sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform,’” the letter reads. “This information is fundamental to Twitter’s business and financial performance and is necessary to consummate the transactions contemplated by the Merger Agreement. … Twitter has failed or refused to provide this information.”

    Twitter was not having it.

    “The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement,” Twitter board chair Bret Taylor said in a tweet Friday, echoing earlier statements by the company that it planned to follow through with the deal. “We are confident we will prevail in the Delaware Court of Chancery.”

    Twitter sued the Tesla billionaire in Delaware court in an attempt to force him to complete the deal.

    The 62-page lawsuit, sprinkled with memes, tweets and a poop emoji, effectively highlighted the bizarre spectacle of the deal from the start. The company paints Musk as a non-serious potential owner — alleging at one point that he has “disdain” for the company, and at another saying, “Musk’s strategy is … a model of bad faith” — while seeking to compel him to become its owner. (Twitter’s board has an obligation to its shareholders to try to see the deal through if they believe it is in their best interest. The dispute could also end in a settlement.)

    Twitter’s lawsuit against Musk over his move to terminate their $44 billion acquisition agreement will go to trial on Oct. 17 and run for five days, a Delaware judge ruled.

    The decision came after Judge Kathaleen St. Jude McCormick, who is overseeing the case, previously ruled in Twitter’s favor that the proceedings could be expedited and take place in October. Twitter initially pushed for an October 10th start.

    Musk’s legal team had asked for the trial to take place in 2023. Twitter’s legal team argued it was necessary to expedite the case in order to limit the “harm” to its business and to ensure the deal can be completed before Oct. 24, the “drop dead” date by which the two sides had previously agreed to close the deal.

    Peiter

    Twitter whistleblower Peiter “Mudge” Zatko testifies before Congress in his first public appearance after his bombshell allegations against the social media company were reported in August by CNN and The Washington Post.

    In a whistleblower disclosure sent to multiple lawmakers and government agencies in July, Zatko accused Twitter of failing to safeguard users’ personal information and of exposing the most sensitive parts of its operation to too many people, including potentially to foreign spies. Zatko — who was Twitter’s head of security from November 2020 until he was fired in January — also alleged company executives, including CEO Parag Agrawal, have deliberately misled regulators and the company’s own board about its shortcomings.

    Zatko claimed in his testimony that Twitter is extremely vulnerable to being penetrated and exploited by agents of foreign governments, as well as detailed some of the personal information Twitter collects on users and alleged that the company does not know where the majority of its collected data goes.

    Days earlier, a judge allowed Musk’s legal team to add arguments based on the whistleblower disclosure to its case.

    Musk sends a letter to Twitter proposing to complete the deal as originally signed for $54.20 per share, citing people familiar with the negotiations. News of the letter, revealed in a security filing the next day, sends Twitter stock surging more than 20%, approaching the deal price for the first time in months.

    Such an agreement could bring to an end a contentious, months-long back and forth between Musk and Twitter that has caused massive uncertainty for employees, investors and users of one of the world’s most influential social media platforms.

    [ad_2]

    Source link