Tag Archives: Share Price Movement/Disruptions

Business

Individual Investors Ramp Up Bets on Tech Stocks

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Technology stocks have taken a beating this year. Many individual investors have used it as an opportunity to double down.

The Nasdaq Composite Index—home to the big tech stocks that propelled the market’s decadelong rally—has fallen 21% in 2022. Shares of

Amazon.com Inc.

AMZN 10.36%

and the parents of Google and

Facebook

META -1.01%

have suffered double-digit declines as well, stung by higher interest rates and souring attitudes about their growth prospects. 

Yet many of those stocks remain the most popular among individual investors who say they are confident in a rebound and expect the companies to continue powering the economy. 

In late July, purchases by individual investors of a basket of popular tech stocks hit the highest level since at least 2014, according to data from Vanda Research. The basket includes the FAANG stocks—Facebook parent Meta Platforms Inc., Amazon,

Apple Inc.

AAPL 3.28%

,

Netflix Inc.

and Google parent

Alphabet Inc.

GOOG 1.79%

—along with a handful of others like

Tesla Inc.

and

Microsoft Corp.

Meanwhile, Apple, chip company

Advanced Micro Devices Inc.

and the tech-heavy Invesco QQQ Trust exchange-traded fund have remained among the most popular individual bets since 2020. 

Interest in risky and leveraged funds tied to tech and stocks like

Nvidia Corp.

has also swelled, a sign that investors have stepped in to play the wild swings in the shares. 

It has been a fruitful bet for many. Tech stocks have been on the rebound of late, partly on investor hopes for a slower path of interest-rate increases in the months ahead. The Nasdaq gained 12% in July, its best month since April 2020, outperforming the broader S&P 500, which rose 9.1%.

Individual investor Jerry Lee says: ‘The market is severely undervaluing how much tech can actually play into our lives.’



Photo:

Peggy Chen

“I’m extremely bullish on tech,” said Jerry Lee, a 27-year-old investor in New York who co-founded a startup that helps people find jobs. “The market is severely undervaluing how much tech can actually play into our lives.” 

In coming days, investors will be parsing earnings reports from companies such as AMD and

PayPal Holdings Inc.

for more clues about the market’s trajectory. Data on manufacturing and the jobs market are also on tap. 

Mr. Lee said he recently stashed cash into a technology-focused fund that counts Apple and Nvidia among its biggest holdings, after years of pouring money into broad-based index funds. His experience working at firms such as Google has made him optimistic about the sector’s future, he said.

Gabe Fisher holds stock in Meta Platforms, Amazon and Alphabet.



Photo:

Ethan Kaplan

Even last week when many of the industry’s leaders, including Apple, Amazon and Alphabet, warned their growth is slowing, investors pushed the stocks higher and expressed confidence in the ability of the companies to withstand an uncertain economy. Apple logged its best month since August 2020, while Amazon finished its best month since October 2009, helped by a 10% jump in its shares on Friday alone.

Many investors also pounced on the tumble in shares of Facebook parent Meta Platforms. The stock was the top buy among individual investors on the Fidelity brokerage Thursday when it fell 5.2% in the wake of the social-media giant’s first-ever revenue drop. Tesla,

Ford Motor Co.

and leveraged exchange-traded funds tracking the tech-heavy Nasdaq-100 index were also widely traded that day.

Gabe Fisher, a 23-year-old investor near San Francisco, said he is holding on to stocks like Meta, Amazon and Alphabet. 

“Even if these companies never grow at as fast of a pace, they’re still companies that are so relevant and so prevalent that I’m going to hold on to them,” Mr. Fisher said.

He said he also has a small position in

Cathie Wood’s

ARK Innovation Exchange-Traded Fund that he doesn’t plan to sell soon, even though the fund has lost more than half of its value this year. 

Other investors have been turning to riskier corners of the market. Leveraged exchange-traded funds tracking tech have been the third- and fourth-most-popular ETFs for individual investors to buy this year, behind funds tracking the S&P 500 and Nasdaq-100 indexes. These funds allow investors to make turbocharged bets on the market and can double or triple the daily return of a stock or index.

Many individual investors have also turned to the options market to bet on tech. Bullish bets that would pay out if Tesla shares rose have been among the most widely traded in the options market, according to Vanda. Individual traders have spent more on Tesla call options on an average day this year than on Amazon, Nvidia and options tied to the Invesco QQQ Trust combined, according to Vanda. The firm analyzed the average premium spent on options that are out-of-the-money, or far from where the shares are currently trading. 

Jeff Durbin, a 59-year-old investor based in Naples, Fla., said he regrets missing out on buying big tech stocks decades ago.  

He has scooped up shares of companies like artificial intelligence firm

Upstart Holdings Inc.

and

Shopify Inc.

SHOP -3.01%

—and hung on despite their sharp swings. Shopify, for example, dropped 14% in a single session last week as it said it would cut about 10% of its global workforce. “It’s painful, but I missed out on things like Amazon and Netflix when they were cheap,” Mr. Durbin said. “Who is going to be the Amazon and Apple 20 years from now?”

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Business

Roku Swings to Second-Quarter Loss on Slower Ad Spending

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Roku Inc.

ROKU -2.01%

said it expected two of its main revenue drivers—advertising and sales of streaming hardware—to come under further pressure during the second half of the year, sending the company’s shares down 25% in after-hours trading.

“We are in an economic environment defined by recessionary fears, inflationary pressures, rising interest rates, and ongoing supply chain disruptions,” the company said in a letter to investors Thursday in which it announced its second-quarter results. It forecast that ad spending would continue to be negatively affected as a result. “We also believe that consumer discretionary spend will continue to moderate, pressuring both Roku TV and Roku player sales.”

The company said it expected to make $700 million in revenue during the third quarter, below analysts’ expectations of $898.3 million. Roku also withdrew its full-year revenue growth rate estimate, citing uncertainty and volatility in the macro environment.

San Jose, Calif.-based Roku is the nation’s largest maker of streaming hardware—accounting for about 37% of the U.S. market, according to Parks Associates—but it derives most of its revenue from advertising: It sells all ads viewed on The Roku Channel, its own streaming service, and also sells some ads that appear on other streaming services viewed on Roku devices.

In the second quarter, the company swung to a loss of $112.3 million, or a loss of 82 cents a share, compared with a profit of $73.5 million, or 52 cents a share, a year earlier. Analysts polled by FactSet expected a loss of 71 cents a share.

Supply-chain issues are pushing up prices for Roku’s component parts, the company said. Roku said it was absorbing the higher costs to insulate customers from price increases, which resulted in a negative gross margin of 24% for its players.

Roku’s stock has had a rough 2022 so far. Even before Thursday’s after-hours plunge, its shares were down 63% since the start of the year.

As markets react to inflation and high interest rates, technology stocks are having their worst start to a year on record. WSJ’s Hardika Singh explains why the sector — from tech giants to small startups — is getting hit so hard. Illustration: Jacob Reynolds

Revenue rose 18% to $764.4 million. Of that, $673.2 million came from platform revenue—which includes revenue from advertisers and content publishers—while player revenue accounted for $91.2 million.

Roku Chief Executive

Anthony Wood

described the ad-market upheaval as cyclical. “We’re in an economic cycle where advertising is trending down. It’ll turn around,” he said during a call with analysts Thursday. He also said Roku was the beneficiary of some of that upheaval, because some advertisers were shifting more ad dollars away from traditional TV and toward streaming services, helping Roku grow its market share.

During the second quarter, advertisers in the automotive and consumer-packaged-goods industries reduced their spending on traditional TV, but increased their spending on Roku by a double-digit percentage, said Alison Levin, Roku’s vice president for ad sales and strategy, during a call with journalists before the earnings call.

Roku will soon face competition for streaming ad dollars from two major competitors: streaming services

Netflix

and

Disney

+ are planning to begin selling ads. Mr. Wood said he believed the new entrants to the market would complement Roku by making streaming ads an even greater draw for advertisers.

“With companies like Netflix and Disney moving into ads, it makes streaming ads even more mainstream,” he said.

Write to Patience Haggin at patience.haggin@wsj.com and Denny Jacob at denny.jacob@wsj.com

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Business

Boeing Profit Falls as Executives Point to Turnaround

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The company said its second-quarter results showed it was making progress in stabilizing its operations after a series of production and regulatory problems have prevented it from delivering commercial aircraft on time and without quality issues.

“We do believe we’re in the middle of a momentum shift,” Chief Executive

David Calhoun

said in a call with analysts Wednesday.

Boeing shares were recently trading around even, having climbed more than 3% at one point.

Production of the 737 MAX has reached 31 planes a month, up from 16 a year ago, as it deals with supply-chain challenges such as engine shortages that are also affecting rival Airbus SE, which reports quarterly earnings later Wednesday. Boeing has said it stepped up 737 deliveries in June.

Executives said Wednesday Boeing appeared on the verge of receiving regulatory approval to resume deliveries of its wide-body 787 Dreamliner. A series of production issues has kept the plane maker from handing over that jet to customers for much of the last two years, leaving it with more than $25 billion of the aircraft in inventory.

A rebound in air travel has fueled airlines’ continued demand for new aircraft, which Mr. Calhoun said hasn’t slowed. “While we understand the sort of recession fears that are growing out there, so far it has not impacted the aviation industry or our customers,” Mr. Calhoun said.

Boeing is typically nearly tied for orders with rival Airbus entering the annual Farnborough Air Show, but this year it’s well behind. WSJ’s George Downs reports from the show on how Boeing is trying to catch up and what it will take to restore balance to the aviation duopoly. Illustration: Rami Abukalam

The company on Wednesday reported a profit of $160 million, or 32 cents a share, for the three months to June 30, down from $567 million, or $1, during the same period a year earlier.

The adjusted per-share loss of 37 cents, which excludes pension charges, fell short of the 13-cent loss consensus among analysts polled by FactSet. Sales in the quarter fell 2% to $16.7 billion, with analysts expecting $17.6 billion.

Results of Arlington, Va.-based Boeing’s defense business continued to be weighed down by around $400 million in charges during the quarter. This included $93 million on its Starliner space capsule in the quarter. Boeing successfully launched the Starliner in May, but it has incurred higher costs after earlier failed attempts to launch and dock with the International Space Station. It also took a $147 million charge on its MQ-25 refueling drone as costs rose to meet requirements set by the U.S. Navy.

Boeing faces a possible strike at three of its defense plants from Aug. 1 after workers rejected a new contract, which Mr. Calhoun said on CNBC could disrupt deliveries.

The company said it had positive operating cash flow in the second quarter. It reiterated the target of generating surplus cash for the full year.

Over the last couple of years, Boeing has dealt with production and regulatory problems that have impeded a recovery from two crises: a nearly two-year grounding of its 737 MAX after two fatal crashes in 2018 and 2019, and the pandemic’s hit to demand for new aircraft.

A year ago, Mr. Calhoun expressed optimism, telling analysts in July 2021: “We are turning a corner, and the recovery is gaining momentum.”

More recently, Mr. Calhoun has said this year would mark a turning point. “I can’t measure it week by week or month by month or even quarter by quarter, but I know the year is going to be substantially better,” he said at a June analyst event.

Airbus has been producing its A320 narrow-body family at a monthly rate of about 50, with a goal of reaching 75 by 2025. But Mr. Calhoun said Wednesday he couldn’t predict when Boeing would be in a position to increase its 737 MAX production rates, citing supply constraints as a barrier to ramping up.

“If I thought I had an engine supply, I’d do it today,” he said.

Boeing has had to slow production of its narrow-body aircraft this year due to supply bottlenecks, and getting stored MAX jets out of inventory has taken longer than the company anticipated. Scores of the planes have been in storage since the MAX grounding. Many of the MAX jets are bound for customers in China, which hasn’t allowed the aircraft to return to service in the country.

After previously saying it expected to deliver about 500 of 737 MAX jets by the end of the year, Boeing finance chief

Brian West

on Wednesday said the company now estimates it will deliver closer to 400 of the aircraft by the end of 2022. As of June 30, the company had handed over 181 of the aircraft to customers.

Write to Andrew Tangel at Andrew.Tangel@wsj.com and Doug Cameron at doug.cameron@wsj.com

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Business

Shopify Says It Will Lay Off 10% of Workers, Sending Shares Lower

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Shopify Inc.

SHOP -14.06%

is cutting roughly 1,000 workers, or 10% of its global workforce, rolling back a bet on e-commerce growth the technology company made during the pandemic, according to an internal memo.

Tobi Lütke,

the company’s founder and chief executive, told staff in a memo sent Tuesday that the layoffs are necessary as consumers resume old shopping habits and pull back on the online orders that fueled the company’s recent growth. Shopify, which helps businesses set up e-commerce websites, has warned that it expects revenue growth to slow this year.

Shopify’s shares fell 14% to $31.55 on Tuesday after The Wall Street Journal first reported on the layoffs. The shares have fallen more than 80% since they peaked in November near $175 adjusting for a recent stock split. The company reports quarterly results on Wednesday.

Mr. Lütke said he had expected that surging e-commerce sales growth would last past the Covid-19 pandemic’s ebb. “It’s now clear that bet didn’t pay off,” said Mr. Lütke in the letter, which was reviewed by the Journal. “Ultimately, placing this bet was my call to make and I got this wrong.”

The Ottawa-based company will cut jobs in all its divisions, though most of the layoffs will occur in recruiting, support and sales units, said Mr. Lütke. “We’re also eliminating overspecialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products,” he wrote. Staff who are being let go will be notified on Tuesday.

Shopify’s job cuts are among the largest so far in a wave of layoffs and hiring freezes that is washing over technology companies. Rising interest rates, supply-chain shortages and the reversal of pandemic trends, including remote work and e-commerce shopping, have cooled what was once a red-hot tech sector.

Shopify’s job cuts are the first big layoffs the company has announced since Tobi Lütke founded it in 2006.



Photo:

Cate Dingley/Bloomberg News

Netflix Inc.

cut about 300 workers in June as it deals with a loss in subscribers.

Twitter Inc.,

now mired in a legal standoff with

Elon Musk,

laid off fewer than 100 members of its talent acquisition team. Mr. Musk’s own company, electric-vehicle maker

Tesla Inc.,

late in June laid off roughly 200 people, after announcing it would cut 10% of salaried staff.

Other firms, including

Microsoft Corp.

and

Alphabet Inc.’s

Google, said they would slow hiring the rest of the year.

Tuesday’s announcement is Mr. Lütke’s first big move after Shopify’s shareholders approved a board plan to protect his voting power. The job cuts are the first big layoffs the company has announced since Mr. Lütke started the company in 2006.

Shopify’s workforce has increased from 1,900 in 2016 to roughly 10,000 in 2021, according to the company’s filings. The hiring spree was made to help keep up with booming business. E-commerce shopping surged during the pandemic, and many small-business owners created online stores to sell goods and services.

Shopify reported annual revenue growth of 86% in 2020 and 57% in 2021 to about $4.6 billion. However, the company reported a softening this year, and warned that 2022’s numbers wouldn’t benefit from the pandemic trends.

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In his memo on Tuesday, Mr. Lütke said, “What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point. Still growing steadily, but it wasn’t a meaningful 5-year leap ahead.”

Shopify has been expanding its business in recent years to provide more services for merchants. It has developed point-of-sale hardware for retailers, launched a shopping app for its merchants to list products and created a network of fulfillment centers to ship orders for its business partners.

In May, Shopify agreed to buy U.S. fulfillment specialist Deliverr Inc. for $2.1 billion in cash and stock. It announced partnerships with Twitter in June and with YouTube earlier this month, allowing users to buy items that Shopify merchants post on those platforms.

Shopify is offering 16 weeks of severance to the laid-off workers, plus one week for every year of service.

Write to Vipal Monga at vipal.monga@wsj.com

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Business

U.S. Stocks Wobble After Three-Day Rally

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U.S. stocks wobbled between small gains and losses Friday, trying to extend a three-day winning streak, as investors parsed earnings reports from Twitter and other companies.

The S&P 500 fell 0.1%, a day after the broad benchmark index jumped 1%. The Dow Jones Industrial Average edged up 0.2%, recently adding 60 points, and the Nasdaq Composite declined 0.6%.

A sharp drop in Snap shares weighed on shares of technology companies and added fuel to investor fears about the state of business growth. Snap lost 32% after posting its weakest quarterly sales growth as a public company. The  parent company of popular photo-sharing social-media app Snapchat said it would substantially reduce its rate of hiring.

Meanwhile, Twitter shares fell 1.2% after the company posted a loss and noted that revenue was hurt by uncertainty related to

Elon Musk’s

acquisition. 

Other megacap technology companies, including

Meta Platforms

and

Alphabet,

also pulled back, falling 6% and 3%, respectively. Meanwhile,

American Express

shares rose 3.8% after the company reported a 31% rise in revenue.

A look at the markets shows asset managers are moving money around in ways that suggest they see a recession coming. WSJ’s Dion Rabouin explains what to look for and why they tell us investors are increasingly pricing in a recession. Illustration: David Fang

Even with Friday’s wobbles, the S&P 500, the Dow and the Nasdaq are all on pace to end the week with solid gains, offering a respite to investors who have seen their portfolios pummeled this year. A stretch of earnings reports this week have given investors confidence to wade in and scoop up beaten-down stocks.

Netflix

and

Tesla

were among the companies that exceeded Wall Street expectations, sending their shares soaring to become two of the S&P 500’s best performers this week.

With a 3.5% rise for the week through Thursday, the S&P 500 is on pace to cap its best week in a month. Nonetheless, few investors are willing to call a bottom to a selloff that has dragged the S&P 500 down 16% this year. Persistently high inflation, the possibility of a recession and the war in Ukraine remain at the forefront of investors’ minds. Next week’s meeting of the Federal Reserve, as well as coming gross domestic product data, could inject more volatility in the markets. 

Some investors say they have jumped back into the market in recent weeks to take advantage of bargains, noting that extreme bearish sentiment is often a contrarian signal. BofA Global Research this week reported “max bearish” sentiment among investors in its Bull & Bear Indicator. 

“There’s lots of metrics that point to negativity on equities. That’s a good starting point for us and what has given us more confidence” to add to equity positions, said John Roe, head of multiasset funds at Legal & General Investment Management.

High inflation, the possibility of a recession and the war in Ukraine remain on investors’ minds.



Photo:

BRENDAN MCDERMID/REUTERS

Meantime, investors are maintaining a close eye on Europe, which has been beset by concerns about the cost of living and an energy crisis that could push economies into recession. On Friday, fresh business surveys suggested that the eurozone economy contracted in July. Excluding pandemic lockdown months, this would mark the first contraction signaled by purchasing managers’ indexes since 2013.

Still, the pan-continental Stoxx Europe 600 gained 0.5%. Shares of

Uniper

fell around 20% following the news that Germany would take a 30% stake in the company and provide a bailout deal after it was hit hard by dwindling supplies of Russian gas. 

Traders remain focused on the flow of Russian natural gas through the critical Nord Stream pipeline, as well as the ripple effects from the resignation of Italian Prime Minister

Mario Draghi.

Italy’s benchmark FTSE MIB stock index rose 0.7%. Brent crude fell 0.6% to $98.87 a barrel Friday. 

The euro retreated 0.4% against the dollar to $1.0185, raising the possibility that Europe’s common currency could reach parity again. 

In bond markets, the yield on the benchmark 10-year U.S. Treasury note fell to 2.795%, down from 2.908% Thursday. Yields fall when bond prices rise. 

In Asia, trading was fairly flat. Hong Kong’s Hang Seng Index rose 0.2%, while China’s Shanghai Composite lost 0.1%. Japan’s Nikkei 225 gained 0.4%.

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By submitting your response to this questionnaire, you consent to Dow Jones processing your special categories of personal information and are indicating that your answers may be investigated and published by The Wall Street Journal and you are willing to be contacted by a Journal reporter to discuss your answers further. In an article on this subject, the Journal will not attribute your answers to you by name unless a reporter contacts you and you provide that consent.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com

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Business

Twitter Stock Drops After Elon Musk Looks to Nix Deal

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Elon Musk’s

effort to terminate his deal to buy

Twitter Inc.

TWTR -9.81%

sent shares of the social-media company tumbling, as investors prepare for what is expected to be a messy courtroom battle.

Twitter shares fell 9.7% to $33.26 in midday trading. The move follows Mr. Musk’s disclosure to securities regulators Friday that he is seeking to abandon his $44 billion deal to buy Twitter and take it private, saying that the company hasn’t provided the information he needs to assess the prevalence of fake or spam accounts.

Twitter stock is trading about 38% below the $54.20-a-share price at which Mr. Musk agreed to buy the company in April, marking a stunning turnaround for what has been considered the buzziest deal of the year. Its shares also are trading below where they were in early April before Mr. Musk took a surprise 9% stake in the company, which officially kicked off his takeover attempt.

Mr. Musk’s bid to buy Twitter has spurred a wild ride in shares of both

Tesla Inc.

and the social-media company at a time when stocks around the globe have been falling. Mr. Musk is chief executive of the electric-car maker and sold Tesla stock this year after agreeing to buy Twitter.

News of the acquisition initially triggered a rush of activity in Twitter shares and options, with many individual investors piling in. Purchases of Twitter shares among individual investors swelled to about 11 times the monthly average since 2020 in April, when Mr. Musk initially made a bid for the company.

Since then, shares of both companies have fallen into a deeper slump. Tesla’s and Twitter’s shares have tumbled around 29% and 35%, respectively, since the deal was announced, compared with a roughly 10% drop for the S&P 500.

Fears about inflation and a potential recession on the horizon have dragged stocks sharply lower and especially punished shares of technology companies.

The technology-focused Nasdaq Composite is down 27% for the year, as investors have dumped shares of tech behemoths and nonprofitable growth companies alike. Twitter also faces a darkening outlook for digital advertising, and, just last week, laid off 30% of its recruitment team.

Mr. Musk’s drama with Twitter has injected even more volatility into shares of Tesla, a stock notorious for its wild swings. Some Tesla fans said they were concerned that Mr. Musk would lose focus from the electric-vehicle maker with the new initiative, which weighed on the company’s shares.

Tesla shares have remained the most popular bearish bet in the U.S. market for investors during the turbulence this year. The slide in the stock also has made it the most profitable short position, according to S3 Partners data as of July 1.

Tesla’s stock already got a boost last week and was among the biggest gainers in the S&P 500, as concerns about the deal falling through swirled. On Monday, Tesla shares fell 5.8% to $708.54.

Now, investors, lawyers and onlookers are bracing for what could be one of the most unusual legal battles in corporate takeover history—a drama reflected in Twitter’s gyrating stock. As of Friday, the social-media company had lost more than $11 billion in market value from its closing high of $51.70 in April.

So far, traders in the options market have been wagering that the deal will eventually fizzle.

“Right now, the options market is leaning more towards they won’t” do a deal, wrote Amy Wu Silverman, a managing director at RBC Capital Markets, in a note to clients.

Two sharply different dynamics have been playing out in the market for Tesla and Twitter options, according to Ms. Wu Silverman. A measure of expected volatility in Tesla has been dropping, while it has been rising for Twitter. Traders have been paying more to protect against further losses in Twitter stock through the options market, while the cost of such insurance has edged lower in Tesla options, according to Ms. Wu Silverman.

Even ahead of Mr. Musk’s regulatory filings late Friday, Tesla options tied to the shares jumping to $760 were among the most popular in the entire market, according to data provider Trade Alert. They were behind only bets tied to the broader S&P 500 and

Apple Inc.

stock.

In his bid to terminate the deal, Mr. Musk said Friday that Twitter had violated the agreement, arguing that it was making critical changes to the ordinary running of the business without his consent. He also accused the company of withholding data from him. Mr. Musk doubled down on his view in the early hours of Monday with a series of characteristic memes and replies to users on Twitter.

Twitter has said previously that it has and will continue sharing information with Mr. Musk. The company now says it will pursue legal action, arguing Mr. Musk is required to close the agreed-on deal.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Gunjan Banerji at Gunjan.Banerji@wsj.com

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Business

Employees Scrambled to Keep Robinhood Afloat in January 2021 Meme-Stock Frenzy, House Report Finds

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Robinhood Markets struggled to handle huge volumes of stock trading and sparred with its principal customer, market maker Citadel Securities, during the week in January 2021 when meme stocks exploded, according to a report from the Democratic staff of the House Financial Services Committee.

The committee held hearings in February 2021, questioning the chief executives of Robinhood and Citadel Securities, as well as meme-stock hero Keith Gill and Gabe Plotkin, the hedge-fund manager who lost billions betting against GameStop and other hot stocks. The staff reviewed tens of thousands of pages of internal documents, including pointed communications inside and between the companies.

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Business

Berkshire Hathaway Inc. Cl B stock outperforms market on strong trading day

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Shares of Berkshire Hathaway Inc. Cl B
BRK.B,
+4.02%
rose 4.02% to $278.28 Friday, on what proved to be an all-around favorable trading session for the stock market, with the S&P 500 Index
SPX,
+3.06%
rising 3.06% to 3,911.74 and the Dow Jones Industrial Average
DJIA,
+2.68%
rising 2.68% to 31,500.68. The stock’s rise snapped a two-day losing streak. Berkshire Hathaway Inc. Cl B closed $83.82 below its 52-week high ($362.10), which the company achieved on March 29th.

The stock demonstrated a mixed performance when compared to some of its competitors Friday, as Honeywell International Inc.
HON,
+3.12%
rose 3.12% to $180.02, 3M Co.
MMM,
+3.21%
rose 3.21% to $134.33, and General Electric Co.
GE,
+4.70%
rose 4.70% to $67.08. Trading volume (6.4 M) eclipsed its 50-day average volume of 4.6 M.


Editor’s Note: This story was auto-generated by Automated Insights, an automation technology provider, using data from Dow Jones and FactSet. See our market data terms of use.

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Business

Stocks Trade Modestly Higher – WSJ

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U.S. stock indexes edged higher Tuesday, reversing course after a profit warning from

Target

cast a pall over the retail sector.

The S&P 500 rose 0.4%. The Nasdaq Composite ticked up 0.4%, while the Dow Jones Industrial Average increased 0.3%. 

Stocks have swung in recent days, buffeted by shifts in views about the strength of the economy and the likely path for central banks and interest rates. A big concern is that central banks could act too aggressively as they combat inflation and trigger a slowdown in economic growth, or even a recession.  

“We’re still in this constant push and pull about where inflation is going to be, where growth is going to be, and whether we’re going to be in a recession or not,” said Fahad Kamal, chief investment officer at Kleinwort Hambros. 

Target shares dropped 3% after the retailer issued a warning that its profit would decline because it needs to cancel orders or offer discounts to clear out unwanted goods, a potential sign of lower consumer spending. Shares of other big retailers followed, with

Walmart

declining more than 2%.

A significant increase in retail inventories and diminishing demand could cause prices to moderate across most consumer goods in the second half of the year, according to Peter Essele, head of portfolio management at Commonwealth Financial Network.

“That would be a good thing for inflation overall and would help buoy markets higher as inflation continues to decline,” Mr. Essele said.

The trade gap in the U.S. for April narrowed to $87.1 billion, shrinking more than economists had forecast, after reaching a record deficit the prior month. A key release this week will be the consumer-price index on Friday, which will be closely watched for signals on whether inflation is weakening or not.  

Ayako Yoshioka, a senior portfolio manager at Wealth Enhancement Group, said year-over-year inflation is likely to peak, but the pace at which higher prices come down remains uncertain.

“As long as inflation remains elevated and continues to come down very slowly, the Fed is going to increase interest rates in order to combat these high inflation rates,” Ms. Yoshioka said. “It’s a very difficult thing for the Fed to engineer a soft landing.”

On Tuesday, the Reserve Bank of Australia lifted its key policy rate by 0.5 percentage point, more than expected. 

“The Australian central bank’s move, it’s a reminder that central banks can surprise on the upside. What does this tell us about what the Fed will do, what the ECB will do?” Mr. Kamal said. “More aggressive tightening directly equals a higher probability of a recession.”

The yield on the benchmark 10-year Treasury note eased to 2.973% from 3.037% on Monday. Yields fall when prices rise. 

“With yields at 3%, it shows that the market hasn’t decided if we’re going to have a recession or if we have one, how severe it’s going to be,” said Julien Lafargue, chief market strategist at Barclays Private Bank. “That is what you would want to own if you expect a recession.”

Traders worked on the floor of the New York Stock Exchange on Friday.



Photo:

justin lane/Shutterstock

In other corporate news,

Kohl’s

shares jumped more than 9% after The Wall Street Journal reported the department-store chain is in exclusive talks to be sold to retail holding company

Franchise Group.

The deal may value the company at about $8 billion. 

Arcade company

Dave & Buster’s Entertainment

rose 2% after reporting a jump in sales growth.

Shares of BuzzFeed climbed 6%, recovering some ground after plunging 41% on Monday after a ban that prevented executives and major investors from selling shares was lifted.

Twitter

shares rose 1% after Elon Musk threatened Monday to end his acquisition of the social-media platform, saying the company didn’t comply with requests for data about spam accounts. 

Casey’s General Stores

is slated to report after markets close.

Overseas, the pan-continental Stoxx Europe 600 slipped 0.3%. In Asia, major benchmarks were mixed. The Shanghai Composite Index added 0.2%, while Hong Kong’s Hang Seng Index declined 0.6%. Japan’s Nikkei 225 edged up 0.1%. 

The Japanese yen weakened 0.7%, reaching the lowest level against the dollar since April 2002. The yen has sold off this year as the

Bank of Japan

has remained committed to ultra-easy monetary policy, while many other central banks have begun lifting interest rates to combat rapid inflation. 

Cryptocurrencies fell, with bitcoin tumbling 4% and dropping below $30,000. Ether also declined 4%.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Vicky Ge Huang at vicky.huang@wsj.com

As markets react to interest-rate hikes and the threat of a recession, stocks are dropping closer to bear-market territory. WSJ’s Gunjan Banerji explains what it takes to push stocks back into a bull market and why it’s hard to predict when they’ll turn around. Illustration: Jacob Reynolds

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

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Business

Stock Market Rises After Weekly Loss

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U.S. stocks rose on Monday, at least temporarily changing direction after more than two months of volatility and losses.

The S&P 500 climbed 0.7% in morning trading, while the Dow Jones Industrial Average rose 0.4%. The technology-focused Nasdaq Composite Index was 0.8% higher. The three indexes fell Friday after data showed hiring growth slowed in May, though employers still added a strong 390,000 jobs.

Investors are still trying to balance the positive signs from the jobs report against more cautious recent economic commentary from executives like Tesla’s Elon Musk and JP Morgan’s Jamie Dimon, said AvaTrade chief market analyst

Naeem Aslam.

On top of the jobs market, investors are also watching economic data closely for clues about the Federal Reserve’s path for raising interest rates. Fears that the Fed could aggressively raise rates and potentially drive the economy into recession have stoked volatility in global markets this year. 

While traders and consumers alike are looking for signs that inflation has peaked, the real issue is when inflation will come down to a more neutral rate and how much the Fed and other central banks will have to raise interest rates to get it there, said

Siddharth Singahi,

chief investment officer at IronHold Capital.

A key test for markets will be Friday’s U.S. consumer-price index. The closely watched inflation gauge is expected to rise 8.2% in May from a year earlier, according to economists surveyed by The Wall Street Journal. Excluding food and energy, price growth is expected to cool slightly to an annual rate of 5.9% in May from 6.2% the previous month.

Fed officials have indicated they plan to raise interest rates by half a percentage point at next week’s policy meeting, and by the same amount again in July. If they need to do more, Mr. Singahi said, he believes they will, no matter the market reaction.

“Until that’s resolved, not much is going to change for the market fundamentally,” he said.

Trading has been quieter in recent weeks as investors gear up for coming central bank decisions and crucial economic data. The Dow industrials fell 0.9% last week, the smallest weekly change for that index in about a month. The S&P 500 lost 1.2% last week while the Nasdaq ended down 1%.

“We seem to be in a kind of wait-and-see mode,” said

Craig Erlam,

senior market analyst at Oanda in London. “We’ve entered a phase where a lot of interest-rate increases are priced in. A lot of growth slowdown is priced in. We are still seeing intraday volatility, but it does seem to have stabilized.”

Amid a record hiring streak in the U.S., economists are watching for signs of a possible wave turn. WSJ’s Anna Hirtenstein looks at how rising interest rates over high inflation, market selloffs and recession risks challenge the growth of America’s workforce. Photo: Olivier Douliery/AFP

Shares of

Spirit Airlines

rose 6.1% after

JetBlue Airways

sweetened its offer to buy the company. JetBlue in May launched a hostile takeover of Spirit, which had already agreed to a merger with

Frontier Airlines.

Spirit’s shareholders are set to vote on the Frontier merger proposal on Friday. Shares of JetBlue rose 2%, while Frontier Group shares rose 2.6%.

Tesla

shares rose 1.3%, partially recovering from a 9.2% fall on Friday after Mr. Musk, its chief executive, said the electric vehicle maker would cut 10% of its salaried workforce, citing concerns about the global economy. Mr. Musk on Monday threatened to terminate his deal to buy

Twitter Inc.,

shares of which fell 3.7%.

Amazon.com

shares rose 2.9% to $127.12. Monday will mark the first day of trading since the company executed a 20-for-1 stock split. Before the split, Amazon shares were $2,447 a share.

Shares of

Keurig Dr Pepper

rose 4.4%, while

VICI Properties

rose 4.7% and

ON Semiconductor

rose 5.3% after S&P Dow Jones Indices said the three companies will join the benchmark S&P 500 index this month.

U.S. crude oil slid 0.3% to $118.45 a barrel. Prices for oil have surged this year as Russia’s war in Ukraine has disrupted global commodity markets. The average price of regular gas in the U.S. rose to $4.86 over the weekend, according to AAA.

In the bond market, the yield on 10-year U.S. Treasurys jumped to 3.028%, from 2.940% Friday, as investors sold government bonds. Yields and bond prices move inversely. Bond yields have been on the rise in recent weeks but remain below their recent high of 3.124% set in early May.

Traders worked on the floor of the New York Stock Exchange on Friday.



Photo:

BRENDAN MCDERMID/REUTERS

Overseas, the British pound rose 0.4% against the U.S. dollar to $1.2539 as Prime Minister

Boris Johnson

is set to face a vote of confidence in his leadership on Monday. Mr. Johnson’s poll ratings have fallen amid revelations that he held parties in Downing Street during Covid-19 lockdowns.

The U.K.’s FTSE 100 rose 1.4% after being closed since Wednesday due to the four-day Platinum Jubilee weekend, celebrating Queen Elizabeth II’s 70 years on the throne. 

The pan-continental Stoxx Europe 600 rose 1.2%. Investors in Europe will be watching the European Central Bank’s policy meeting on Thursday, where it is expected to lay out its plans for unwinding bond purchases and raising interest rates. The ECB is expected to raise rates for the first time in 11 years in July as it seeks to contain surging inflation.

Asian markets rallied as China continued to ease Covid-19 restrictions in major cities. China’s Shanghai Composite rose 1.3% while Hong Kong’s Hang Seng Index gained 2.7%. Japan’s Nikkei 225 rose 0.6%.

Write to Chelsey Dulaney at chelsey.dulaney@wsj.com and Paul Vigna at Paul.Vigna@wsj.com

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