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Business

Elon Musk Says Twitter Has Had Massive Revenue Drop as Layoffs Begin

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Twitter Inc. has suffered “a massive drop in revenue” because of advertisers cutting back on using the social-media platform, new owner

Elon Musk

said Friday, as the company started sweeping layoffs just over a week after the billionaire took it over.

Mr. Musk, in a tweet Friday, blamed the cutback in advertising on “activist groups pressuring advertisers.” He said that the company hadn’t changed content moderation and had tried to address activists’ concerns. “Extremely messed up!” he said, casting the pullback as an assault on free speech.

Mr. Musk’s remarks came after several big-name advertisers, including food company

General Mills Inc.,

GIS -0.63%

Oreo maker

Mondelez International Inc.,

MDLZ 0.44%

and

Pfizer Inc.

PFE 0.74%

and others have temporarily paused their Twitter advertising in the wake of the takeover of the company by Mr. Musk, The Wall Street Journal has reported. German car-making giant

Volkswagen AG

said it had recommended to its various brands they pause advertising on Twitter to assess any revisions the company makes to its brand safety guidelines.

Mr. Musk’s tweet comes after Twitter, in a message sent to staff Thursday, said staffers would be notified by 9 a.m. Friday if they had lost their position or were still employed, the Journal reported.

Twitter by early Friday began notifying employees who had been laid off, according to documents viewed by the Journal.

Roughly 50% of Twitter’s workforce has been hit with layoffs, according to an email sent overnight to one of those affected in the U.S. that was viewed by the Journal. It didn’t specify what departments the terminated employees worked in.

Twitter had more than 7,500 employees at the start of this year, according to a regulatory filing.

The staff reductions were intended “to place Twitter on a healthy path,” according to the company’s Thursday email. “We recognize that this will impact a number of individuals who have made valuable contributions to Twitter, but this action is unfortunately necessary to ensure the company’s success moving forward,” the company added.

In the layoff emails, Twitter said employees assigned “nonworking” status would continue to receive compensation and benefits through a separation date, which for one person was designated as early February and for another early January. It said to expect to receive one month’s base pay in severance approximately 45 days after the termination date, in addition to providing instructions for returning company property such as laptops.

Twitter didn’t say whether employees should expect to receive year-end bonuses, which historically have been based on individual and company performance. The company also didn’t mention whether employees would receive equity payments during the nonworking period.

Some employees said they had lost access to Twitter communication tools overnight. An email sent to an employee in Canada and seen by the Journal said that suspended access to the company’s systems didn’t mean the person’s employment has been terminated.

The layoffs cap a tumultuous period for Twitter staff that began in April, when the company disclosed Mr. Musk had become its largest individual shareholder. Mr. Musk then agreed to join Twitter’s board, before deciding not to. He launched a bid for the company that Twitter eventually accepted. Weeks later Mr. Musk raised questions about the deal, then tried to abandon it, before reversing course again last month and saying he would go ahead with the transaction. Along the way, he at times criticized the company and its executives.

The Thursday email said Twitter’s offices would be temporarily closed to ensure the safety of employees, the company’s systems and customer data. Employees who were in an office or on their way to one were asked to go home, according to the email.

Twitter employees have been bracing for job cuts. The Journal previously reported that the company was drafting plans for broad layoffs, with one investor saying up to 50% of staff could be cut and that employees would be evaluated to determine the scope of the firings.

Elon Musk has purchased Twitter, ending a monthslong saga over whether or not he would go through with his offer to acquire the social media platform. WSJ takes an inside look at the tweets, texts and filings to see exactly how the battle played out. Illustration: Jordan Kranse

Signs of pushback against Twitter’s actions emerged in the wake of the apparent dismissals. In a federal lawsuit dated Thursday, a handful of Twitter employees accused the company of violating federal and California law in failing to provide enough warning of a mass layoff.

The lawsuit, filed in California federal court by five former employees of Twitter who said they were terminated this week, said the company’s layoffs violated the federal Worker Adjustment and Retraining Notification Act and its California equivalent, which require giving 60 days of advance written warning of dismissing a large number of employees of a company at once. The lawsuit asked the court to issue an order blocking Twitter from its alleged violations of the acts. Twitter didn’t immediately respond to a request for comment.

In April, as Mr. Musk was moving to buy Twitter, entrepreneur

Jason Calacanis,

a close ally, suggested cutting the number of Twitter employees to roughly 3,000, according to messages between the two, which were released as part of litigation around the transaction.

A staff of 3,000 would represent the lowest level since 2013, the year Twitter went public, when the platform had about 2,700 employees and its revenue was roughly 13% of its level last year.

Twitter’s employee numbers began climbing in 2019, after ranging between approximately 3,000 and 4,000 for several years. Twitter has said that the increase in recent years was driven by investments in engineering, product, design and research.

Even before officially taking control at Twitter, Mr. Musk had indicated that he was concerned about the company’s expenses. Twitter has posted a loss in eight of its past 10 fiscal years, according to FactSet.

Mr. Musk moved quickly to make personnel changes at the top of the company. Last week, on the same day he closed the deal, he fired Twitter Chief Executive

Parag Agrawal

and three other top executives. Mr. Musk fired the executives for cause and is saying he isn’t required to pay them multimillion-dollar severance packages, the Journal reported. Other executives have departed since.

Mr. Musk has leveraged other parts of his business empire to try to put his imprint on Twitter. He brought in some

Tesla

engineers to begin working on reshaping the social-media platform, the Journal reported. Also added to an internal company directory were some people who appeared to work for the Boring Co., a tunneling business Mr. Musk founded.

Broadly, the social-media industry is struggling with weaker revenue from digital advertisers. Such advertising has slowed due to several factors, including rising inflation, the war in Ukraine, and

Apple

privacy changes that have made it harder to track the performance of ads. Twitter rival Snap Inc. this year said it was letting 20% of staff go.

Facebook

parent Meta Platforms Inc. also has indicated it was trimming ranks.

Tech companies beyond social media also have embarked on belt tightening that is leading to job losses and hiring freezes. On Thursday, ride-hailing company

Lyft Inc.

and payments company Stripe Inc. announced major layoffs, and

Amazon.com Inc.

said it would freeze corporate hiring for months.

Write to Sarah E. Needleman at sarah.needleman@wsj.com and Alexa Corse at alexa.corse@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Philip Morris to Raise Offer for Swedish Match and Buy U.S. Rights for IQOS

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Philip Morris’s original offer for Swedish Match in May was 161.2 billion Swedish Krona, which was then equivalent to $16 billion. The new offer is expected to be announced as soon as Thursday, the people said.

The move is made easier by the strength of the U.S. dollar against the Swedish currency since the deal was struck. Other factors that went into the revised offer were inflation, volatility in equity markets and changes in interest rates, one of the people said. Philip Morris has been under pressure from Elliott Management Corp. and other investors to sweeten the bid.

Philip Morris has separately struck a deal with

Altria

MO -0.22%

to buy back the U.S. commercialization rights for IQOS, Philip Morris’s heated tobacco device, the companies said.

The deal, which takes effect April 30, 2024, frees up Philip Morris to market IQOS in the U.S. through the Swedish Match sales force if the Swedish Match deal closes. Philip Morris is also prepared to sell IQOS in the U.S. on its own, Philip Morris Chief Executive Jacek Olczak said. The deal includes an upfront $1 billion payment with the rest paid by July 2023,

Altria

said.

Altria introduced IQOS in the U.S. in 2019 and sold it in a handful of states until last year, when it had to stop importing IQOS as the result of a patent dispute. Philip Morris has said it plans to begin manufacturing IQOS in the U.S. next year so that it may resume selling the products in the U.S.

The payments from Philip Morris will give Altria greater flexibility to allocate resources toward its plan to expand into smoke-free products, Altria Chief Executive Billy Gifford said.

Both IQOS, which is sold outside the U.S., and the proposal to buy Swedish Match are part of Philip Morris’s strategy to generate more than 50% of annual net revenue from smoke-free products by 2025, up from about 30% currently.

IQOS is a device that heats tobacco but doesn’t burn it or produce smoke when users inhale. It is an alternative to e-cigarettes, which create an aerosol from a nicotine liquid.

Philip Morris and Altria have been in a dispute over IQOS, which they introduced into the U.S. through a partnership. Philip Morris argued that Altria hadn’t met the agreed-upon sales targets for IQOS that would allow Altria to extend its exclusive U.S. rights. Altria said that it had. The two Marlboro makers will now pursue competing products in the U.S.

Altria, which sells Marlboro cigarettes in the U.S., said it expects to complete the design for its own new heated tobacco device by the end of 2022; it would then need to seek FDA authorization. Altria is also the largest shareholder in Juul Labs Inc., an e-cigarette maker that is in a dispute with U.S. officials over whether it can remain on the U.S. market.

The friendly deal between Philip Morris and Swedish Match has been conditional on the tobacco company gaining more than 90% of Swedish Match’s shares. That would allow Philip Morris to squeeze out any residual shareholders by paying them the same price as other investors, and then fully fold the business into its own.

But Philip Morris has been under pressure by a group of investors led by Elliott, which holds a 7.25% stake in Swedish Match, to raise the bid after they opposed it as too low. Without their support, Philip Morris would need to lower the minimum threshold to complete the offer.

That is risky, however, because Swedish Match’s remaining minority shareholders could frustrate Philip Morris’s ability to fully integrate the business. Any move to transfer assets or carry out related-party transactions would require Philip Morris to hold a shareholder vote, which Philip Morris couldn’t join, according to Sweden’s takeover rules.

Write to Jennifer Maloney at jennifer.maloney@wsj.com and Ben Dummett at ben.dummett@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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World

Biden Administration Pares Back Covid Fight as Funding Push Falls Short

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The Biden administration has stopped paying to mail out free Covid-19 tests and expects to end free vaccines for Americans after Congress dropped billions of dollars for such efforts from a government funding bill last month.

People familiar with the matter said the administration’s Covid-19 task force will remain in place ahead of an expected uptick in cases in the coming winter months. But the team will shift focus from emergency response to longer-term issues, such as boosting domestic manufacturing of personal protective equipment, researching long Covid and supporting genomic sequencing to identify variants, the people said.

The shift means that health insurers and employers will likely pay for Covid-19 vaccines, drugs and tests, as they do for most medical products and services.

The administration on Tuesday released updates to the national biodefense strategy that it said would strengthen surveillance for risky pathogens and preparedness for future outbreaks or biowarfare attacks. Some of the planning is under way, officials said, and other aspects are dependent on $88 billion in funding for pandemic preparedness and biodefense the administration has requested from Congress.

Changes in the administration’s pandemic strategy come as Covid-19 cases are climbing in Europe, which is often a precursor to rising case numbers in the U.S. And the arsenal of available treatments for people infected with Covid-19 has dipped as mutations allow variants to evade them.

The White House had sought $22.4 billion from Congress for more Covid tests, vaccines and treatments.



Photo:

Kyle Mazza/Zuma Press

“Just because we’ve ended the emergency phase of the pandemic doesn’t mean Covid is over,” said

Eric Topol,

executive vice president of Scripps Research, a medical-research facility.

After the coronavirus hit, the federal government funded development of some Covid-19 vaccines and took control of the purchase and distribution of the shots, tests and other products to guarantee sufficient supplies and make sure they went where needed.

Federal officials planned to relinquish their control to the private sector after the emergency subsided.

Eli Lilly

& Co. said in August it planned to start selling its Covid-19 antibody drug after federal supplies ran out and without new appropriations from Congress.

The federal government has also wound down its program of providing free Covid-19 tests to people who ordered them online, though it is still distributing free tests in other locations, such as long-term-care facilities and rural health clinics.

The issue is tricky for the Biden administration. President Biden had campaigned on a promise to get the pandemic under control, and the White House has sought to show progress in combating the virus. Yet many Americans have stopped masking and taking other precautions, which administration officials worry will put them at risk if a new wave emerges during the winter.

The administration had sought $22.4 billion for the Covid-19 response from Congress, and it recently extended the pandemic’s status as a public-health emergency. The White House said the money was needed to pay for more tests, vaccines—including development of new, next-generation vaccines—and treatments.

The money wasn’t included in a must-pass government-funding bill last month.

To build support for new funding, Biden administration officials have been warning about the risks to people if cases surge in the cold-weather months and there aren’t sufficient supplies of Covid-19 products because the federal government lacks the money to buy them.

“We are going into this fall and winter without adequate tests because of congressional inaction,”

Ashish Jha,

the White House Covid-19 coordinator, said recently. “You can’t fight a deadly virus without resources.”

The new bivalent vaccine might be the first step in developing annual Covid shots, which could follow a similar process to the one used to update flu vaccines every year. Here’s what that process looks like, and why applying it to Covid could be challenging. Illustration: Ryan Trefes

Republicans, who opposed including the Covid funds in the spending bill, said there had not been a thorough accounting of how pandemic-relief funds had been spent. Congress had allocated about $4.6 trillion as of August, according to USASpending.gov, which tracks federal-spending information.

“You have been given astonishing amounts of money,” Sen.

Richard Burr

(R., N.C.) said at a recent congressional hearing.

Without a new appropriation, funds for the federal government to buy and supply Covid-19 vaccines are expected to run out by early next year. The administration now is looking into ways to guarantee that about 30 million uninsured people can access future boosters, treatments and vaccines. Foundations, companies and other groups have paid for non-pandemic medicines for some people who don’t have insurance.

The administration is also in talks with various stakeholders such as vaccine makers about how to transition from the government procuring vaccines to more traditional models, such as insurance coverage of shots or treatments.

SHARE YOUR THOUGHTS

Is Congress allocating enough money to fight Covid-19? Why or why not? Join the conversation below.

The administration is also figuring out how to move forward with efforts to develop a more durable, next-generation Covid-19 vaccine without the boost in funds. Without a vaccine that blocks both infection and transmission, the virus has been able to continue mutating to evade immunity. Members of the White House Covid-19 task force have said a nasal vaccine could be more effective because it targets immune responses where the virus first enters the body, though developing such a shot poses scientific challenges.

Anthony Fauci,

the president’s chief medical adviser, said the National Institutes of Health is giving grants totaling more than $60 million over three years to academic institutions for development of a broad coronavirus vaccine. But more funding will be necessary to finish that work, said Dr. Fauci, who leads the NIH’s National Institute of Allergy and Infectious Diseases.

Some public-health leaders and federal officials say the U.S. is falling behind countries such as China, which has introduced a vaccine that is inhaled through the nose and mouth.

“It’s a national-security risk,” said

Jennifer Nuzzo,

a professor of epidemiology and director of the pandemic center at the Brown University School of Public Health in Rhode Island. “Other countries have looked at how the U.S. is struggling.”

—Michael R. Gordon contributed to this article.

Write to Stephanie Armour at Stephanie.Armour@wsj.com

Corrections & Amplifications
The White House wants to show progress in combating the coronavirus. An earlier version of this article incorrectly said the White House wants to show progress in combating the vaccine. (Corrected on Oct. 18)

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Peloton Co-Founder John Foley Faced Repeated Margin Calls From Goldman Sachs as Stock Slumped

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John Foley,

the co-founder and former chief executive of

Peloton Interactive Inc.,

PTON -3.41%

faced repeated margin calls on money he borrowed against his Peloton holdings before he left the fitness company’s board last month, according to people familiar with the situation.

As Peloton’s shares slumped over the past year,

Goldman Sachs Group Inc.

GS -2.11%

asked Mr. Foley several times to provide fresh funds or additional collateral for personal loans the bank had extended to him, the people said. The company’s share price has fallen nearly 95% from its $160 peak in December 2020.

Resigning from the board gave Mr. Foley flexibility to sell or pledge more Peloton shares, though he said the margin calls weren’t the reason he left the company.

“I didn’t resign from the board because I was underwater,” he said. “To the extent that I took on debt through Goldman, it was because I am bullish on Peloton and still am. It was and is a great company.”

The former chairman and CEO had pledged as collateral about 3.5 million Peloton shares as of the end of September 2021, or about 20% of his stake at the time, securities filings show. The pledged shares were worth more than $300 million a year ago. At current prices, they are worth roughly $30 million.

Peloton has cut thousands of jobs this year to stem its losses.



Photo:

John Smith/VIEWpress/Getty Images

Mr. Foley was able to secure private financing and avoid stock sales by Goldman, the people said. He declined to say on Monday how much of his current stake had been pledged or how much he had borrowed against his holdings.

His seat on the board limited his ability to raise additional funds because most public companies prohibit directors and executives from selling their shares during certain trading periods. In addition, Peloton’s policy limits pledges for margin loans by directors or executives to 40% of the value of an individual’s shares or vested options.

Mr. Foley’s decision to leave the board on Sept. 12 followed a tumultuous several months at the company he co-founded a decade ago, as well as a sharp decline in his personal wealth as Peloton’s sagging fortunes diminished the value of his holdings. His stake in the company, worth $1.5 billion a year ago, is currently worth less than $100 million.

“Everyone can see I had a rocky year,” Mr. Foley said. “This was not a fun personal balance-sheet reset.”

Barry McCarthy, a Silicon Valley veteran, became Peloton’s CEO in February.



Photo:

Angela Owens/The Wall Street Journal

In February, Mr. Foley stepped down as Peloton’s CEO and was succeeded by

Barry McCarthy,

a former

Netflix Inc.

and Spotify Technology SA executive. Mr. Foley kept his position as Peloton’s executive chairman and continued to hold a controlling stake in the company through Class B shares with 20 votes apiece.

A few weeks later, Mr. Foley reported selling $50 million worth of Peloton shares in a private transaction. At the time, Peloton said the sale was part of the executive’s personal financial planning. The sale left him and his wife,

Jill Foley,

a former Peloton executive, with 6.6 million shares and options on another 8.4 million, according to securities filings, which combined are currently worth less than $100 million. He hasn’t reported any stock or option sales since March. Business Insider reported in March that Mr. Foley was in discussions with Goldman about restructuring his personal loans.

Peloton’s business deteriorated throughout the spring and summer, with the company in August reporting a $1.2 billion loss and the first ever quarter in which its subscriber numbers failed to grow. The company has cut thousands of jobs this year to stem its losses, including a round of layoffs unveiled last week.

Mr. Foley’s 10-year tenure as CEO was marked by rapid growth and sometimes lavish spending. He took heat from Peloton employees last December for hosting a black-tie holiday party that included some of the company’s celebrity instructors weeks after implementing a hiring freeze. Pictures circulated on Instagram of gown-clad instructors dancing at New York’s luxury Plaza Hotel. Mr. Foley acknowledged on social media that the event caused “frustration and angst” among employees.

Peloton has been on a wild ride, announcing its CEO was stepping down and thousands of jobs would be cut, despite seeing a surge in sales early in the pandemic. Here’s why Peloton became a viral success, and why it’s spinning out now. Photo illustration: Jacob Reynolds

That same month, Mr. Foley paid $55 million to purchase an oceanfront mansion in East Hampton, N.Y., according to real-estate records and people familiar with the transaction. He and Ms. Foley in September put their Manhattan penthouse up for sale. The property, last priced at $6.5 million, is in contract to be sold, according to listings website StreetEasy.

Margin loans, or borrowing against portfolios of stocks and bonds, come with the risk that a broker can call for additional cash or collateral to meet the minimum equity required if a security’s price drops too low. Sharp drops in stock prices during the 2000 dot-com burst and the 2008 financial crisis generated margin calls for executives at well-known companies.

John Foley paid $55 million to purchase this oceanfront mansion in East Hampton, N.Y.



Photo:

PICTOMETRY

Peloton requires directors, executives and employees to get approval for pledging their shares as collateral for margin loans. Other Peloton executives also have pledged some of their Class B holdings, and in the annual report Peloton filed last month, the company warned that investors could be harmed if its stock fell and executives were forced to sell shares.

Goldman has worked closely with Peloton, including when Mr. Foley was the CEO. The investment bank was one of the lead underwriters of the company’s initial public offering in 2019. Goldman bankers also co-led a $1 billion stock offering in November 2021.

Investors initially soured on Peloton—its shares fell 11% the day they made their debut at $29. The stock surged in 2020 during the onset of the Covid-19 pandemic, giving the company a peak market value of $50 billion and making Mr. Foley a billionaire on paper. The shares closed down 3.4% Tuesday at $8.78.

—Theo Francis

and Katherine Clarke contributed to this article.

Write to Sharon Terlep at sharon.terlep@wsj.com and Suzanne Vranica at suzanne.vranica@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

He nailed three big S&P 500 moves this year. Here’s where this strategist sees stocks headed next, with beaten down names to buy.

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A Wall Street hat trick may not be on the cards, with stocks in the red for Wednesday.

A two-day rally was never a guaranteed exit out of the bear woods anyway, as some say signs of a durable bottom are still missing.

Enter our call of the day, from the chief market technician at TheoTrade, Jeffrey Bierman, who has made a string of prescient calls on what has been a roller coaster year for the index thus far. He’s also a professor of finance at Loyola University Chicago and DePaul University.

Bierman, who uses quant and fundamental analysis to determine market direction, sees the S&P 500
SPX,
-1.62%
finishing the year between 4,000 and 4,200, maybe around 4,135. “Fourth-quarter seasonality favors bulls following a weak third quarter.  Not to mention most stocks are priced for no growth,” he told MarketWatch in a Monday interview.

In December 2021, he forecast the S&P 500 might see a 20% decline within six months, toward 3,900 — it hit 3,930 in early May. In June, he forecast a rally and recovery to 4,300 — the index hit 4,315 by mid-August.

Speaking to MarketWatch on Aug. 25, Bierman saw a retest of around 3,600 for the index, citing an often rough September for stocks. It closed out last month at a new 2022 low of 3,585.

“I think we’re going to end up for the quarter. [The market is] deeply oversold and some stocks are completely mispriced in terms of their valuation metrics,” said Bierman, who is looking squarely at retail and technology sectors.

“The valuations on half the chip stocks are trading below a multiple of seven. I’ve never seen that ever…but what that means is when the semiconductor sector comes back, the multiple expansion is gonna be like a volcanic eruption to the upside,” he said of the sector known for its boom/bust cycles.

For example, he owns Intel
INTC,
-2.53%,
which hit a five-year low on Friday. Eventually, the company that has invested $20 billion in a new U.S. plant will come roaring back alongside rivals like Advanced Micro
AMD,
-4.65%.
“People will look back on this and go ‘Oh, my God, I can’t believe Intel was at five times earnings,’ which is insanity for this stock.”

For the S&P 500 as a whole next twelve months price/earnings is currently 16.13 times, so Intel’s would be less than half of the broader index, according to FactSet

As for retail, he’s been looking at Urban Outfitters
URBN,
-1.06%,
Macy’s
M,
-1.94%
and Nordstrom
JWN,
-0.67%,
all places where millennials don’t shop, but the middle class does, with the all-important holiday shopping period dead ahead.

“There are 100,000 people being hired to work part time at these companies, and their margins are not coming down at all,” with no markdowns and decent sales, he said, noting those companies are being priced at a multiple of 5 times forward earnings.

“It means that you don’t think that Macy’s can put together for the Christmas quarter a comparative quarter, year over year of greater than 5%? If you don’t then don’t buy it, but I do,” said Bierman. “That’s why I’m willing to stick my neck out and buy these things. I bought Abercrombie & Fitch
ANF,
-3.78%
at 10 times earnings…I’ve never seen it that low.”

For those who aren’t comfortable picking stocks, he says they can still get exposure through exchange-traded funds, such as SPDR S&P Retail
XRT,
-2.58%
or the Technology Select Sector SPDR ETF
XLK,
-1.70%.

Bierman adds that investors need to be careful not to be overly concentrated in the top stocks, given “10 stocks accounted for 45% of the Nasdaq and the fact that 25% of the S&P almost accounted for about 50% of the S&P movement.”

“Everbody’s concentrated in 10 stocks that can still fall another 30% or 40%, like Apple and Microsoft. The idea of concentration risk is that everybody owns Apple, everybody owns Amazon,” he said.

And that could force the hand of passive and active managers heavily invested in those big names, driving a 10% drop for markets that “washes away all other stocks.”

The markets

Stocks
DJIA,
-1.21%

SPX,
-1.62%

COMP,
-2.19%
are in the red, and bond yields
TMUBMUSD10Y,
3.783%

TMUBMUSD02Y,
4.199%
are up, along with the dollar
DXYN,
.
Silver
SI00,
-5.00%
is retracing some of this week’s big gains, and bitcoin
BTCUSD,
-2.62%
is also off, trading at just over $20,000. Hong Kong stocks
HSI,
+5.90%
surged 6% in a catch-up move following a holiday. New Zealand’s central bank hiked rates a half point, the fifth increase in a row.

The buzz

Oil prices
CL.1,
-0.02%

BRN00,
+0.28%
are flat as OPEC+ reportedly agreed to cut oil production by 2 million barrels a day. Some say don’t be too impressed by any output reduction.

Amazon
AMZN,
-2.34%
will reportedly freeze corporate hires in its retail business for the remainder of 2022.

Mortgage applications fell to the lowest pace in 25 years in the latest week.

The ADP private-sector payrolls report showed 208,000 jobs added in September. The trade deficit narrowed, which should be good news for third-quarter GDP. The Institute for Supply Management’s services index is due at 10 a.m. Atlanta Fed President Raphael Bostic will also speak.

Expect the spotlight to stay on Twitter
TWTR,
-2.53%
after Tesla
TSLA,
-5.16%
CEO Elon Musk committed to the $44 billion deal. But will it feel like a win once he owns it?

Plus: Elon Musk’s legal battle with Twitter may be over, but his war with the SEC continues

EU countries agreed to impose new sanctions on Russia after the illegal annexation of four Ukraine regions. Those moves will include an expected price cap on Russian oil.

South Korea’s missile fired in response to North Korea’s weapon launch over Japan, crashed and burned.

Best of the web

Russians fleeing Putin’s mobilization are finding haven in poor, remote countries.

Consumers are throwing away perfectly good food because of ‘best before’ labels.

The CEO of an election software company has been arrested on accusations of ID theft.

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern:

Ticker Security name
TSLA,
-5.16% 		Tesla
GME,
-7.59% 		GameStop
AMC,
-9.56% 		AMC Entertainment
TWTR,
-2.53% 		Twitter
NIO,
-5.92% 		NIO
AAPL,
-1.77% 		Apple
APE,
-8.40% 		AMC Entertainment preferred shares
BBBY,
-8.52% 		Bed Bath & Beyond
AMZN,
-2.34% 		Amazon
DWAC,
-0.64% 		Digital World Acquisition Corp.
The chart

More market-bottom talk:


Twitter

Random reads

All about the investment manager who caught Yankees’ superstar Aaron Judge’s record-breaking home run.

An iPhone in a 162-year old painting? The internet is stumped.

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Technology

Games That Push the Brain to the Limit Get Scientists’ Attention in Fight Against Dementia

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You may be able to prevent or delay dementia with changes in diet and exercise, research has found. Now another possible tool for avoiding dementia is getting researchers’ attention: specially designed videogames.

Companies are marketing a crop of digital games that promise a workout for the brain, with a battery of speed, attention and memory exercises. Researchers are working on them, too. Scientists are studying whether such “brain training” games can help stave off or delay age-related deterioration in the brain.

These games aren’t what people typically think of as videogames or puzzles. In some, players must differentiate and recall sounds, patterns and objects, making snap decisions that grow harder as the games progress. One game gives users a split second to locate two matching butterflies in a swarm before the image disappears. 

Many scientists say it’s too early to tell whether the games really can prevent dementia, and question whether they can lead to long-term improvements in memory and daily functioning. But some scientists think the games are promising enough that they’re pouring millions of dollars into studying them. 

Neuroscientists have long recommended traditional games, such as bridge, Sudoku and crossword puzzles, to keep the brain sharp. Crosswords don’t help people process information speedily, though, a skill whose age-related deterioration can progress to dementia.

The newer games, such as one called Double Decision developed by scientists, try to stimulate and speed up neural activity and slow deterioration in brain physiology that occurs with age. 

In a healthy brain, myelin, a layer of insulation, keeps nerve fibers taut and densely bundled, says

Chandramallika Basak,

an associate professor at the University of Texas at Dallas. Our myelin frays and unravels with age, interfering with memory and clear thinking, she says.

In recent imaging studies, her team and scientists from the University of Iowa observed that people who played brain training games maintained or increased myelin in some parts of the brain compared with control groups that played other types of games that didn’t require speed or increasing levels of difficulty.  

Interest in studying brain-training games has grown since a 2020 report published in the journal Lancet said that as many as 40% of dementia cases could theoretically be prevented or delayed with lifestyle changes, such as adjusting diet and exercise and managing hypertension. 

Dementia is marked by age-related losses in memory, attention and thinking speed that are severe enough to interfere with daily living. Alzheimer’s, a neurodegenerative disease, is the most common type of dementia. Women who are 45 years old have a 20% lifetime chance of developing Alzheimer’s, according to the Alzheimer’s Association. Men the same age have a 10% chance. 

Cognitive training, which includes anything from computerized exercises to puzzles and bridge, has been identified by the National Academies of Sciences, Engineering and Medicine as a promising area of dementia-intervention research. There’s no recommended age to start playing these games. You can find games online or at libraries, community colleges or local chapters of the Alzheimer’s Association.

Brain-training games haven’t been proven to prevent dementia, says the National Institute on Aging, part of the National Institutes of Health. Studies so far have yielded mixed results on the games’ effectiveness; doubts remain over their ability to produce long-term practical improvements. 

Still, the research to date has been encouraging enough—and dementia so prevalent—that scientists are studying the games further. The World Health Organization in 2019 recommended cognitive training for older adults as a way to reduce the risk of dementia even though the science behind it isn’t definitive.

The National Institute on Aging is funding 21 clinical trials to try to learn what types of games might improve factors such as memory and attention and reduce the long-term risk of developing dementia. A series of studies of nearly 3,000 people funded in part by the NIA suggested that the benefits of a course of exercises requiring speedy observations and snap decisions appeared to help older people 10 years later and lower their dementia risk by 29%.

The training in the study consisted of 10 initial 60- to 75-minute sessions where people played speed-and-recall games, and eight booster sessions later. The study wasn’t designed at the outset to assess dementia risk, according to

Dana Plude,

a deputy director at the National Institute on Aging. But the results are a key reason for his interest in cognitive training, and the NIA is currently funding a $7 million clinical trial to further test the results.

Brain training games can be fun but frustrating, regardless of your age and mental stamina. Apps generally charge a monthly or annual fee; some offer a training routine that may be personalized.

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CogniFit, one such app, offers online cognitive assessments and brain training for $19.99 a month for its basic 20-game plan and $29.99 for its 60-game premium plan. It suggests users spend 10 to 15 minutes three times a week on nonconsecutive days to increase their cognitive scores.

Double Decision is sold by Posit Science, whose games are offered commercially and have been used in studies funded by the U.S. Defense Department, the NIA and others. 

The goal of Double Decision is to progressively increase the amount of visual information a brain can take in and the speed at which it processes the information—capabilities that typically decline with age. Repeated gameplay trains the brain to think and react more quickly,  focus better and remember more, says

Michael Merzenich,

chief science officer of Posit Science. 

In the exercise, two different cars appear in the middle of a screen with a Route 66 sign floating in the periphery. One of the cars plus the road sign flash onto the screen and then disappear. A player must recall which car they just saw and the location of the road sign. The game speeds up and adds distractions like a herd of cows or dozens of road signs. 

“Brain health is manageable,” says Dr. Merzenich. “We should treat brain health as seriously as our physical health.”

Double Decision is designed to improve attention, memory and processing speed by forcing the brain into split-second observations and decisions. Content hosted by BrainHQ

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Business

Peloton’s Quarterly Loss Tops $1.2 Billion

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Peloton Interactive Inc.,

PTON -19.32%

racing to save itself, will reject some of the most fundamental aspects of its decade-old business model. 

The once-hot maker of connected fitness equipment posted losses of more than $1.2 billion in the most recent quarter as revenue plunged and the company warned it would spend more cash than it brings in for several more months. Peloton lost $2.8 billion in the year ended June 30, compared with a $189 million loss in the prior year.

Losses come as demand for Peloton’s bikes and treadmills has plunged and the company’s count of people who subscribe to its fitness classes stagnated after growing fourfold since early 2020. The company had about 3 million subscribers to its connected fitness offering at the end of the June quarter.

Peloton CEO Barry McCarthy aims to make Peloton primarily a subscription-based company.



Photo:

Kevin Dietsch/Getty Images

Peloton shares were down nearly 20% in morning trading, as the company posted steeper losses and weaker revenue than analysts had projected. Through Wednesday’s close, its share price was down 88% from a year ago.

“The naysayers will look at our [fourth-quarter] financial performance and see a melting pot of declining revenue, negative gross margin, and deeper operating losses. They will say these threaten the viability of the business,” Chief Executive

Barry McCarthy

said in a letter to shareholders. “But what I see is significant progress driving our comeback and Peloton’s long-term resilience.”

Peloton has long sought out an affluent base of customers with stationary bikes that cost up to $2,500, and has worked to ensure only owners of its equipment are able to connect to its popular workout classes.

Mr. McCarthy, who took over in February, said the company also will court more frugal customers and make its workout classes, often accessed through screens on Peloton equipment, compatible with competitors’ exercise products.

He said the company is also trying to bring more people in through selling equipment and clothes through Amazon.com Inc.’s e-commerce platform to letting people rent bikes through a subscription. Peloton historically has offered two subscription options, one in which courses connect to bikes and treadmills and cheaper options in which classes aren’t connected.   

“You never know which initiative is going to get us where we want to go, but I am confident of the cumulative effect,” Mr. McCarthy said in a call with analysts. 

The efforts come as Peloton’s finances deteriorate. 

Revenue for the June quarter fell to $679 million, a nearly 30% drop from a year ago as declining exercise equipment sales more than offset higher revenue from subscriptions. 

Efforts to restructure the company contributed to it burning through $412 million in cash in the latest quarter, after going through $650 million in each of the prior two periods. It ended June with $1.25 billion in cash reserves and a $500 million credit line. 

Peloton is taking steps to shore up its finances, from sweeping layoffs to outsourcing manufacturing of its fitness equipment. The company said earlier this month it would cut around 800 jobs in an effort to reduce costs, after announcing in February it would lay off about 2,800 workers. Executives said cost-cutting aims to ensure the company maintains at least $1 billion in available cash.

One of the pandemic’s biggest winners, Peloton has struggled to adapt as Americans revert to prepandemic habits and tighten spending amid inflation near its highest level in decades. Americans are spending less on in-home fitness, from sales of equipment to connected workouts, as they return in droves to gyms and become increasingly cautious about spending available cash amid economic uncertainty.

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Mr. McCarthy’s predecessor, Peloton co-founder

John Foley,

spent hundreds of millions of dollars to expand the company’s manufacturing and supply, betting that demand would hold as the pandemic waned. Along with replacing Mr. Foley, the company earlier this year made changes to its board and said it would cancel plans for a $400 million factory in Ohio.

For the first time, in the most recent quarter, Peloton’s subscription revenues were greater than equipment sales. Mr. McCarthy, who previously worked at

Spotify Technology SA

and

Netflix Inc.

, aims to make Peloton primarily a subscription-based company. Subscriber revenue for the quarter was $383 million; equipment sales were $296 million. 

Peloton’s subscriber count rose by just 4,000 in the quarter ended June 30 and the company predicts that the total number of subscribers will remain flat in the current quarter.

It is a big change from the start of 2021, when Peloton’s quarterly revenue peaked at $1.2 billion, and exercise equipment comprised more than 80% of sales. 

The company said it expects total revenue between $625 million and $650 million for the current quarter, which ends Sept. 30.

Mr. McCarthy, in his investor letter, likened Peloton to a dangerously tipping cargo ship he was aboard as a high-schooler when the crew managed a dramatic recovery.

“Peloton is like that cargo ship,” he said. “We’ve sounded the alarm for general quarters. Everyone’s at their station.”

Write to Sharon Terlep at sharon.terlep@wsj.com

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Technology

Samsung’s New $1,800 Foldable Galaxy Phone Tests High-End Budgets

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NEW YORK—The entire smartphone industry is slumping except for the priciest devices.

Samsung

Electronics Co. is testing the limits of that high-end demand.

On Wednesday, Samsung unveiled its latest models of two of the world’s most-expensive phones. The Galaxy Z Fold 4, which becomes the size of a small tablet when opened, will cost about $1,800. The more compact Galaxy Z Flip 4 will go for around $1,000. The phones have prices similar to last year’s versions and become available in the U.S. later this month.

Total smartphone shipments slid 8% in the first half of this year versus the same period in 2021, largely because consumers have cut back spending on nonessential goods amid inflation and a shakier economic outlook, according to Counterpoint Research, a research firm. The declines were steepest for the lowest-priced devices, it said.

Foxconn Technology Group, the world’s biggest iPhone assembler, on Wednesday said demand for smartphones and other consumer electronics is slowing, prompting it to be cautious about the current quarter.

Shipments of “ultra-premium” phones—devices sold for $900 or more—grew by more than 20% during the same period, Counterpoint said. This category comprises mostly

Apple Inc.’s

iPhones and Samsung’s flagship devices.

WSJ’s Dalvin Brown checks out the newest foldable smartphones from Samsung to see if the kinks in early models have been ironed out and whether folding is a feature worth spending for, or just a gimmick. Illustration: Adele Morgan

The resilience of the phone industry’s upper class mirrors that of the luxury-goods business, as wealthier consumers show a willingness to keep spending on clothing, handbags and jewelry despite economic rockiness. Brands including

LVMH Moët Hennessy Louis Vuitton SE,

Ralph Lauren Corp.

and Gucci owner

Kering SA

have reported robust growth this year.

Apple, in its most recent quarter, reported a surprise rise in iPhone sales, defying analysts’ expectations for a decline. There has been no obvious macroeconomic impact on iPhone sales in recent months, Apple Chief Executive

Tim Cook

said on an earnings call last month.

Samsung, the world’s largest smartphone maker, recently said it expects the overall smartphone market to see shipments stay flat or experience minimal growth this year. But the South Korean company expressed optimism that its foldable-display devices, which are among its most expensive products, would sell well.

Demand for iPhones and Samsung’s flagship devices, boosted in recent years by the arrival of superfast 5G connectivity and pandemic-time splurging on gadgets, should remain high, said Tom Kang, a Seoul-based analyst for Counterpoint. “It’s clear that the affluent consumers are not affected by current economic headwinds,” Mr. Kang said.

Samsung has much riding on the Galaxy Z Fold 4, left, and the Galaxy Z Flip 4 becoming a success.



Photo:

SAMSUNG

The smaller of the two new devices, the Galaxy Z Flip 4, is an update of the model that accounted for most of Samsung’s foldable-phone sales last year. When fully open on its vertical axis, it has a display that measures 6.7 inches. When closed, it is half the size of most mainstream smartphones, and owners can view text messages and other alerts on a smaller, exterior screen. Compared with last year’s version, Samsung said the Galaxy Z Flip 4 takes better photos and has a slimmer hinge and larger battery.

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The heftier Galaxy Z Fold 4 sports a tablet-sized display that is 7.6 inches diagonally when fully opened. It opens and closes like a book, and when shut, it has a 6.2-inch outer screen that performs most smartphone functions. The new version has a slightly thinner hinge and improved camera capabilities, Samsung said.

The Galaxy Z Fold 4 is the first device to use Android 12L, a version of the operating system created by

Alphabet Inc.’s

Google specifically for tablets and foldable phones, Samsung said.

Alongside the two foldable phones, Samsung on Wednesday also introduced two new versions of its Galaxy Watch 5, as well as a new edition of its Galaxy Buds wireless earphones, the Galaxy Buds 2 Pro.

Samsung has much riding on the Galaxy Z Fold 4 and the Galaxy Z Flip 4 becoming a success. Given their high price and fatter margins, foldable devices could represent about 60% of Samsung’s mobile-division operating profits, despite accounting for roughly one-sixth of the company’s smartphone shipments, said Sanjeev Rana, a Seoul-based analyst at brokerage CLSA.

Samsung said the Galaxy Z Fold 4 is the first device to use Android 12L, a version of the operating system created by Google specifically for tablets and foldable phones.



Photo:

SAMSUNG

Across the industry, the priciest tier of smartphones represent about 10% of annual shipments but about 70% of the industry’s profits, Counterpoint said.

Samsung was a pioneer in an industry that had gone stale when it released the first mainstream foldable smartphone more than three years ago. But the original Galaxy Fold stumbled out of the gate. Design flaws delayed its release. The pandemic closed stores, cutting off opportunities for would-be early adopters to test out the devices, Samsung executives have said. And many consumers balked at an initial price tag close to $2,000.

Last year, Samsung’s Galaxy Z Fold 3 and Galaxy Z Flip 3 saw stronger sales, helped by price cuts. The company also juiced demand through aggressive promotions and trade-in discounts that made purchases more affordable.

Worldwide foldable smartphone shipments are expected to total nearly 16 million units this year, up roughly 73% from the prior year, Counterpoint said. Samsung is projected to account for roughly 80% of the foldable market this year, according to Counterpoint.

The other foldable players—selling at prices below the ultra-premium threshold—include major Chinese brands, including Huawei Technologies Co., Xiaomi Corp., as well as BBK Electronics Co.-owned Vivo and Oppo.

Lenovo Group Ltd.

’s

Motorola,

which first launched a foldable phone in 2019, is slated to introduce a new model this month.

Write to Jiyoung Sohn at jiyoung.sohn@wsj.com

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Business

Procter & Gamble Sounds a Warning After Strong Quarter

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Procter & Gamble Co.

PG -6.18%

, maker of Tide detergent and Pampers diapers, is predicting the slowest sales growth in years as consumer belt-tightening is beginning to hit household staples.

The outlook comes after the Cincinnati-based consumer-products giant on Friday reported its biggest annual sales increase in 16 years because of the price increases that it placed on mainstays from toothpaste to toilet paper.

P&G’s organic sales, a closely watched metric that strips out deals and currency moves, rose 7% for the year ended June 30, the most since 2006. Shoppers paid substantially higher prices.

But consumers are beginning to cut back amid mounting inflation, executives said. They are using up products they stockpiled during the pandemic or holding off on replenishing supplies. Sales volumes declined 1% in the most recent quarter.

“For us, the downturn is not yet visible,” P&G finance chief

Andre Schulten

said. “We’re also not naive, we see the pressure on the consumer.”

P&G expects organic sales growth of 3% to 5% for the current year, the lowest since 2019 when the company notched a 5% increase. The company predicts consumer-goods industry growth will slow by a percentage point or more from the last fiscal year’s 5% growth.

P&G Chief Executive

Jon Moeller

said in an interview that consumers are beginning to shift to cheaper, private-label alternatives, a trend already under way in food and beverages. He called the shift small but noticeable.

Mr. Moeller said he is confident that growth, though more muted relative to the past few years, will remain solid as high employment levels coupled with healthy household balance sheets enable consumers to keep spending on necessities while they cut costs elsewhere.

“There is no inherent reason why people are just going to stop buying modestly priced consumer products, daily-use essentials where performance matters,” he said. “You have to look elsewhere to get signals of consumer stress.”

The consumer-sentiment index and the consumer-confidence index both try to measure the same thing: consumers’ feelings. WSJ explains why the Federal Reserve is keeping a close eye on consumer confidence in 2022. Illustration: Adele Morgan

P&G shares fell more than 6%.

P&G’s results and outlook largely echo the messages coming from other big consumer brands. Companies including

Coca-Cola Co.

,

McDonald’s Corp.

and

Kimberly-Clark Corp.

this week reported sales gains driven by higher prices, and executives said they would keep passing along increased costs to shoppers for now. Yet some executives also said consumers are starting to show signs of stress, trading down to cheaper brands or cutting back on how much they buy.

The world’s biggest consumer packaged goods company by sales, P&G has largely outpaced competitors amid the pandemic, especially in the U.S.

Rivals are showing signs of gaining ground.

Colgate-Palmolive Co.

on Friday said it now expects bigger-than-expected organic sales gains, predicting an increase of 5% to 7% for the calendar year, up from 4% to 6%. Last week,

Kimberly-Clark

and

Unilever

PLC also raised sales outlooks for the calendar year.

Church & Dwight Co.

Chief Executive

Matthew Farrell

said on Friday that demand is accelerating for low-cost laundry detergent, while people are giving up electric toothbrushes for manual options. “Consumers are making choices to make their budget stretch further,” he said.

A central question is how consumers and retailers respond to further price increases. P&G said Friday that it had announced to retailers another round of price increases, in mid-single-digit percentages, which will take effect toward the end of summer.

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P&G, after more than four years of market-share gains, lost share in the four-week period ended July 16 compared with a year ago, Bernstein analyst Callum Elliott said in a research note analyzing retail data. Losses are in every category except for beauty, he said.

“While prices spiral, the consumer also continues to adjust to the new reality,” he said.

Mr. Moeller said P&G continues to gain market share broadly in the U.S. and globally.

Organic sales rose 7% in the quarter ended June 30, with prices up 8% on average. P&G attributed the 1% decline in sales volume primarily to Covid-related shutdowns in China and intentional downsizing of its business in Russia amid the war in Ukraine.

P&G reported $19.5 billion in revenue for the quarter, up 3% from a year ago. Diluted net earnings per share were $1.21, up 7%.

The company expects diluted net earnings per share will be between flat and up 4% for the fiscal year as it faces an anticipated $3.3 billion hit tied to foreign-exchange rates and higher costs for materials and freight.

Write to Sharon Terlep at sharon.terlep@wsj.com

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