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DealBook Briefing: Stocks Bounce Between Gains and Losses DealBook Briefing: Can Disney’s Earnings Help Alleviate Investor Concerns?
(about 1 hour later)
Good Tuesday. Here’s what we’re watching:Good Tuesday. Here’s what we’re watching:
• Will the Mouse help keep the bear at bay?
• After Mayhem Monday, is this Turnaround Tuesday?• After Mayhem Monday, is this Turnaround Tuesday?
• What should we be asking about the markets?• What should we be asking about the markets?
• Virtual currencies are falling, too.• Virtual currencies are falling, too.
• Will Congress avoid another government shutdown?• Will Congress avoid another government shutdown?
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When stock markets are plunging, sober-minded investors try to gauge the underlying strength of bellwether companies, to see whether all the selling is justified.
That is why many eyes will be on the earnings of the Walt Disney Company, which reports after the close of regular trading Tuesday. If the company releases stronger-than-expected results for the three months through the end of December, it will reinforce a general sense of optimism about corporate America .
Stellar results from Disney would add to a strong earnings report on Tuesday from General Motors, which helped push the company’s shares 3 percent higher. Micron Technology, a large maker of computer chips, on Monday upped its outlook for the current quarter. Its shares soared 7.7 percent on Tuesday.
Though Disney is not a high growth company, its results offer insight into the strength of consumer spending. As a result, if the company reports earnings that are below the forecasts of Wall Street analysts, it may add to the unease among investors..
The numbers to watch: Analysts expect Disney to earn $1.61 per share, and take in $15.44 billion in revenue in the quarter, according to data from Bloomberg.
Of course, a lot more companies are going to have to report strong earnings to convince investors to jump back into the stock market. One of the reasons that stocks rallied in recent months is that analysts are expecting a 20-percent plus jump in profits in 2018, an eye-popping rise. The more large companies that hit their numbers in this earnings season, the more likely the stock market will find a floor.
— Peter Eavis
The sometimes-panicky global market selloff dissipated Tuesday morning, as the Standard & Poor’s 500-stock index bounced between positive and negative territory in early trading.The sometimes-panicky global market selloff dissipated Tuesday morning, as the Standard & Poor’s 500-stock index bounced between positive and negative territory in early trading.
Following steep drops in Asia and Europe, broad gauges of United States stocks climbed into positive territory soon after the start of trading and danced between gaining and declining through most of the morning.Following steep drops in Asia and Europe, broad gauges of United States stocks climbed into positive territory soon after the start of trading and danced between gaining and declining through most of the morning.
The Dow Jones industrial average is down 0.04 percent, the S.&P. 500 is off 0.4 percent and the Nasdaq Composite fell 0.25 percentThe Dow Jones industrial average is down 0.04 percent, the S.&P. 500 is off 0.4 percent and the Nasdaq Composite fell 0.25 percent
Investors appear to be assessing whether the previous day’s violent decline—the S.&P. suffered its worst decline since August 2011—reflected actual fundamentals or was merely a long-overdue outbreak of investor jitters.Investors appear to be assessing whether the previous day’s violent decline—the S.&P. suffered its worst decline since August 2011—reflected actual fundamentals or was merely a long-overdue outbreak of investor jitters.
For months, markets seemed to sleepwalk higher, as measures of volatility—the ups and downs of stock prices—hit historically low levels. Investors appeared to grow accustomed to an economic backdrop in which growth and inflation remained lackluster, a state of affairs that ensured powerful global central banks would continue to support markets with a range of policies.For months, markets seemed to sleepwalk higher, as measures of volatility—the ups and downs of stock prices—hit historically low levels. Investors appeared to grow accustomed to an economic backdrop in which growth and inflation remained lackluster, a state of affairs that ensured powerful global central banks would continue to support markets with a range of policies.
But the peaceful climb ended over the past week amid worries that solid economic growth in the United States and abroad could be showing early signals of growing inflation pressure. Those concerns drove yields on long-term Treasury bonds sharply higher in recent weeks, as economic data—such as the U.S. jobs report on Friday—showed wages growing at their fastest clip in years.But the peaceful climb ended over the past week amid worries that solid economic growth in the United States and abroad could be showing early signals of growing inflation pressure. Those concerns drove yields on long-term Treasury bonds sharply higher in recent weeks, as economic data—such as the U.S. jobs report on Friday—showed wages growing at their fastest clip in years.
— Matt Phillips— Matt Phillips
Asked about the roiled stock market at a House Financial Services Committee hearing on Tuesday, Steven Mnuchin, the Treasury secretary, said that the Trump administration was not concerned and that it remains focused on the long-term trajectory of the economy.Asked about the roiled stock market at a House Financial Services Committee hearing on Tuesday, Steven Mnuchin, the Treasury secretary, said that the Trump administration was not concerned and that it remains focused on the long-term trajectory of the economy.
“We are very focused on long-term economic growth, and we believe that the policies that we have enacted, including tax reform are very positive for long-term economic growth,” Mr. Mnuchin said.“We are very focused on long-term economic growth, and we believe that the policies that we have enacted, including tax reform are very positive for long-term economic growth,” Mr. Mnuchin said.
He said that he was closely monitoring for orderly market functioning and that there were “no systemic issues” that were reported to him.He said that he was closely monitoring for orderly market functioning and that there were “no systemic issues” that were reported to him.
“I’m happy to report I got the green lights,” Mr. Mnuchin said.“I’m happy to report I got the green lights,” Mr. Mnuchin said.
The Treasury secretary said that given how much the market has rallied in the last year, he does not think the recent drop in prices raises financial stability concerns.The Treasury secretary said that given how much the market has rallied in the last year, he does not think the recent drop in prices raises financial stability concerns.
Asked if the Trump administration will take the blame for the recent drop in stocks after taking credit for the rally, Mr. Mnuchin demurred.Asked if the Trump administration will take the blame for the recent drop in stocks after taking credit for the rally, Mr. Mnuchin demurred.
“I think we’ll still claim credit for the fact that it’s up over 30 percent since the election,” he said of the stock market.“I think we’ll still claim credit for the fact that it’s up over 30 percent since the election,” he said of the stock market.
— Alan Rappeport— Alan Rappeport
When stock markets sell off as they have the past two trading sessions, there is often more than one cause. But one popular trade is taking a lot of blame for Monday’s plunge: short volatility.When stock markets sell off as they have the past two trading sessions, there is often more than one cause. But one popular trade is taking a lot of blame for Monday’s plunge: short volatility.
Investors had piled money into exchange-traded products designed to rise when the C.B.O.E. Volatility Index, or VIX, falls. The VIX, known as the market’s fear gauge, measures how volatile investors expect stock markets to be in the month ahead. Those wagers paid off handsomely, rising 180 percent last year as the VIX plumbed historic lows.Investors had piled money into exchange-traded products designed to rise when the C.B.O.E. Volatility Index, or VIX, falls. The VIX, known as the market’s fear gauge, measures how volatile investors expect stock markets to be in the month ahead. Those wagers paid off handsomely, rising 180 percent last year as the VIX plumbed historic lows.
That quickly reversed Monday. The VIX surged 117 percent in its biggest one-day jump on record and two short volatility exchange-traded product — VelocityShares Daily Inverse VIX Short-Term Exchange Traded Note, XIV, and Next Notes S&P 500 VIX Inverse ETN — endured heavy selling.That quickly reversed Monday. The VIX surged 117 percent in its biggest one-day jump on record and two short volatility exchange-traded product — VelocityShares Daily Inverse VIX Short-Term Exchange Traded Note, XIV, and Next Notes S&P 500 VIX Inverse ETN — endured heavy selling.
The selling led Credit Suisse to say it is going to buy back XIV and after the bank has done that it will no longer exist. Nomura also said its Next Notes “would be redeemed at a steep discount to their closing price on Monday in Asia, crystallizing large losses for investors,” the WSJ reported.The selling led Credit Suisse to say it is going to buy back XIV and after the bank has done that it will no longer exist. Nomura also said its Next Notes “would be redeemed at a steep discount to their closing price on Monday in Asia, crystallizing large losses for investors,” the WSJ reported.
From Barclays:From Barclays:
From Morgan Stanley:From Morgan Stanley:
From Nicholas Colas, co-founder of DataTrek Research:From Nicholas Colas, co-founder of DataTrek Research:
— Stephen Grocer— Stephen Grocer
Stock markets around the world appear headed down for a third straight trading day, after yesterday’s 4 percent drop in the S.&P. 500. Here are the latest numbers:Stock markets around the world appear headed down for a third straight trading day, after yesterday’s 4 percent drop in the S.&P. 500. Here are the latest numbers:
• Hong Kong’s Hang Seng fell 5 percent.• Hong Kong’s Hang Seng fell 5 percent.
• Japan’s Nikkei was down 4.7 percent.• Japan’s Nikkei was down 4.7 percent.
• The U.K.’s FTSE 100 was down 2 percent.• The U.K.’s FTSE 100 was down 2 percent.
• Wall Street’s “fear gauge,” the VIX, is at its highest level in two and a half years.• Wall Street’s “fear gauge,” the VIX, is at its highest level in two and a half years.
And here’s some more context from our colleague Peter Eavis.And here’s some more context from our colleague Peter Eavis.
The technical question: Has computer-driven unwinding of “Goldilocks” trades tied to peaceful market rises played a role here?The technical question: Has computer-driven unwinding of “Goldilocks” trades tied to peaceful market rises played a role here?
The economic question: Economies are growing around the world, which is likely to mean rising wages and then, perhaps, inflation. So will central bankers have to raise rates more than previously expected?The economic question: Economies are growing around the world, which is likely to mean rising wages and then, perhaps, inflation. So will central bankers have to raise rates more than previously expected?
The political question: What does this mean for President Trump, who has touted stock market gains as a measure of his success?The political question: What does this mean for President Trump, who has touted stock market gains as a measure of his success?
More from Ben White of Politico:More from Ben White of Politico:
There’s another way of thinking about Mr. Trump’s role, Andrew writes in his latest column:There’s another way of thinking about Mr. Trump’s role, Andrew writes in his latest column:
But don’t expect action from the newly sworn-in Fed chairman, Jay Powell — at least, not yet.But don’t expect action from the newly sworn-in Fed chairman, Jay Powell — at least, not yet.
A bit of humor, courtesy of our colleague Binyamin Appelbaum:A bit of humor, courtesy of our colleague Binyamin Appelbaum:
Where Bitcoin was this morning: $6,628, down almost 16 percent over the past 24 hours, according to CoinMarketCap. Ethereum’s Ether and Ripple’s XRP fell by double digits, too.Where Bitcoin was this morning: $6,628, down almost 16 percent over the past 24 hours, according to CoinMarketCap. Ethereum’s Ether and Ripple’s XRP fell by double digits, too.
What’s happening: Regulators are clamping down on digital money, and scams and hacks are eroding trust in it.What’s happening: Regulators are clamping down on digital money, and scams and hacks are eroding trust in it.
More from Nathaniel Popper of the NYT:More from Nathaniel Popper of the NYT:
Next: The heads of the S.E.C. and the Commodity Futures Trading Commission are to talk Bitcoin with the Senate Banking Committee today.Next: The heads of the S.E.C. and the Commodity Futures Trading Commission are to talk Bitcoin with the Senate Banking Committee today.
The House appears ready to vote on a stopgap bill; funding would otherwise expire at 12:01 a.m. on Friday.The House appears ready to vote on a stopgap bill; funding would otherwise expire at 12:01 a.m. on Friday.
What it does: Pairs short-term funding for the government with long-term funding for the military.What it does: Pairs short-term funding for the government with long-term funding for the military.
What it doesn’t do: Include the increase in domestic spending demanded by Democrats, particularly Senate Democrats. Nor does it address immigration, which caused last month’s shutdown (though Senators John McCain and Chris Coons have a bipartisan proposal on that).What it doesn’t do: Include the increase in domestic spending demanded by Democrats, particularly Senate Democrats. Nor does it address immigration, which caused last month’s shutdown (though Senators John McCain and Chris Coons have a bipartisan proposal on that).
Expect more give-and-take between the two sides of Congress:Expect more give-and-take between the two sides of Congress:
Elsewhere in policyElsewhere in policy
• Most of President Trump’s legal team wants to avoid letting Robert Mueller question him. (NYT)• Most of President Trump’s legal team wants to avoid letting Robert Mueller question him. (NYT)
• Mr. Trump flippantly suggested that Democrats who sat through his State of the Union address stone-faced were guilty of treason. (NYT)• Mr. Trump flippantly suggested that Democrats who sat through his State of the Union address stone-faced were guilty of treason. (NYT)
• The House Intelligence Committee voted unanimously to release a Democratic memo tied to the investigation of a Trump campaign aide. Now it’s up to the White House. (Politico)• The House Intelligence Committee voted unanimously to release a Democratic memo tied to the investigation of a Trump campaign aide. Now it’s up to the White House. (Politico)
• China is investigating U.S. sorghum exports, a move that threatens a widening trade standoff. (NYT)• China is investigating U.S. sorghum exports, a move that threatens a widening trade standoff. (NYT)
It depends whether AT&T’s bid for Time Warner goes through. Comcast dropped out of the running for Fox once it became clear that Rupert Murdoch would prefer a tie-up with Disney, but it is studying whether to rejoin the fray, CNBC reported.It depends whether AT&T’s bid for Time Warner goes through. Comcast dropped out of the running for Fox once it became clear that Rupert Murdoch would prefer a tie-up with Disney, but it is studying whether to rejoin the fray, CNBC reported.
More from Alex Sherman of CNBC:More from Alex Sherman of CNBC:
Elsewhere in the deal worldElsewhere in the deal world
• Archer-Daniels Midland is in advanced talks to buy Bunge, unnamed sources say. (Bloomberg)• Archer-Daniels Midland is in advanced talks to buy Bunge, unnamed sources say. (Bloomberg)
• Kroger agreed to sell its convenience store business to the British investment firm EG Group for $2.15 billion. (FT)• Kroger agreed to sell its convenience store business to the British investment firm EG Group for $2.15 billion. (FT)
• Alibaba and an arm of the Chinese government have bought roughly 13 percent of Dalian Wanda’s movie business for $1.2 billion. (Bloomberg)• Alibaba and an arm of the Chinese government have bought roughly 13 percent of Dalian Wanda’s movie business for $1.2 billion. (Bloomberg)
• Midstates Petroleum offered to merge with SandRidge Energy in an all-stock deal that would create a nearly $1 billion oil company. (Reuters)• Midstates Petroleum offered to merge with SandRidge Energy in an all-stock deal that would create a nearly $1 billion oil company. (Reuters)
• Viacom is near a deal to buy the online video conference VidCon, unnamed sources say. (Variety)• Viacom is near a deal to buy the online video conference VidCon, unnamed sources say. (Variety)
• Elliott Advisors continued to push BHP Billiton to simplify its dual-listed corporate structure. (FT)• Elliott Advisors continued to push BHP Billiton to simplify its dual-listed corporate structure. (FT)
• Walmart has bought a virtual reality start-up, Spatialand, for its Store No. 8 incubator unit. (Recode)• Walmart has bought a virtual reality start-up, Spatialand, for its Store No. 8 incubator unit. (Recode)
That’s what Emily Chang of Bloomberg said about her reporting for “Brotopia,” her forthcoming book about the lopsided power dynamics in Silicon Valley. (NYT)That’s what Emily Chang of Bloomberg said about her reporting for “Brotopia,” her forthcoming book about the lopsided power dynamics in Silicon Valley. (NYT)
The misconduct flyaroundThe misconduct flyaround
• Steve Wynn and his legal representatives set up a limited liability company solely to handle settlement funds, including $7.5 million for a manicurist who accused him of sexual assault. (WSJ)• Steve Wynn and his legal representatives set up a limited liability company solely to handle settlement funds, including $7.5 million for a manicurist who accused him of sexual assault. (WSJ)
• Laurent Potdevin resigned as C.E.O. of Lululemon because, the company said, he had failed to “exemplify the highest levels of integrity and respect for one another.” (NYT)• Laurent Potdevin resigned as C.E.O. of Lululemon because, the company said, he had failed to “exemplify the highest levels of integrity and respect for one another.” (NYT)
• A partner at the international law firm Baker McKenzie lost his job after allegations surfaced that he had sexually assaulted a female colleague. (FT)• A partner at the international law firm Baker McKenzie lost his job after allegations surfaced that he had sexually assaulted a female colleague. (FT)
• Even with generous social policies, women in Scandinavia are still paid less than men, because they spend more time on child-rearing. (NYT)• Even with generous social policies, women in Scandinavia are still paid less than men, because they spend more time on child-rearing. (NYT)
The venture firm, which has invested in the likes of Groupon, Dollar Shave Club and Nutanix, has closed both its 12th venture fund, at $800 million, and its latest side fund for later-stage deals, at $450 million. (It also promoted Morad Elhafed to general partner.)The venture firm, which has invested in the likes of Groupon, Dollar Shave Club and Nutanix, has closed both its 12th venture fund, at $800 million, and its latest side fund for later-stage deals, at $450 million. (It also promoted Morad Elhafed to general partner.)
Battery’s latest investment focuses include big data, cloud and A.I. software, and consumer internet apps.Battery’s latest investment focuses include big data, cloud and A.I. software, and consumer internet apps.
From Michael Brown, a Battery general partner:From Michael Brown, a Battery general partner:
The tech flyaroundThe tech flyaround
• The Uber-Waymo trial began with dueling sports metaphors. (NYT)• The Uber-Waymo trial began with dueling sports metaphors. (NYT)
• Meanwhile, Uber is working on its relationship with drivers. (Recode)• Meanwhile, Uber is working on its relationship with drivers. (Recode)
• Isaac Choi, who was C.E.O. of the failed start-up WrkRiot, has pleaded guilty to defrauding employees. (Axios)• Isaac Choi, who was C.E.O. of the failed start-up WrkRiot, has pleaded guilty to defrauding employees. (Axios)
• American and British lawmakers will convene to discuss their respective inquiries into social media’s impact on elections. (Axios)• American and British lawmakers will convene to discuss their respective inquiries into social media’s impact on elections. (Axios)
• Facebook is hiring an “extraterrestrial product manager” to oversee an aerospace initiative. (CNBC)• Facebook is hiring an “extraterrestrial product manager” to oversee an aerospace initiative. (CNBC)
• Hudson’s Bay, the parent of Saks and Lord & Taylor, has hired a new C.E.O.: Helena Foulkes, the president of CVS’s pharmacy division. (NYT)• Hudson’s Bay, the parent of Saks and Lord & Taylor, has hired a new C.E.O.: Helena Foulkes, the president of CVS’s pharmacy division. (NYT)
• So has Avon: Jan Zijderveld, most recently the head of Unilever’s European business. (FT)• So has Avon: Jan Zijderveld, most recently the head of Unilever’s European business. (FT)
• President Trump plans to nominate Charles Rettig, a tax lawyer, to lead the I.R.S. (WSJ)• President Trump plans to nominate Charles Rettig, a tax lawyer, to lead the I.R.S. (WSJ)
• Stephen Friend, a co-founder of Sage Bionetworks who joined Apple’s health care team, has left the tech giant. (CNBC)• Stephen Friend, a co-founder of Sage Bionetworks who joined Apple’s health care team, has left the tech giant. (CNBC)
• Marco Santori, a partner at the law firm Cooley and an expert in initial coin offerings, has joined the virtual currency start-up Blockchain as its chief legal officer. (Axios)• Marco Santori, a partner at the law firm Cooley and an expert in initial coin offerings, has joined the virtual currency start-up Blockchain as its chief legal officer. (Axios)
• Saudi Arabia is trying to untie itself from oil and tie itself to one of its other natural resources: sunlight. (NYT)• Saudi Arabia is trying to untie itself from oil and tie itself to one of its other natural resources: sunlight. (NYT)
• Renée James, a former No. 2 at Intel, is taking aim at the company’s most lucrative business, which she helped to build. (NYT)• Renée James, a former No. 2 at Intel, is taking aim at the company’s most lucrative business, which she helped to build. (NYT)
• Two top editors and a reporter at Newsweek were fired on Monday in a purge that targeted employees involved in covering the company’s financial and legal troubles. (NYT)• Two top editors and a reporter at Newsweek were fired on Monday in a purge that targeted employees involved in covering the company’s financial and legal troubles. (NYT)
• Melvyn I. Weiss, whose class-action lawsuits made him a pariah to corporate America, a hero to plaintiffs, a catalyst for legal protections of investors and consumers and finally a felon, died on Friday at 82. (NYT)• Melvyn I. Weiss, whose class-action lawsuits made him a pariah to corporate America, a hero to plaintiffs, a catalyst for legal protections of investors and consumers and finally a felon, died on Friday at 82. (NYT)
• Romana Acosta Bañuelos, the U.S. treasurer under President Nixon, has died at 92. (NYT)• Romana Acosta Bañuelos, the U.S. treasurer under President Nixon, has died at 92. (NYT)
• A lunch for Oscar nominees attracted protests over the lack of Hispanic characters in movies. (NYT)• A lunch for Oscar nominees attracted protests over the lack of Hispanic characters in movies. (NYT)
• James Gorman, asked to rate his time leading Morgan Stanley, gave himself an A-minus. (Bloomberg)• James Gorman, asked to rate his time leading Morgan Stanley, gave himself an A-minus. (Bloomberg)
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