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Business

Wall Street surges, powered by tech rebound

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  • Baker Hughes falls on missing Q4 profit estimates
  • Activist investor Elliott Management takes stake in Salesforce
  • Chips on track for biggest daily gain since Nov
  • Indexes up: Dow 0.98%, S&P 1.41%, Nasdaq 2.09%,

NEW YORK, Jan 23 (Reuters) – Wall Street surged on Monday, led higher by technology stocks as investors embarked on an earnings-heavy week with a renewed enthusiasm for market leading momentum stocks that were battered last year.

All three major stock indexes extended Friday’s rally, gaining momentum as the day progressed. The tech-heavy Nasdaq was out front, boosted by a 4.9% jump in semiconductor shares (.SOX).

“This is a remarkable rally in many of the names that did badly last year,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. “No one wants to be watching from the sideline with a bunch a cash as the market gets away from them.”

The session marks a calm before the storm in a week jam-packed with high profile earnings reports and back-end loaded with crucial economic data.

Investors are all but certain the Federal Reserve implement a bite-sized interest rate hike next week even as the U.S. central bank remains committed to taming the hottest inflationary cycle in decades.

Financial markets have priced in a 99.8% likelihood of a 25 basis point hike to the Fed funds target rate at the conclusion of its two-day monetary policy meeting next Wednesday, according to CME’s FedWatch tool.

The Dow Jones Industrial Average (.DJI) rose 328.17 points, or 0.98%, to 33,703.66, the S&P 500 (.SPX) gained 55.93 points, or 1.41%, to 4,028.54 and the Nasdaq Composite (.IXIC) added 232.84 points, or 2.09%, to 11,373.28.

All 11 major sectors in the S&P 500 were higher, with tech (.SPLRCT) up the most, jumping 2.8%.

Fourth-quarter reporting season has shifted into overdrive, with 57 of the companies in the S&P 500 having posted results. Of those, 63% have delivered better than expected earnings, according to Refinitiv.

Analysts now see S&P 500 fourth quarter earnings, on aggregate, dropping 3% year-on-year, nearly twice as steep as the 1.6% annual drop seen at the beginning of the year, per Refinitiv.

This week, Microsoft Corp (MSFT.O) and Tesla Inc , along with a spate of heavy-hitting industrials including Boeing CO (BA.N), 3M Co (MMM.N), Union Pacific Corp (UNP.N) Dow Inc (DOW.N), Northrop Grumman Corp (NOC.N), are expected to post quarterly results.

Tesla Inc (TSLA.O) surged 7.8% as Chief Executive Elon Musk took the stand in his fraud trial related to a tweet saying he had backing to take the electric automaker private.

Baker Hughes Co (BKR.O) missed quarterly profit estimates due to inflation pressures and ongoing disruptions due to Russia’s war on Ukraine. The oilfield services company’s shares were off 0.9%.

Cloud-based software firm Salesforce Inc (CRM.N) jumped 3.1% following news that activist investor Elliot Management Corp has taken a multi-billion dollar stake in the company.

Spotify Technology SA (SPOT.N) joined the growing list of tech-related companies to announce impending job cuts, shedding 6% of its workforce as rising interest rates and the looming possibility of recession continue to pressure growth stocks. The music streaming company’s shares rose 2.1%.

On the economic front, the Commerce Department is expected to unveil its initial “advance” take on fourth-quarter GDP in Thursday, which analysts expect to land at 2.5%.

On Friday, the wide-ranging personal consumption expenditures (PCE) report is due to shed light on consumer spending, income growth, and crucially, inflation.

Advancing issues outnumbered declining ones on the NYSE by a 3.53-to-1 ratio; on Nasdaq, a 1.95-to-1 ratio favored advancers.

The S&P 500 posted 11 new 52-week highs and no new lows; the Nasdaq Composite recorded 66 new highs and 14 new lows.

Reporting by Stephen Culp; Additional reporting by Shreyashi Sanyal and Johann M Cherian in Bengaluru
Editing by Marguerita Choy

Our Standards: The Thomson Reuters Trust Principles.

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Business

Spotify to trim 6% of workforce in latest tech layoffs

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Jan 23 (Reuters) – Spotify Technology SA (SPOT.N) said on Monday it plans to cut 6% of its workforce and would take a related charge of up to nearly $50 million, adding to the massive layoffs in the technology sector in preparation for a possible recession.

The tech industry is facing a demand downturn after two years of pandemic-powered growth during which it had hired aggressively. That has led firms from Meta Platforms Inc (META.O) to Microsoft Corp (MSFT.O) to shed thousands of jobs.

“Over the last few months we’ve made a considerable effort to rein in costs, but it simply hasn’t been enough,” Chief Executive Daniel Elk said in a blog post announcing the roughly 600 job cuts.

“I was too ambitious in investing ahead of our revenue growth,” he added, echoing a sentiment voiced by other tech bosses in recent months.

Spotify’s operating expenditure grew at twice the speed of its revenue last year as the audio-streaming company aggressively poured money into its podcast business, which is more attractive for advertisers due to higher engagement levels.

Reuters Graphics

At the same time, businesses pulled back on ad spending on the platform, mirroring a trend seen at Meta and Google parent Alphabet Inc (GOOGL.O), as rapid interest rate hikes and the fallout from the Russia-Ukraine war pressured the economy.

The company, whose shares rose 5.8% to $103.55, is now restructuring itself in a bid to cut costs and adjust to the deteriorating economic picture.

It said Dawn Ostroff, the head of content and advertising, was leaving after an over four-year stint at the company. Ostroff helped shape Spotify’s podcast business and guided it through backlash around Joe Rogan’s show for allegedly spreading misinformation about COVID-19.

The company said it is appointing Alex Norström, head of the freemium business, and research and development boss Gustav Söderström as co-presidents.

Spotify had about 9,800 full-time employees as of Sept. 30.

($1 = 0.9196 euros)

Reporting by Eva Mathews in Bengaluru; Editing by Sherry Jacob-Phillips and Shailesh Kuber

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Business

Amazon’s AWS to invest $35 bln in Virginia

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WASHINGTON, Jan 20 (Reuters) – Amazon.com Inc’s (AMZN.O) cloud services division said Friday it plans to invest another $35 billion by 2040 to expand data centers in Virginia.

Amazon Web Services (AWS) said the new investment will create 1,000 jobs. Virginia Republican Governor Glenn Youngkin said AWS will establish multiple data center campuses across Virginia.

In 2021, AWS said from 2011 to 2020 it had invested $35 billion in data centers located in northern Virginia and had 3,500 full time employees at its data centers in the state.

Pending approval by state lawmakers, Virginia is developing a new “Mega Data Center Incentive Program,” which would allow the company to receive up to a 15-year extension of Data Center Sales and Use tax exemptions on equipment and software.

AWS also will be eligible to receive a state grant of up to $140 million “for site and infrastructure improvements, workforce development, and other project-related costs.”

Amazon shares closed up 3.8% Friday.

Amazon in 2018 after a long contest announced northern Virginia would be home to its second headquarters known as “HQ2” and eventually employ more than 25,000 employees. As of April, Amazon said its headcount assigned to the site was around 5,000.

Youngkin has faced some criticism for withdrawing from a competition to attract a new Ford Motor (F.N) battery plant expected to be built with China’s Contemporary Amperex Technology Co Ltd (CATL) (300750.SZ), the world’s largest battery producer.

Youngkin defended his decision Friday, telling Bloomberg News that he looks “forward to bringing a great company there. It won’t be one that uses kind of a Trojan-horse relationship with the Chinese Communist Party in order to gain.”

A spokesperson for Youngkin has said that “while Ford is an iconic American company, it became clear that this proposal would serve as a front for the Chinese Communist party.”

Ford declined to comment on Youngkin’s decision to withdraw.

In July, Ford said it plans to localize 40 GWh of battery capacity in North America starting in 2026. It also announced CATL would provide battery packs for Mustang Mach-E models for North America starting in 2023 and would discuss cooperation for batteries in Ford vehicles around the world.

“Our talks with CATL continue – and we have nothing new to announce on either front,” Ford said.

Michigan is also a candidate for the Ford battery plant, sources said, and a decision could be made in the coming weeks.

Reporting by David Shepardson and Akash Sriram in Bengaluru; Editing by Aurora Ellis and Himani Sarkar

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Business

Exclusive: Google parent to lay off 12,000 workers in latest blow to tech sector

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Jan 20 (Reuters) – Google’s parent Alphabet Inc (GOOGL.O) is eliminating about 12,000 jobs, or 6% of its workforce, the company said Friday, in the latest cuts to shake the technology sector.

Sundar Pichai, Alphabet’s CEO, said in a staff memo shared with Reuters that the company had rapidly expanded headcount in recent years “for a different economic reality than the one we face today.”

“I take full responsibility for the decisions that led us here,” he said.

The cuts come days after rival Microsoft Corp (MSFT.O) said it would lay off 10,000 workers.

Alphabet’s job losses affect teams across the company including recruiting and some corporate functions, as well as some engineering and products teams.

The layoffs are global and impact U.S. staff immediately.

Alphabet has already emailed affected employees, the memo said, while the process will take longer in other countries due to local employment laws and practices.

The news comes during a period of economic uncertainty as well as technological promise, in which Google and Microsoft have been investing in a burgeoning area of software known as generative artificial intelligence.

“I am confident about the huge opportunity in front of us thanks to the strength of our mission, the value of our products and services, and our early investments in AI,” Pichai said in the note.

Reuters was first to report the news.

Reporting by Jeffrey Dastin in Davos, Switzerland; Editing by Elaine Hardcastle and Alexander Smith

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Business

Wall St slips as labor market data fuels Fed worry

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  • Procter & Gamble falls after commodity cost pressure warning
  • Netflix down ahead of quarterly results
  • Dow down 0.76%, S&P 500 down 0.76%, Nasdaq down 0.96%

NEW YORK, Jan 19 (Reuters) – U.S. stock indexes closed lower on Thursday after data pointing to a tight labor market renewed concerns the Federal Reserve will continue its aggressive path of rate hikes that could lead the economy into a recession.

A report from the Labor Department showed weekly jobless claims were lower than expected, indicating the labor market remains solid despite the Fed’s efforts to stifle demand for workers.

Expectations the central bank would further dial down the size of its interest rate increases at its policy announcement next month were unchanged by the report.

Investors have been looking for signs of weakness in the labor market as a key ingredient needed for the Fed to begin to slow its policy tightening measures.

Jobless claims

Other data showed manufacturing activity in the mid-Atlantic region was subdued again in January, while data from the commerce department confirmed the recession in the housing market persisted.

“What we are seeing is the market carving out a bottom in the uncertainty so the news is having less of an effect and what we are seeing today is really just a continuation of that,” said Brad McMillan, chief investment officer for Commonwealth Financial Network, an independent broker-dealer in Waltham, Massachusetts.

“The fact we are not seeing more of a reaction says a lot of the bad news is out there.”

The Dow Jones Industrial Average (.DJI) fell 252.4 points, or 0.76%, to 33,044.56, the S&P 500 (.SPX) lost 30.01 points, or 0.76%, to 3,898.85 and the Nasdaq Composite (.IXIC) dropped 104.74 points, or 0.96%, to 10,852.27.

Traders work at the post where Carvana Co. is traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 7, 2022. REUTERS/Brendan McDermid

Recent comments from Fed officials continue to highlight the disconnect between the central bank’s view of its terminal rate and market expectations.

Boston Fed President Susan Collins echoed comments from other policymakers to support the case for interest rates to rise beyond 5%.

But stocks moved off their session lows after Fed vice chair Lael Brainard said the Fed is still “probing” for the level of interest rates that will be necessary to control inflation.

Markets, however, see the terminal rate at 4.89% by June and have largely priced in a 25-basis point rate hike from the U.S. central bank in February, with rate cuts in the back half of the year. .

Both the S&P 500 and the Dow fell for a third straight session, their longest streak of declines in a month.

On the earnings front, Procter & Gamble Co (PG.N) declined 2.11% after warning of commodity costs pressuring profits, despite raising its full-year sales forecast.

Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.8% for the fourth quarter, according to Refinitiv data, compared with a 1.6% decline in the beginning of the year.

Netflix Inc (NFLX.O) closed 3.23% lower ahead of its results scheduled for release after the closing bell on Thursday. But the stock rebounded to gain 3.33% after posting subscriber gains for the quarter and the departure of co-founder Reed Hastings as chief executive to an executive chairman role.

Declining issues outnumbered advancing ones on the NYSE by a 1.49-to-1 ratio; on Nasdaq, a 1.70-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 46 new highs and 33 new lows.

Reporting by Chuck Mikolajczak, editing by Deepa Babington

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Business

Brazil court grants bankruptcy protection for retailer Americanas

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SAO PAULO, Jan 19 (Reuters) – A Rio de Janeiro court on Thursday accepted Brazilian retailer Americanas SA’s (AMER3.SA) bankruptcy protection request, days after the company disclosed nearly $4 billion in accounting inconsistencies that have sparked a legal feud with creditors and investors.

Americanas, a 93-year-old company with stores all over Brazil and a major e-commerce unit, said in a securities filing that it would restructure debts of about 43 billion reais ($8.2 billion).

Shares in the company plunged about 42.5% to 1.00 real following news of the filing, extending its year-to-date drop to around 90%.

The firm, backed by the billionaire trio that founded 3G Capital, said the move had come “despite the efforts and measures that the management has been taking in the past few days alongside its financial and legal advisers to protect the company from the effects” of the accounting scandal.

Investors had expected the decision, with some deeming it unavoidable, especially after lender BTG Pactual (BPAC3.SA) obtained on Wednesday a court decision overturning part of the firm’s protection from creditors.

Americanas is also facing seven different investigations launched by securities regulator CVM, as well as an arbitration process requesting compensation of 500 million reais to the firm and the trio that founded 3G Capital.

In a document filed with the court, law firms Basilio Advogados and Salomao Kaiuca Abrahao attributed the urgency in filing for bankruptcy to the creditors’ decision to seize the companies’ assets.

The retailer also mentioned a debt downgrade by ratings agencies, which prevented any new loans from being extended. S&P, Moody’s and Fitch all downgraded Americanas’ credit ratings following the accounting scandal.

Earlier, Americanas had said that its current cash position stood at only 800 million reais, down from a previously reported 7.8 billion.

Lucas Pogetti, a partner at M&A advisers RGS Partners, said a large part of Americanas’ previously disclosed cash position was linked to the prepayment of receivables or deposited with creditors.

“Naturally, when the banks became aware of the company’s real situation they began to adopt a more aggressive posture to protect themselves, consequently restricting access to resources,” Pogetti said.

In the filing, Americanas asks to exclude its fintech, Ame, from the bankruptcy protection, as it is regulated by the central bank, and for authorization to increase its capital.

Americanas’ stores are ubiquitous at Brazilian shopping malls. It e-commerce unit, which traded as a separate company before a recent restructuring, is one of the country’s top online retailers.

Chief executive Sergio Rial resigned last week, less than two weeks after taking the job, citing the discovery of “accounting inconsistencies” totaling 20 billion reais.

Rial, the former head of Banco Santander’s Brazilian arm (SANB3.SA), attributed the inconsistencies to differences in accounting for the financial cost of bank loans and debt with suppliers.

Chief financial officer Andre Covre, who had just joined Americanas as well, also left the firm, which has Brazilian billionaires Jorge Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles as reference shareholders.

Americanas said the reference shareholders intended to maintain the company’s liquidity at levels that allowed for a “good operation” of its stores, digital channel and other entities.

($1 = 5.2226 reais)

Reporting by Gabriel Araujo, Tatiana Bautzer and Peter Frontini in Sao Paulo and Carolina Pulice in Mexico City; Editing by Rosalba O’Brien and Bradley Perrett

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Business

Wall St stumbles after weak data, hawkish Fed comments

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  • Fed’s Bullard, Mester back rate increases
  • U.S. retail sales drop in December
  • Indexes down: Dow 1.28%, S&P 1.07%, Nasdaq 0.78%

Jan 18 (Reuters) – Wall Street’s main indexes fell on Wednesday after weak economic data and hawkish comments from Federal Reserve officials sparked worries that the central bank may not pause interest rate hikes any time soon.

Before the market opened, U.S. economic data showed retail sales and producer prices declined more than expected in December. Also production at U.S. factories fell more than expected in December and output in the prior month was weaker than previously thought.

With Wall Street’s major averages showing gains so far for 2023, Sam Stovall, chief investment strategist at CFRA research, said some investors saw the week data as an opportunity to take profits while others worried about the prospects for a recession.

“The market was overbought. Today’s economic data served as a trigger to initiate a profit taking spell and the groups with most profits to take have been the ones that have done best last year,” said Stovall.

By 2:14PM ET, the Dow Jones Industrial Average (.DJI) fell 434.27 points, or 1.28%, to 33,476.58, the S&P 500 (.SPX) lost 42.57 points, or 1.07%, to 3,948.4 and the Nasdaq Composite (.IXIC) dropped 87.02 points, or 0.78%, to 11,008.10.

The weakest sectors on the day are the defensive consumer staples (.SPLRCD), down more than 2%, and utilities (.SPLRCU), which was last down 1.8%.

The benchmark S&P and the blue-chip Dow were both on track for their second straight day of losses, while the Nasdaq, if it ends lower, would snap a seven-day winning streak.

U.S. stocks had started 2023 on a strong footing, with the S&P having closed up almost 4% year-to-date on Tuesday, on hopes that a moderation in inflationary pressures could give the Fed cover to dial down the size of its interest rate hikes.

Roughly halfway through January, the S&P was up 2.7% for the month so far while the Nasdaq was up more than 5% and the Dow, the best performer of the three for 2022, was up 0.9%.

Earlier, St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester stressed on the need to raise rates beyond 5% to bring inflation to heel.

The Fed commentary also highlighted the disparity between the U.S. central bank’s estimate of its terminal rate and market expectations, which were of the rate peaking at 4.88% by June. Traders are now betting on a 25-basis point rate hike in February.

“This market is very hopeful that we’re going to get a soft landing and every time you have hawkish comments from the Fed, it feels you’re not going to get that,” Dennis Dick, trader at Triple D Trading.

Investors are also focused on the fourth-quarter earnings season as a window into how corporate America is doing against the backdrop of higher interest rates.

Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.6% for the quarter, according to Refinitiv data, compared with a 1.6% decline in the beginning of the year.

IBM Corp (IBM.N) was down 2.6% after Morgan Stanley downgraded the company’s shares to “equal weight” from “overweight”.

Early gainers Microsoft Corp (MSFT.O) and Tesla Inc (TSLA.O) erased gains by late afternoon trading with Microsoft down 1.2% and Tesla off 2.7%.

Moderna Inc (MRNA.O) rose 3.6% after reporting data which demonstrated the effectiveness of its respiratory syncytial virus (RSV) vaccine.

PNC Financial Services Group Inc (PNC.N) was down 5.4% after the company missed estimates for fourth-quarter profit.

Declining issues outnumbered advancing ones on the NYSE by a 1.38-to-1 ratio; on Nasdaq, a 1.66-to-1 ratio favored decliners.

The S&P 500 posted 9 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 71 new highs and 14 new lows.

Reporting by Sinéad Carew in New York, Shreyashi Sanyal and Amruta Khandekar in Bengaluru; Additional reporting by Shubham Batra; Editing by Shounak Dasgupta and David Gregorio

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Technology

Apple indefinitely postpones launch of AR glasses – Bloomberg News

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Jan 17 (Reuters) – Apple Inc (AAPL.O) has postponed the launch of its lightweight augmented-reality glasses indefinitely due to technical challenges, but is still planning to unveil its first mixed-reality headset this year, Bloomberg News reported on Tuesday.

The iPhone maker’s mixed-reality headset – which combines both augmented and virtual reality – is set to launch in this year’s spring event, Bloomberg said, adding that the device will cost around $3,000.

Apple’s mixed-reality device would compete with the likes of Meta Platforms’ (META.O) Quest Pro virtual and mixed-reality headset, which it launched late last year for $1,500, half of the Apple device’s reported price.

The Cupertino, California-based company now plans to focus on lowering the price of the follow-up version of its mixed-reality device, expected as soon as 2024 or early 2025, instead of working on the AR glasses, according to the report.

Apple will aim to do so by using chips on par with those in the iPhone rather than components found in higher-end Mac computers.

Apple did not immediately respond to a Reuters request for comment.

The Information website first reported Apple’s plans to unveil a cheaper mixed-reality headset on Tuesday.

earlier in the day, the iPhone maker unveiled MacBooks powered by its new and faster M2 Pro and M2 Max chips in a surprise launch weeks ahead of its usual schedule.

Reporting by Kanjyik Ghosh and Shubham Kalia in Bengaluru; Editing by Janane Venkatraman

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Business

Microsoft to cut thousands of jobs across divisions – reports

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Jan 17 (Reuters) – Microsoft Corp (MSFT.O) plans to cut thousands of jobs with some roles expected to be eliminated in human resources and engineering divisions, according to media reports on Tuesday.

The expected layoffs would be the latest in the U.S. technology sector, where companies including Amazon.com Inc (AMZN.O) and Meta Platforms Inc (META.O) have announced retrenchment exercises in response to slowing demand and a worsening global economic outlook.

Microsoft’s move could indicate that the tech sector may continue to shed jobs.

“From a big picture perspective, another pending round of layoffs at Microsoft suggests the environment is not improving, and likely continues to worsen,” Morningstar analyst Dan Romanoff said.

U.K broadcaster Sky News reported, citing sources, that Microsoft plans to cut about 5% of its workforce, or about 11,000 roles.

The company plans to cut jobs in a number of engineering divisions on Wednesday, Bloomberg News reported, according to a person familiar with the matter, while Insider reported that Microsoft could cut recruiting staff by as much as one-third.

The cuts will be significantly larger than other rounds in the past year, the Bloomberg report said.

Microsoft declined to comment on the reports.

The company had 221,000 full-time employees, including 122,000 in the United States and 99,000 internationally, as of June 30, according to filings.

Microsoft is under pressure to maintain growth rates at its cloud unit Azure, after several quarters of downturn in the personal computer market hurt Windows and devices sales.

It had said in July last year that a small number of roles had been eliminated. In October, news site Axios reported that Microsoft had laid off under 1,000 employees across several divisions.

Shares of Microsoft, which is set to report quarterly results on Jan. 24, were marginally higher in late afternoon trading.

Reporting by Yuvraj Malik in Bengaluru; Editing by Maju Samuel and Sriraj Kalluvila

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Business

Microsoft to expand ChatGPT access as OpenAI investment rumors swirl

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Jan 16 (Reuters) – Microsoft Corp (MSFT.O) on Monday said it is widening access to hugely popular software from OpenAI, a startup it is backing whose futuristic ChatGPT chatbot has captivated Silicon Valley.

Microsoft said the startup’s tech, which it so far has previewed to its cloud-computing customers in a program it called the Azure OpenAI Service, was now generally available, a distinction that’s expected to bring a flood of new usage.

The news comes as Microsoft has looked at adding to the $1 billion stake in OpenAI it announced in 2019, two people familiar with the matter previously told Reuters. The news site Semafor reported earlier this month that Microsoft might invest $10 billion; Microsoft declined to comment on any potential deal.

Public interest in OpenAI surged following its November release of ChatGPT, a text-based chatbot that can draft prose, poetry or even computer code on command. ChatGPT is powered by generative artificial intelligence, which conjures new content after training on vast amounts of data — tech that Microsoft is letting more customers apply to use.

ChatGPT itself, not just its underlying tech, will soon be available via Microsoft’s cloud, it said in a blog post.

Microsoft said it is vetting customers’ applications to mitigate potential abuse of the software, and its filters can screen for harmful content users might input or the tech might produce.

The business potential of such software has garnered massive venture-capital investment in startups producing it, at a time funding has otherwise dried up. Already, some companies have used the tech to create marketing content or demonstrate how it could negotiate a cable bill.

Microsoft said CarMax, KPMG and others were using its Azure OpenAI service. Its press release quoted an Al Jazeera vice president as saying the service could help the news organization summarize and translate content.

Reporting By Jeffrey Dastin; Editing by Leslie Adler

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