“Doesn’t fit reality” — How Google is describing the European Union’s ongoing claims that Google abuses its dominance by shutting rivals out of search and shopping ads. Shots fired.
Market Snapshot
- Make it eight: U.S. stocks headed south again yesterday, with the S&P 500 extending its losing streak to eight straight days—call it the election effect (markets hate uncertainty, dontcha know)
- Generic drugmakers got smashed on news that the DOJ could file charges this year over the drugmakers colluding on drug pricing—among the casualties: Mylan (-6.90%), Teva (-9.53%), Allergan (-4.53%) and of course Valeant (-8.48%)
Starbucks Has The Best Quarter of Its Life
…But investor concern is brewing. With shares down 14% in 2016, Schulz & Co. needed a pick-me-up to get the Seattle-based coffee company back on track. And that’s what it got: Starbucks (+1.41% after hours) reported its most profitable quarter and full year expectations ever, driven by improved same store sales growth in two key regions: the Americas and China. Don’t get all fired up just yet though, the OG Morning Brew isn’t without its flaws. Despite regional sales strength, global same store sales growth (4.0% vs 4.9%) and U.S. same store sales growth (4.0% vs 5.0%) fell short of expectations. Keep brewing you, Starbucks.
Guess How GoPro Did
…This is starting to sound like a broken record. The action camera company (-23.1% after hours…here we go) took a huge tumble after reporting Q3 revenue that missed expectations by—wait for it—23%…and expectations were very low to begin with. GoPro’s been banking on the release of its new camera and drone, but since they weren’t released until October, those sales haven’t been included in this quarter’s earnings. That doesn’t mean Q4 looks any better though: the struggling company has said it’s running into production issues for its flagship products—just in time for the holiday season, no less.
Kraft Takes Another Blow
…The company best known for Velveeta Cheese and Heinz Ketchup took a hit yesterday, as quarterly sales fell 1.5%. As consumers continue to demand organic and fresh food, old-school staples like Kraft (-1.16% after hours), the world’s fifth-largest food and beverage company, are struggling to keep up. While Kraft continues to try to innovate in the fresh food space to compete with newer niche companies, its new offerings like a reformulated mac & cheese and Devour, a new frozen food line, have not caught up, and investors aren’t pleased.
Egypt Cuts Its Currency in Half
…Devaluing the Egyptian pound by 48% in an effort to draw foreign capital back in and stabilize Egypt’s struggling economy. Bonus: bringing down the pound is also one of the requirements the country needs to check off in order to get final approval for a $13 billion loan from the IMF. What’s all that for? Egypt has been hurting, hit hard by high inflation and plummeting foreign reserves, thanks mostly to all sorts of political turmoil. The loan would be a big help in getting things back on track. The good news? Egyptian stocks soared 8% immediately following the announcement to hit a six month high.
Other Stories
- Uber settles lawsuit over driver sexual assault claims
- U.S., 35 states to boost electric vehicle charging network
- Wells Fargo warns litigation cost could reach $1.7 billion
- Walmart adding Chase Pay as another payment option
Economic Calendar
- Monday: Personal Income and Outlays (+/-)
- Tuesday: Pfizer (-), BP (-), Royal Dutch Shell (+), Sony (-), Kellogg (+), Electronic Arts (+), Coach (+), Zillow (-), Herbalife (-), Square (+), Etsy (+) Earnings; ISM Manufacturing Index (+); Construction Spending (-); Fed Meeting Begins
- Wednesday: Facebook (+/-), Alibaba (+/-), Time Warner (+), Allergan (-), Qualcomm (+), AIG (-), MetLife (+), Prudential (+), Estee Lauder (+/-), Whole Foods (+), Fitbit (-), Yelp (+), Zynga (-), Office Depot (+) Earnings; Private Employment Report (-); Fed Meeting Announcement (+/-)
- Thursday: Kraft Heinz (-), Starbucks (+/-), Charter Communications (+/-), Las Vegas Sands (+), GoPro (-), Activision Blizzard (+/-), Credit Suisse (+/-), Hyatt Hotels (+), AMC Networks (-), Lions Gate (+) Earnings; Weekly Jobless Claims (-); Factory Orders (+); ISM Non-Manufacturing Index (-)
- Friday: Humana Earnings; October Jobs Report
The Clockwork Economy
Is turning back the clocks slowing down the economy? Yesterday, JP Morgan released a report about the impact of turning back the clock on consumer spending. First established as an energy-saving initiative, some businesses believe that daylight savings influences their profits. Fact or fiction?
- In the study, credit and debit card transactions of 2.5 million Chase customers in Phoenix and Los Angeles were analyzed. Because Arizona doesn’t turn back its clocks, Phoenix customers set a baseline. The results: relative to Phoenix, L.A. saw a 0.9% spending increase per capita at the start of daylight savings time.
- …But there was also a 3.5% spending decrease when daylight savings ended. Most pronounced for goods, the losses were felt at grocery stores, gas stations and other retailers.
- Fortunately, we can’t all be L.A.: While Denver saw similar trends as Los Angeles, a push in spring spending in San Diego offset a fall spending decline. Maybe sunny San Diego’s success will prompt a study on the economic effect of perfect weather.
Interview Question of the Day
If you multiply me by two, subtract one and read the reverse result, you’ll find me. Which numbers can I be? (Answer)
Business Term of the Day
Corporate cannibalism doesn’t involve any eating—except eating away of revenue, of course. It occurs when companies introduce new products into a market where existing products are already established. In effect, the new products are competing against their own incumbent products.
Food for Thought
Fox’s broadcast of game 7 of the World Series between the Cubs and Indians eclipsed the 40 million viewer mark, making it the most-watched baseball game of the past 25 years. How did Fox fare? It charged more than $500,000 for a 30-second ad—so not bad.