News Archive

S&P, Nasdaq fall as Facebook plummets; Dow up

NEW YORK (Reuters) – A plunge in Facebook Inc’s (FB.O) shares pushed the Nasdaq down more than 1 percent on Thursday, the index’s biggest one-day drop in a month, but industrial stocks rose after the United States and the European Union said they would negotiate on trade.

The Dow Jones Industrial Average .DJI rose 114.39 points, or 0.45 percent, to 25,528.49, the SP 500 .SPX lost 8.6 points, or 0.30 percent, to 2,837.47, and the Nasdaq Composite .IXIC dropped 80.05 points, or 1.01 percent, to 7,852.19.

Reporting by Chuck Mikolajczak; Editing by Leslie Adler

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Game publisher EA’s first quarter revenue beats estimates

(Reuters) – Electronic Arts Inc beat analyst estimates for quarterly revenue on Thursday, as more gamers thronged to its popular game franchises such as “FIFA” and “The Sims”.

On an adjusted basis, EA’s revenue was $749 million, beating analysts’ average estimate of $742.42 million, according to Thomson Reuters I/B/E/S.

Redwood City, California-based Electronic Arts has iconic video-game franchises such as ‘Battlefield’ and ‘Need for Speed’ in its kitty, but the rise of games from the “battle royale” genre such as “Fortnite” have somewhat challenged publishers, including rivals Activision Blizzard Inc and Take Two Interactive Software Inc.

The company’s “The Sims 4” player base grew 35 percent and the “FIFA World Cup” update had over 15 million unique players in the reported quarter.

The company forecast second-quarter adjusted revenue of $1.16 billion.

As the number of free-to-play games with captivating graphics and story-lines go up, the company could face stiff competition without the release of a new game headlining its portfolio.

Net income fell to $293 million, or 95 cents per share, in the first quarter ended June 30, from $644 million, or $2.06 per share, a year earlier.

The company said beginning April, 1 it adopted a new accounting rule, which affected how it accounts and reports earinings per share.

Reporting by Pushkala Aripaka in Bengaluru; Editing by Shounak Dasgupta

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Synchrony Financial’s credit card program with Walmart ends

(Reuters) – Synchrony Financial (SYF.N) said on Thursday that its store credit card program with Walmart Inc (WMT.N) will not be renewed, ending a near two-decade long partnership.

Shares of the company, which issues private-label cards as well as co-branded cards, fell 10 percent to $30.15 in late-afternoon trading.

Synchrony’s strategic options for its Walmart cards program, including a possible sale, is expected to fully offset the impact to its earnings per share, according to a regulatory filing from Synchrony.

Earlier on Thursday, the Wall Street Journal reported that Walmart had chosen Capital One Financial Corp (COF.N) as the new issuer of its store credit card, citing people familiar with the matter.

Under the deal, Capital One will issue credit cards that can only be used on Walmart’s website and stores, as well as co-branded cards that can be used almost anywhere else, the Journal reported.

Synchrony said it expects to use the majority of $2.5 billion that could come from the sales of its Walmart portfolio to buy back shares by the end of 2019.

Walmart and Capital One did not immediately respond to requests for comment.

Reporting by Diptendu Lahiri in Bengaluru; Editing by Anil D’Silva and Shounak Dasgupta

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Facebook plunge puts Amazon investors on guard

NEW YORK/SAN FRANCISCO (Reuters) – A plunge in Facebook Inc shares rattled Inc investors on Thursday, and traders in the options market were defensive as the social network’s fellow FAANG company gets set to report quarterly results later in the day.

Facebook on Wednesday warned about a margin hit as revenue growth slows and user privacy costs climb, and its 20 percent share drop heightened focus on the online retailer, already a closely watched stock.

Amazon was the second-biggest decliner in the so-called FAANG group of high-flying tech companies, but Facebook’s second-quarter earnings also cast a pall on shares of Apple Inc, Netflix Inc and Google parent Alphabet Inc.

The Nasdaq was down about 1 percent, even while the Dow Jones Industrial Average traded up 0.5 percent.

Amazon shares fell nearly 3 percent to $1,811.66, while shares of Netflix, Alphabet and Apple were roughly flat.

“Those investors who were tempted to hold Amazon through earnings saw Facebook and decided to sell,” said Jack Ablin, chief investment officer at Cresset Wealth Advisors in Chicago.

“This is a move to take some risk off the table,” Ablin said.

As Amazon expands into grocery retail through its acquisition of Whole Foods Market last year, and as more businesses move their IT departments onto the cloud, its stock price has been red hot. It was recently trading at 110 times expected earnings, compared to more-profitable but slower growing Apple’s valuation of 15 times earnings.

Amazon’s stock market value has surged more than 50 percent in 2018 and briefly reached a record $900 billion on July 18 before easing to $880 billion on Thursday.

(Graphic: Big Five Market Cap –

Analysts on average expect Amazon’s revenue to rise 41 percent in the June quarter to $53.41 billion and increase a total of 33 percent in 2018, according to Thomson Reuters data. Analysts expect Amazon to report $2.50 in non-GAAP earnings per share in the June quarter.

(Graphic: Big Five Revenue –

Weekly options on Amazon implied a 5.7 percent swing in either direction by Friday, up about 1 percentage point from what they implied on Wednesday just before Facebook posted results, according to data from options analytics firm Trade Alert.

“That is opposite to what normally happens,” said Fred Ruffy, analyst at New York-based Trade Alert. “Volatility perceptions have increased after Facebook.”

All things being equal, the value of options decline over time, meaning that as the days pass there is a tendency for the move implied by the options price to shrink.

The implied move for Amazon is now bigger than its 4 percent average move the day after results over the last eight quarters.

A strong demand for defensive options was evident in the sharp rise in the price of puts.

The cost of a put contract that would protect against a drop in Amazon shares below $1,830 by the end of trading on Friday jumped about 80 percent to $50.72, according to Thomson Reuters data.

“Since Amazon hit $1,000 a share, we’ve taken some money off the table, but we’re not selling today,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. “Of all the tech companies, Amazon to me is the most vital. It’s the one with the brightest future.”

Reporting by Saqib Iqbal Ahmed; Editing by Alden Bentley and Meredith Mazzilli

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Papa John’s founder sues pizza chain

NEW YORK (Reuters) – John Schnatter, the founder and ousted former chairman of Papa John’s International Inc (PZZA.O), on Thursday sued the pizzeria chain, complaining that the company had not provided adequate response to an earlier request for internal documents.

The complaint, Schnatter v. Papa Johns International Inc filed in Delaware Chancery Court, comes after a request by Schnatter and his attorneys access to company documents to inspect accusations of inappropriate behavior.

“Mr. Schnatter’s attorneys are seeking to inspect Company documents because of the unexplained and heavy-handed way in which the Company has treated him since the publication of a story that falsely accused him of using a racial slur,” Schnatter’s attorneys said in a statement. 

The lawsuit is the latest installation in a weeks-long drama surrounding the pizza chain following a report by Forbes this month that Schnatter had used the “n-word” during a media training call.

“Colonel Sanders called blacks n——-s,” Schnatter reportedly said during an exchange on how he could separate himself from online hate groups.

Schnatter resigned as chairman of the company’s board amid the controversy, though he would later say he regretted his decision to step down.

Reporting by Alana Wise; Editing by Marguerita Choy

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Comcast shares rise on internet customer, profit growth

(Reuters) – Comcast Corp (CMCSA.O) on Thursday reported a quarterly profit that beat Wall Street estimates as it added more high-speed internet customers, part of a push to diversify away from the shrinking U.S. pay-TV market.

Comcast, which dropped its pursuit of Twenty-First Century Fox Inc’s (FOXA.O) entertainment assets last week after a bidding war with Walt Disney Co (DIS.N), is still in the hunt to acquire a controlling stake in European pay-TV company Sky PLC (SKYB.L) to expand internationally.

Shares of Comcast were up 3.7 percent to $34.66 in morning trading after the results.

Chief Executive Brian Roberts told investors on a conference call that Comcast walked away from its bid for the Fox assets because it could not justify the escalating price.

Sky posted double-digit earnings growth earlier on Thursday as it added another 500,000 customers, underscoring why Comcast is battling Fox to acquire a majority stake in the company.

Comcast’s revenue from high-speed internet customers rose 9.3 percent to $4.26 billion during the second quarter as it added 260,000 internet subscribers, above the average estimate of 200,000 from analysts at MoffettNathanson and Macquarie.

Comcast said it has increased its marketing for internet-only subscribers, since internet has higher profit margins than cable, which are diminished by TV programming costs.

The growth in internet connections is “more than offsetting the pressure on video and the outlook for the second half of the year is strong,” said Kevin Roe, an analyst at Roe Equity Research.

Comcast, the biggest U.S. cable provider, shed 140,000 video customers during the quarter, up from 34,000 customers in the prior-year quarter, as TV viewers opt for cheaper streaming options, such as ATT Inc’s (T.N) newly launched WatchTV at $15.

While streaming platforms will continue to pressure Comcast’s cable TV business, it will increase demand for high-speed broadband, said Roberts.

Net income attributable to Comcast rose 27.6 percent to $3.2 billion, or 69 cents per share, from $2.5 billion, or 52 cents per share, a year earlier.

Excluding adjustments, Comcast earned 65 cents per share, up from 52 cents per share last year, beating analyst estimates of 60 cents per share, according to Thomson Reuters data.

Comcast’s revenue rose 2.1 percent from the previous year to $21.7 billion but fell short of analyst estimates of $21.86 billion.

Revenue from NBCUniversal was flat year on year, because of a revenue decline for its movie studios, as hit movie “Jurassic World: Fallen Kingdom” opened late in the quarter.

Reporting by Sheila Dang; Additional reporting by Munsif Vengattil in Bengaluru; Editing by James Dalgleish and Steve Orlofsky

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Fiat Chrysler says it did not know about Marchionne’s illness

ZURICH (Reuters) – Fiat Chrysler FCHI.MI said it knew nothing about the medical condition of Sergio Marchionne after a Swiss hospital said on Thursday it had been treating the deceased chief executive for more than a year.

“Due to medical privacy, the company had no knowledge of the facts relating to Mr. Marchionne’s health,” a Fiat Chrysler spokesman said.

Questions have been raised about how long Marchionne, who died on Wednesday, was ill and how much the company knew before it made the situation public.

Marchionne rescued Fiat and Chrysler from bankruptcy after taking the wheel of the Italian carmaker in 2004 and he multiplied Fiat’s value 11 times through 14 years of canny dealmaking. He was due to step down at FCA in April next year.

“The company was made aware that Mr. Marchionne had undergone shoulder surgery and released a statement about this,” the spokesperson said.

“On Friday July 20, the Company was made aware with no detail by Mr. Marchionne’s family of the serious deterioration in Mr. Marchionne’s condition and that as a result he would be unable to return to work. The Company promptly took and announced the appropriate action the following day.”

The announcement of the death of Marchionne, 66, one of the

auto industry’s most tenacious and respected CEOs, drew tributes

from rivals and tears from his closest colleagues on Wednesday.

University Hospital Zurich said earlier on Thursday Marchionne had been having treatment for a serious illness for more than a year before his death.

Marchionne had fallen gravely ill after what the company had

described as shoulder surgery at a Zurich hospital. He was replaced as chief executive last weekend after Fiat Chrysler (FCA) said his condition had worsened.

“Mr. Sergio Marchionne was a patient at USZ. Due to serious illness, he had been the recipient of recurring treatment for more than a year,” the hospital said in a statement.

“Although all the options offered by cutting-edge medicine were utilized, Mr. Marchionne unfortunately passed away.”

University Hospital Zurich declined to comment on Marchionne’s illness, but said it deeply regretted his death and expressed its condolences to his family.

Reporting by John Revill, additional reporting by Stephen Jewkes in Milan; Editing by Alexandra Hudson

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Global stocks struggle to hold four-month peak as Facebook plunges

NEW YORK (Reuters) – World stock markets struggled to hold on to four-month highs on Thursday as a record sell-off in shares of Facebook Inc offset optimism that the European Union and the United States would settle their differences on trade.

Facebook Inc, the fifth-largest global stock by market capitalization, collapsed 18.89 percent, set for the biggest one-day wipeout in U.S. stock market history, after the social media company’s earnings report showed slowing usage in the biggest advertising markets. Executives warned profits would plummet as the company improves privacy safeguards.

That countered optimism over news that U.S. President Donald Trump agreed to refrain from imposing car tariffs while Europe and the U.S. negotiated to cut other trade barriers.

MSCI’s gauge of stocks across the globe gained 0.01 percent after earlier rising to the highest level since March 16.

The Dow Jones Industrial Average rose 100.35 points, or 0.39 percent, to 25,514.45, the SP 500 lost 8.65 points, or 0.30 percent, to 2,837.42 and the Nasdaq Composite dropped 83.64 points, or 1.05 percent, to 7,848.60.

The dollar index rose 0.28 percent.

Liz Young, senior investment strategist at BNY Mellon Investment Management, said investor skepticism of the market’s run is leading people to take a close look at corporate earnings and other fundamental factors “rather than jumping on the bandwagon and investing in tech stocks.”

“People need to be careful right now to be in those trendy trades,” she said.

The heat has eased somewhat over U.S. and European trade issues, allowing markets to return their attention to central banks and their plans to withdraw stimulus.

“The lifting of the threat of tariffs on the auto sector in particular is a major development,” said Royal Bank of Canada European economist Cathal Kennedy.

The euro, which initially received the U.S.-EU trade news warmly, sharply lost ground after European Central Bank boss Mario Draghi reaffirmed a commitment to keep interest rates on hold “through” next summer, even though he saw inflation picking up by the end of the year.

The euro was last down 0.59 percent to $1.1659.

Concerns about Facebook’s major earnings miss in an otherwise largely positive U.S. corporate results season did little to support bonds, which lost value as yields resumed their climb higher.

Benchmark 10-year notes last fell 8/32 in price to yield 2.9653 percent, from 2.936 percent late on Wednesday.

Progress on trade also helped demand for oil, which is sensitive to economic growth prospects. Crude prices were also helped as Saudi Arabia suspended oil shipments through a strait in the Red Sea after an attack by Yemen’s Iran-aligned Houthi movement.

U.S. crude rose 0.51 percent to $69.65 per barrel and Brent was last at $74.37, up 0.6 percent on the day.

Trade is by no means removed from a slate of issues facing investors, with the U.S. still to finalize an agreement with Europe, while it remains in negotiations with China as well as with Canada and Mexico.

China’s blue-chip shares lost 1.1 percent. Qualcomm Inc dropped its $44 billion bid for NXP Semiconductors after a deadline for securing Chinese regulatory approval passed.

The breakdown of the deal leaves “investors fearing that the trade war has just turned even more so on China,” Citi analysts told clients.

(For a graphic on ‘Analysts downgrade autos sector earnings’ click

(For a graphic on ‘European stocks surge on trade hopes’ click

(For a graphic on ‘World FX rates in 2018’ click

(For a graphic on ‘Emerging markets in 2018’ click

(For a graphic on ‘MSCI All Country World Index Market Cap’ click

Reporting by Trevor Hunnicutt; Additional reporting by Andrew Galbraith in Shanghai, Abhinav Ramnarayan and Tommy Wilkes in London; Editing by Nick Zieminski

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Zuckerberg loses $16 billion in record Facebook fall

(Reuters) – Facebook Inc Chief Executive Officer Mark Zuckerberg’s fortune took an almost $16 billion hit on Thursday, as the social media giant headed for the biggest one-day wipeout in U.S. stock market history, a day after executives forecast years of lower profit margins.

At least 16 brokerages cut their price targets on Facebook after Chief Financial Officer David Wehner startled an otherwise routine call with analysts by saying the company faced a multi-year squeeze on its business margins.

That “bombshell”, as one analyst termed it, played into concerns on Wall Street that Facebook’s model could be under threat after a year that has been dominated by efforts to head off concerns over privacy and its role in global news flow.

Shares fell as much as 19.6 percent to $174.78, a decline that if sustained would wipe about $124 billion off the company’s value – or nearly four times the entire market capitalization of Twitter Inc.

Dismal revenue, which initially pulled the stock down nearly 9 percent on Thursday, clearly was not the end for wounded investors.

“Over the next several years, we would anticipate that our operating margins will trend towards the mid-30s on a percentage basis,” Wehner told the results conference call with analysts.

Facebook’s margin fell to 44 percent in the second quarter from 47 percent a year ago as it spent heavily on security and initiatives to convince users the company was protecting their privacy.

The company also said that revenue growth from emerging markets and the company’s Instagram app, which has been less affected by privacy concerns, would not be enough to repair the damage.

The impact on the rest of the FAANG group of high-flying tech stocks was marginal.

Shares in Alphabet were unchanged while those in Apple Inc and Netflix Inc dipped just a third of a percent. Inc fell 2.8 percent ahead of its own results report later on Thursday.

Of 47 analysts covering Facebook, 43 still rate the stock as “buy”, two rate it “hold” and only two rate it “sell”. Their median target price is $219.30.

MoffettNathanson analysts called the company’s forecast “either the new economic reality of their business model or a very public act of self-immolation to stave off further regulatory pressure”.

The $15.8 billion in net worth that Zuckerberg stands to lose in the move is equal to the wealth of the world’s 81st-richest person, currently Japanese businessman Takemitsu Takizaki, according to Forbes real time data.

Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma, in recent years has trimmed, but not eliminated, the amount of Facebook shares in his clients’ accounts, and he said he sees the company as a three-year investment.

“We own it for its leadership in the tech industry,” he said. “It’s the F in FAANG, but what’s to say that, 10 years from now, Facebook isn’t the next Myspace and something else has taken its place?”

(Click for a graphic on Facebook’s slowing revenue growth)

Reporting by Vibhuti Sharma, Munsif Vengattil and Devbrat Saha in Bengaluru and Noel Randewich in San Francisco; Editing by Robin Paxton and Patrick Graham

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