Without further ado, the Brew’s third weekly quiz is live! Reminder: five questions. Get ’em all right, and you’ll be entered for a shot to win a Brew swag prize and a shoutout in an issue next week. Good luck!
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“Hard to accept that these imbeciles represent the people in our government” — A tweet from former Turing Pharmaceuticals CEO (and all-around supervillain) Martin Shkreli, after pleading the fifth at a Congressional committee yesterday. Clearly, his pleading of the fifth didn’t extend to Twitter.
MARKET SNAPSHOT
Big Picture
- U.S. stocks closed mildly higher in a volatile Thursday as investors reacted to weak economic data showing increases in jobless claims, decreases in productivity and falling oil prices—quite the trio
Alternatives to Watch
- The U.S. dollar fell again in a rough followup to Wednesday’s huge drop, which was influenced by the aforementioned data convincing investors that the U.S. economy is contracting
Market Movers
- Shares of Mattel and Hasbro both jumped yesterday as rumors circulated over a possible merger between the world’s two largest toy companies
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WORLD MACRO
Bank of England Gets Grim
The Bank of England was in action yesterday, and it was quite the downer: the Bank cut the UK’s GDP growth forecast from 2.5% to 2.2%, and for good measure unanimously voted to keep interest rates at a low of 0.5%. The last time the Bank held a unanimous vote was July 2015…so at least they’re all on the same page. With wage growth in the UK remaining weak and a bleak outlook on the international economy, the Bank’s accommodating action (or lack thereof) should come as no surprise.
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CORPORATE PRIMER
LinkedIn’s Grim Outlook
Your favorite (and likely only) professional networking site, LinkedIn, received a rough market treatment following its earnings announcement. Why? Despite beating analyst expectations on revenue and earnings, shares slid a whopping 27% in after-hours trading. Low expectations for future growth led investors to be skittish (although LinkedIn is placing the blame on investors for setting expectations too high). Shares of the networking site have already slid 26% over the last three months, and after releasing earnings, the downtrend is showing no signs of letting up.
An Empty Shell
Yesterday, oil and gas behemoth Royal Dutch Shell announced that its profits plummeted nearly 60% this past quarter—and 80% for the year (BP and Exxon can sympathize). The drastic drop in oil prices exhausted the company’s oil reserves, leading to the abysmal quarter and year. Shell technically “beat expectations” according to analysts, but having its bar set so low to begin with tells you all you need to know.
Apparel Retailers Face Headwinds
Recent quarterly earnings came up sour for big name brands Ralph Lauren and Kohl’s, and shares for both companies experienced their largest declines in two decades following the negative news. Why the poor results? A warmer than expected winter season, a stronger dollar and a consumer shift toward online shopping (that neither company is capitalizing on) hampered sales for both companies. Long story short: the apparel industry outlook remains pretty gloomy.
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OTHER STORIES
- Warner, Sony say they’ll share potential Spotify windfall with artists
- Honda expands airbag recall to 2.2 million more U.S. vehicles
- Philippe Dauman succeeds Sumner Redstone as Viacom chairman
- Chicago entrepreneur buys a large stake in L.A. Times’ owner
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ECONOMIC CALENDAR
- Monday: Alphabet (+), Aflac (+) Earnings; ISM Manufacturing Index (-); Personal Income and Outlays (+/-)
- Tuesday: Chipotle (-), Yahoo (-), BP (-), Dow Chemical (+), Exxon (-), Ferrari (-), Gilead (+), Match Group (-), Michael Kors (+), Pfizer (+/-) Earnings; Motor Vehicle Sales (+)
- Wednesday: General Motors (+), GoPro (-), Yum Brands (+/-), Buffalo Wild Wings (-), Comcast (+) Earnings; Private Employment Report (+/-); ISM Non-Manufacturing Index (-)
- Thursday: LinkedIn (-), Phillip Morris (+/-), Ralph Lauren (-), News Corp (-), Cigna (-), ConocoPhillips (-), Deckers (-), Dunkin’ Brands (+/-) Earnings; Weekly Jobless Claims (-)
- Friday: January Jobs Report; Tyson Foods Earnings
STATES NOT QUITE RECESSION-PROOF
You may have heard that we might be heading into round two of the “Great Recession”—while this may or may not be true, there’s another reason we’re hoping it isn’t. While states started the last recession with substantial funds for unemployment benefits, for most these funds have dwindled drastically. Here’s the breakdown:
- For example: at the end of 2007, California had $2.5 billion in funds for unemployment benefits. Now? The number of Californians using unemployment benefits is at an all-time low…but the unemployment fund is $6 billion in debt.
- To be clear, this doesn’t mean troubled states like California will suddenly stop paying out unemployment benefits: states can borrow unlimited amounts from the federal government, and many underfunded states have cut back on the amount of benefits doled out.
- The conclusion? Let’s hope we’re not headed into another recession, so that the states lagging behind have enough time to replenish their funds.
INTERVIEW QUESTION OF THE DAY
You are given 12 balls and a scale. Of the 12 balls, 11 are identical and one weighs either slightly more or less. How do you find the ball that is different using the scale only three times and tell if it is heavier or lighter than the others? (Answer)
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BUSINESS TERM OF THE DAY
Value Chain — A high-level model of how businesses receive raw materials as input, add value to the raw materials through various processes and sell finished products to customers.
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FOOD FOR THOUGHT
$6: Subway is increasing the price of a footlong sandwich from $5 to $6. The root cause? Subway blames inflation.