One Restaurant In New York Is Doing Away With Tipping Waiters, Plus Has Netflix Growth Stalled In The U.S.?

morning-brew

“None of the waiters has quit yet, so that’s a good sign.” — Notable New York restaurateur Danny Meyer, who is eliminating tipping at his numerous New York restaurants, which will affect how its 1,800 employees are paid. Meyer is taking on the deeply ingrained U.S. tipping culture; we’ll see if it pays off.

MARKET SNAPSHOT 

Roller Coaster Wednesday

  • Roller coasters can be fun—unless the stock markets are riding one. On Wednesday, all three major indices played mind games with investors, but ultimately finished in the red.
  • On the bright side, computer memory maker SanDisk surged 11 percent after Bloomberg reported that the company was pursuing a possible sale. One potentially interesting candidate: fellow chipmaker Micron, which you might remember almost got bought out by Chinese state-owned enterprise Tsinghua Unigroup over the summer (don’t worry, Micron flatly rejected the offer, but Tsinghua isn’t giving up).
  • The benchmark 10 year government bond yield took a tumble yesterday on some disappointing economic data: retail sales for September, which were expected to grow by a mere 0.2 percent, only mustered 0.1 percent. A main driver in the miss was still-falling gasoline prices, counteracting the one bright spot: auto sales, which logged a solid 1.8 percent gain. The Federal Reserve is sure to account for all of this in its interest rate hike equation.
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CORPORATE PRIMER

2 Out of 3 Ain’t Bad

Wells Fargo and Bank of America released their third quarter earnings yesterday, and the future looks bright. Both banks exceeded earnings and revenue expectations—great news after JP Morgan fell short a few days ago. While investors had relatively muted reactions to both companies’ earnings, the results show comforting strength in U.S. banks, which are facing tough times due to low interest rates and strict regulations.

Walmart’s Extreme Makeover

One step back, two steps forward: that’s the plan for Walmart, but things don’t look too pretty at the moment. Amidst a push to increase employee wages and improve store efficiency, Walmart has lowered its profit forecasts through 2017 by 6-12 percent, sending shares plummeting by over 10 percent yesterday. Tack on stiff competition from both online and physical retailers, and Walmart is on pace for its worst fiscal performance since 1973.

Things At Volkswagen Get Worse

Think Volkswagen hit rock bottom? Nope, it’s still on its way down. Yesterday, the emissions scandal-ridden company’s Chief Designate of North America, Winfied Vahland, called it quits. This comes just three weeks after he was called upon to run the company’s North America branch. Smells a bit fishy for a company already packed with scandals, but Vahland has emphasized he left because of “differences in the group’s organization of the region.” Whatever the reason, it’s tough to blame him for leaving.

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TODAY IN TECH

Netflix Double-Take

At first glance, Netflix’s Q3 earnings report appears pretty dismal. U.S subscriber growth missed expectations by about 20 percent and net income halved year-over-year. But upon closer inspection, the case looks better. The slowdown in domestic growth can be attributed to Netflix’s focus on international expansion—adding 14 percent more overseas subscribers than projected—and the drop in earnings is due to higher costs for original content, not a decrease in sales. The market seemed to agree: after initially plummeting 14 percent after hours, investors quickly bid the stock up to nearly even.

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OTHER STORIES

  • Carlyle fires Indonesia dealmaker for insider trading
  • Meet the millennials working to elect the next president
  • You can now jailbreak iOS 9 devices
  • Jack Dorsey owns 24.4 percent of Square
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ECONOMIC CALENDAR

  • Monday: Columbus Day (Markets Open, Banks Closed)
  • Tuesday: JPMorgan, Johnson & Johnson, Kinder Morgan, Las Vegas Sands Earnings
  • Wednesday: Netflix, Bank of America, Delta, Wells Fargo Earnings; Retail Sales
  • Thursday: Goldman Sachs, Citigroup, Philip Morris Earnings; Weekly Jobless Claims; Consumer Price Index
  • Friday: General Electric Earnings; Industrial Production

A PRESIDENTIAL TRADITION

In case you missed Tuesday night’s Democratic debate, presidential candidate Jim Webb responded quite literally after being asked which enemy he’d made that he was most proud of: “I’d have to say the enemy soldier that threw the grenade that wounded me…but he’s not around right now to talk to.” Over the line or not, Webb isn’t the first presidential hopeful (or elected president) to have killed someone:

  • Technically, all acting presidents have killed someone indirectly by acting as commander-in-chief, but at least three U.S. presidents have done the deed with their own hands.
  • In 1806, Andrew Jackson shot and killed attorney Charles Dickinson in a duel after he insulted Jackson’s wife by publishing news of her horse racing debts.
  • In 1896, Teddy Roosevelt led the charge up Cuba’s San Juan Hill in the Spanish-American War. He was awarded a Medal of Honor for his bravery in the battle, as “the first to reach the enemy trenches, where he quickly killed one of the enemy with his pistol.”
  • In 1912, Grover Cleveland executed two convicts while serving as Sheriff of Erie County, New York.

INTERVIEW QUESTION OF THE DAY

A man hijacks an airplane transporting eight passengers and valuable cargo. After taking the cargo, the man demands nine parachutes, puts one of them on and jumps, leaving the other eight behind. Why did he want eight? (Answer)

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BUSINESS TERM OF THE DAY

Nash Equilibrium — A concept of game theory where the optimal outcome of a game is one where no player has an incentive to deviate from his or her chosen strategy after considering an opponent’s choice.

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FOOD FOR THOUGHT
$862 million: the amount Apple might have to pay after losing a patent lawsuit against the University of Wisconsin, related to the chips used on the iPhone and iPad. Apple’s $200 billion cash hoard may be receiving a small dent soon.

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