Monday trading is over and worries over the future of the tech industry are challenging the trade war for the limelight. Here’s what investors are focusing on for Tuesday.
Stocks closed mixed on Monday, as investors fretted about a possible regulatory crackdown on the tech industry, as well as trade.
Tech stocks were hit hard. Google parent Alphabet (GOOGL) closed more than 6% down, while Facebook (FB) fell 7.5%.
Microsoft (MSFT) was the biggest loser in the Dow, dropping 3.1%.
Apple is replacing iTunes on Macs with three separate desktop apps for music, podcasts and TV.
That’s similar to how these services were already organized on iPhones and iPads.
The move doesn’t come as a surprise. The company has been pushing users toward its Apple Music subscription service, which charges a monthly fee.
Stocks dropped further in the last hour of the trading day, with the Nasdaq falling nearly 2% as investors worried about regulation in the tech sector.
Google parent Alphabet (GOOGL), Amazon (AMZN), Facebook (FB) and Apple (AAPL) all dropped amid reports of Department of Justice investigations and government reviews of Big Tech.
Meanwhile, the Dow was down some 90 points, or 0.3%, and the S&P 500 fell 0.6%. Both indexes had briefly pared their losses earlier in the afternoon following comments on a potential interest rate cut by St. Louis Fed President James Bullard.
Ratings agency Fitch warned that US tariffs on Mexican imports would increase uncertainty surrounding the US-Mexico-Canada (USMCA) trade agreement.
USMCA was agreed to last November and is supposed to replace the North America Free Trade Agreement (NAFTA).
It’s not just the trade deal that could be in jeopardy. The Mexico tariffs would also negatively affect cash flows for companies, said Fitch, particularly the auto industry.
General Motors (GM) is the most exposed to tariffs on cars made in Mexico, according to the ratings agency, followed by Fiat Chrysler (FCAU).
Eddie Lampert, who reacquired Sears out of bankruptcy earlier this year, is now repurchasing Sears Hometown and Outlet Stores.
Sears Hometown and Outlet Stores (SHOS) at a glance:
Lampert was the CEO and primary shareholder of Sears when Sears Hometown was spun off of Sears Holdings. ESL, the holding company controlled by Lampert that reacquired Sears out of bankruptcy, already owned 58% of the Sears Hometown and Outlet shares.
Shares of Sears Hometown rose 8% on the offer, bringing it slightly above the $2.25 price that ESL is offering for the shares.
But the offer does allow for a slight upward adjustment in the price based on certain conditions being met. Monday’s stock price of $2.35 is still only a fraction of the $31 IPO price from October 2012.
Apple (AAPL) unveiled the new Mac Pro at WWDC. It’s designed for professional users who need it for things like production rendering and video editing.
The flagship desktop computer hadn’t seen a major upgrade since 2013.
It features a new Intel Xeon processor, 300 watts of power and up to 1.5 terabytes of memory.
The tech-heavy Nasdaq was taking a beating Monday as investors worried about the possibility of a major regulatory crackdown on some of the sector’s leading companies.
Shares of Google owner Alphabet (GOOGL), Amazon (AMZN), Facebook (FB) and Apple (AAPL) had collectively lost nearly $145 billion in market value as of midday afternoon, thanks to several reports suggesting that the US Department of Justice and Federal Trade Commission were going to look more closely at how much power these companies wield in the tech marketplace.
Alphabet has been lower all day, dropping nearly 7%, due to reports that the US Department of Justice was opening up an antitrust investigation. That news was followed by speculation that Amazon and Facebook may also be in the cross hairs of regulators. Amazon fell 4.5% while Facebook was down more than 7%.
If that wasn’t enough, there were reports later Monday about Apple also being targeted in a government review of Big Tech. Apple shares gave up their gains from earlier in the day as a result, sliding about 1%. The stock had been higher in anticipation of new product announcements from its World Wide Developers Conference.
The Federal Reserve may need to cut interest rates soon, according to James Bullard, president of the St. Louis Federal Reserve.
Bullard is a voting member of the Fed committee that sets rates. His comments came in light of ongoing trade war turmoil and concerns about weak inflation in the United States.
The personal consumption expenditure index — the Fed’s preferred measure of inflation — stood at an annualized rate of 1.5% in April, well below the 2% target.
The central bank has raised interest rates nine times since cutting them to record lows in the aftermath of the financial crisis. But it took its foot off the gas in January and has been patient ever since.
The chances of a rate cut happening have been increasing, though. investors see a 97% chance that a rate cut could happen by the end of the year, according to CME’s FedWatch tool.
President Donald Trump has been calling on the central bank to cut rates and stimulate the US economy by cutting rates.
Stocks responded positively to Bullard’s comments — lower interest rates are favorable for companies. The Dow briefly turned green, and the S&P 500 pared its previous losses. But both indexes soon slipped lower again.
Apple’s upcoming software update includes a slew of new features and capabilities.
At Apple WWDC, the company highlighted several updates to the Apple Watch:
Shares of Facebook (FB) sank more than 6% following a report that the Federal Trade Commission will lead a antitrust investigation into the company.
The Wall Street Journal said that the agency will examine if Facebook “has engaged in unlawful monopolistic practices.”
It was reported earlier that the Department of Justice was laying the foundation of a possible antitrust probe into Google (GOOGL).
The newspaper said the two US government agencies came to an agreement about which tech giant to examine because they “must work out turf arrangements regarding which agency will handle what issues.”
Shares of Google (GOOGL) are down nearly 6%, on Monday, as the Department of Justice is laying the foundation of a possible antitrust probe into the tech giant.
The exact scope of the possible investigation is unclear, but it could related to the company’s search business.
Read more about the DOJ probe here.
The stock was down 5.8% in midday trading. That slide is weighing on the Nasdaq Composite and Nasdaq 100, which are 0.5% and 0.8% lower, respectively.
About an hour and a half into the trading day, stocks are mixed.
Only six Dow components are in the red. They are Boeing (BA), Microsoft (MSFT), UnitedHealth (UNH), Visa (V), Goldman Sachs (GS) and McDonald’s (MCD).
Walgreens Boots Alliance (WBA) is the biggest gainer in the Dow, up 2.4%, followed by Verizon (VZ), up 2%.
The ISM manufacturing index dropped to 52.1 in May, marking its lowest level since October 2016.
The number undercut a consensus estimate of 53, according to Refinitiv.
In April, the index, which is an important data point in assessing the US economy, also underperformed expectations.
In other economic data this morning, construction spending for April was flat, undercutting consensus estimates of a 0.4% increase.
The ongoing trade spat between the United States and the nations it buys from and sells to has caused enough damage to slash earnings estimates, according to analysts at Bank of America (BAC).
The bank cut its 2019 estimated earnings per share by 1.2% and its 2020 earnings estimates by 2.2%.
On top of that, a stronger US dollar could also weigh on the company’s earnings.
“Globalization has benefited S&P 500 margins for decades, and protectionism coupled with rising wages and input costs, pose risks to peak margins,” the analysts said.
BofA has lowered its net margin assumption by 10 basis points to 12% this year and by 20 bps to 12.2% in 2020, compared with 12.5% last year.
AMD (AMD) has inked a new deal with Samsung (SSNLF) to use the company’s chips in its mobile devices, including smartphones.
The deal sent AMD’s stock up nearly 7% in early trading.
AMD said Samsung will pay the chipmaker royalties and licensing fees, but terms of the multiyear partnership weren’t disclosed.
The stock is up 60% for the year.
Stocks opened mixed at the start of the week and the first trading day of June, as investors digested developments on the trade front that took place last week and over the weekend.
These included China vowing it wouldn’t “back down” from trade pressures, as well as the threat of import tariffs on Mexican goods.
Last week, the Dow posted its longest weekly losing streak since June 2011. All three stock indexes fell in the month of May but remain higher for the year.
Chewy, the online retailer that sells pet supplies, is ready to do some tricks for investors as it begins its roadshow.
The PetSmart-owned company rolled out details of its IPO, valuing it at $7.6 billion. It’s planning to sell 41.6 million shares at a price range between $17 to $19 per share.
Chewy will soon trade on the New York Stock Exchange under the ticker “CHWY.” It pulled in $3.5 billion in 2018, around a 65% increase from the year prior.
Fake news is a huge problem for social media giants. But Twitter (TWTR) is hoping to get a leg up on rivals like Facebook (FB) and Google’s (GOOGL) YouTube with a new acquisition.
Twitter announced Monday that it was buying Fabula AI, a London-based startup that uses algorithms and machine learning technology to identify false information. In a blog post about the deal, Twitter did not use the term “fake news.” It simply said that Fabula’s tech would “improve the health of the conversation,” “stop spam” and “help people feel safe.”
But make no mistake. This deal is about trying to help Twitter combat the fake news problem. When you search Fabula AI on Google, the first result shows the website with the following SEO title. “FABULA AI - FACT NOT FAKE.”
And Fabula announced in February that by focusing on the difference between how fake news and real news spreads, it has been better able to flag erroneous reports. Fabula said it can detect fake news with greater than 93% accuracy within milliseconds of processing an article and as little as 2 hours after it has started to spread.
