Twitter Shares Fall, Ending A Hard Week For Social Media Stocks

Social media companies have not had a good week in the stock market.

Twitter’s shares fell 20 percent on Friday, after the company announced that it had lost users. The number of monthly Twitter users dropped from 336 million to 335 million, according to the company’s latest financial release.

The decline came despite Twitter’s simultaneous announcement that its revenue is up a whopping 24 percent this year, and posted a record profit of $100 million.

But that wasn’t enough for investors.

Twitter has been aggressively purging their website of millions of suspicious user accounts, deleting bots and other accounts that it believes are fraudulent or violate the company’s anti-spam policies.

The crackdown was meant to restore public trust in the platform. Twitter has been criticized for allowing users to use hateful, violent and racist language, and, along with Facebook, has been a tool for Russian influence, as NPR has reported.

In the financial report released Friday, the company acknowledged that “our work sometimes includes the removal of accounts, some of which are included in our metrics,” but that getting rid of problematic accounts will make the service more user-friendly, driving future growth.

The company’s chief financial officer, Ned Segal, wrote on Twitter earlier this month that most of the deleted accounts are never counted in the company’s user metrics.

Nonetheless, the newly announced decline in monthly users clearly worried investors.

Twitter’s slide comes one day after Facebook’s stock took a huge hit, losing $100 billion in value, after the company announced its profits had grown by a third, but that it expected revenue growth to slow down for the rest of the year.

Social media companies, and tech stocks in general, have been reliable drivers of stock market growth in the past, but data breaches, privacy scandals and questions about how social media sites should be regulated have made some investors anxious.

Earlier this year, weak tech stocks dragged down the Nasdaq composite index. Facebook’s stock continued to fall on Friday, and the Nasdaq composite was down more than 1.6 percent.


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Author: Rebecca Hersher
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Wall Street slips ahead of Fed decision

U.S. stocks were slightly lower on Wednesday, with declines in biotechnology and insurers negating Apple’s rise after strong results, ahead of the Federal Reserve’s policy announcement.

Expectations the U.S. central bank will sound more hawkish on policy tightening kept investors wary of big market moves, especially after currency markets were roiled this week by the dollar’s surge to 3-1/2-month highs against a basket of currencies.

The U.S. two-year Treasury yields US2YT=RR, most sensitive to monetary policy, hit a 9-1/2-year high after data showed U.S. private-sector payrolls for April came roughly in line with market forecasts, cementing expectations for a rate increase in June. [US/]

Despite U.S. companies being on track to post their strongest quarterly profit growth in seven years, worries about inflation and rising raw material costs have weighed on investors’ minds.

Apple (AAPL.O) was a bright spot, rising 4.1 percent after it posted resilient iPhone sales in the face of waning global demand and promised $100 billion in additional stock buybacks.

Its suppliers Cirrus Logic (CRUS.O), Lumentum Holdings (LITE.O) and Skyworks Solutions (SWKS.O) were all up between 2.5 percent and 10 percent.

“The market is on a wait-and-see mode until the Fed announcement, as well as any implication out of China, Mexico, Canada with regards to trade,” said Lindsey Bell, investment strategist at CFRA Research in New York.

Investors kept an eye out for developments around U.S.-China trade talks as a Trump administration delegation is expected to visit Beijing on Thursday and Friday for talks with top Chinese officials.

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At 11:29 a.m. EDT the Dow Jones Industrial Average .DJI was down 41.35 points, or 0.17 percent, at 24,057.70, the S&P 500 .SPX was down 4.35 points, or 0.16 percent, at 2,650.45 and the Nasdaq Composite .IXIC was up 7.77 points, or 0.11 percent, at 7,138.48.

“It’s refreshing to see Nasdaq leading the way even though everything is more or less flat … you’re seeing tech return to leadership category which is kind of what the market hasn’t had in the past several weeks,” said Bell.

MasterCard (MA.N) rose 2.7 percent after it reported a better-than-expected quarterly profit, boosted by higher consumer spending on credit and debit cards.

The gains kept the S&P technology index .SPLRCT in the positive territory, up 0.52 percent.

On the other end of the spectrum was Snap (SNAP.N), whose shares plunged more than 17.9 percent, after the Snapchat owner fell short of Wall Street forecasts for revenue and regular users.

Biotechnology stocks also took a hit on Gilead Sciences’ (GILD.O) 6.1 percent drop after the company reported a lower quarterly profit as sales of its flagship hepatitis C drugs fell.

Insurers MetLife (MET.N), AIG (AIG.N) and Prudential Financial (PRU.N) were all down after disability insurance provider Unum Group (UNM.N) reported a lower-than-expected profit. Unum shares fell about 16 percent.

Advancing issues outnumbered decliners for a 1.31-to-1 ratio on the NYSE and for a 1.53-to-1 ratio on the Nasdaq.

The S&P index recorded nine new 52-week highs and 16 new lows, while the Nasdaq recorded 56 new highs and 25 new lows.


 

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Why are global stock markets falling?

Fears of interest rate rises in the US aimed at taming inflation are making markets nervous.

The FTSE 100 has posted its worst one-day performance since last April, as the London index picked up from a Wall Street sell-off at the end of last week. Indices also fell in Europe and Asia. Here we look at some of the issues raised by the sell-off.

Why are stock markets falling?

For several weeks, economists and analysts have warned that inflation levels in major economies could increase this year beyond the 2% to 3% that central banks believe is good for developed countries. Official US figures turned those concerns into a sell-off last Friday, after they showed average wage rises in the US had reached 2.9%. The data increased fears that shop prices would soon rise further, increasing the pressure for high interest rates to calm the economy down. Investors then bolted at the prospect of an era of cheap money – which encourages consumers and companies to spend – coming to an end.

Over the past month, several members of the US central bank, the Federal Reserve, have argued that three 0.25% interest rate rises scheduled for this year could become four or five.

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Is there worse to come?

There is every prospect that the US economic data will continue to strengthen, increasing the potential for higher interest rates. President Donald Trump’s tax reform bill, which gained approval in Congress before Christmas, will inject more than $1tn (£710bn) into the US economy, much of it in the form of corporation tax cuts. Many firms have pledged to give a slice of the cash to their workers. Decades of flat wages should mean that increases expected in 2018 and possibly 2019 are too small to trigger a reaction from the central bank, but investors are betting rates will rise. As a consequence, stock market jitters could continue.

Is it a threat to the global economy?

Many developing world economies have borrowed heavily in dollars and will be stung by the higher cost of servicing their debts. On the other hand, a booming US economy will suck in imports from those nations, boosting the incomes of the developing world. However, the Eurozone looks unlikely to increase interest rates until its recovery is more firmly anchored. That means the euro will continue to rise in value against the dollar, making it harder for European countries to export to the US.

What does it mean for the UK economy?

A falling stock market should not affect the economy immediately. Its main effect should be to limit the availability of shareholder funds for investment, affecting the long-term health of the economy. But there is a strong feedback loop from falling wealth, such as share portfolios, into lower consumer spending. Shoppers measure their financial well-being in terms of their asset-based wealth as much as their income. As a result, a big fall in share prices could damage the economy.


 

Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Take Five – World markets themes for the week ahead

LONDON

Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them.

1/PATIENT, PERSISTENT, PRUDENT

ECB chief Mario Draghi has good reason to stick to a mantra of PPP – patience, persistence and prudence – when the central bank meets on Thursday. Since the ECB’s March meeting, economic data has disappointed, inflation estimates have been revised lower and a global trade spat may loom.

ECB policymaker Francois Villeroy de Galhau has already said the bank may have to alter its march toward a more normal policy stance if protectionism, exchange rates or market swings end up depressing inflation. Flash Purchasing Managers’ Index reports due on Monday will show if the run of soft data — after a record 18 quarters of uninterrupted growth — is continuing.

Economists anticipate that ECB steps towards winding down QE will come only in June or later. But Draghi will be pressed on what he thinks about the economic wobbles, trade wars and the euro. In trade-weighted terms, the euro remains less than one percent below a 3-1/2 year high hit on March 8, the last time the ECB met.

2/FAANGS-TASTIC

The FAANG group of stocks — Facebook, Amazon.com, Apple Inc, Netflix and Google parent Alphabet Inc — have tended to move together in the past, but of late their fortunes have diverged: Amazon shares have risen 33 percent this year, Google and Apple have chalked up single-digit gains and Netflix is up a whopping 72 percent.

Facebook shares are at the other extreme, having fallen 6 percent, hit by fears of tighter regulation and slowing advertising revenue growth after a data privacy scandal.
FAANG-topper Netflix has set the results bar high as well, with corporate earnings on track to rise 19.7 percent for the first quarter, their highest increase in seven years.

Now attention turns to the others. Investor interest is running high in Facebook which reports earnings next Wednesday. Google and Amazon will post their results on Monday and Thursday and investors are hoping that earnings growth and forecasts will be strong enough to bring the FAANGs back into favour.

3/SUCCESSOR-NOMICS

Public support for Japanese Prime Minister Shinzo Abe, the architect of Abenomics — reforms that have lifted growth and corporate profits while weakening the yen — has never been this low. Chances are he will not be re-elected leader of the ruling party, yet investors appear unfazed.

The Nikkei volatility index and implied yen volatility are at their lowest in almost three months. But latest data shows consumer inflation slowed in March to 0.9 percent, stubbornly below the Bank of Japan’s 2 percent target. The question is, if Abe leaves, would his successor have any better ideas than to continue on the path he has set?

The answer may lie at the central bank, which meets on Thursday and Friday. Its governor Haruhiko Kuroda, the man behind the monetary stimulus, was reappointed this year and would therefore survive beyond an Abe exit. While no policy change is expected, the BOJ’s forecasts on inflation will be crucial; sources say it will maintain its view on hitting the target in 2019.

And if Kuroda reassures markets the BOJ is nowhere near an exit from ultra-loose monetary policies, investors will stay unruffled by all the doubts about Abe’s political future.

4/CRUDE: BARRELS OF FUN

European oil majors Shell, Total, Statoil and Eni, and U.S. oil producers Exxon Mobil and ConocoPhilips are all due to report next week.

Crude’s surge to 2014 highs is a boon to oil companies’ bottom line and is supporting share prices but it could also be approaching the point where it starts amplifying inflation.

It is on the radar of U.S. President Donald Trump for sure, inducing him to tweet on Friday that oil prices were being kept “artificially” high by OPEC and this “will not be accepted”. While his tweet sent oil prices lower, they remain just below $73 per barrel, a 9 percent gain in 2018.

Will inflation start to become a concern for investors? They are already hyper-sensitive to any sign inflationary pressures are denting consumer confidence in this late-cycle environment. Bond prices have reacted with minor move upwards but it hasn’t ruffled too many feathers.

Investors in oil stocks, on the other hand, are in a heightened state of anticipation ahead of the big companies’ first-quarter results, which some expect to deliver the strongest cash flow figures in a decade.

5/IT’S A SNAP!

A snap election in Turkey and U.S. sanctions on Russia are seen influencing central bank policy in both countries next week. Turkey is now seen as very likely to raise interest rates at its meeting on Wednesday, while Russia’s Friday meeting may have to hold off cutting rates any further.

With Turkey’s election set for June, expectations are the central bank will at last be able to act on tackling double-digit inflation, the assumption being the government won’t want to go to the polls with a currency in freefall.

The lira has firmed more than 3 percent off record lows since the announcement.
In Russia, inflation is well below target but the rouble’s 6 percent slump to the dollar in the wake of new U.S. sanctions imposed on April 6 has fuelled concerns of pass through to prices.

Having earlier flagged rate cuts, policymakers are now signalling a “hold”, warning of higher inflation expectations. Their take on inflation will be in focus next week as will any comment on the rouble outlook.


 

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FTSE dips after Syria strike; WPP falls on Sorrel exit

LONDON

UK shares eased on Monday morning, with two corporate events taking centre stage: CEO Martin Sorrell’s exit from advertising company WPP and U.S. hedge fund Elliott Management raising its stake in hotel and coffee-shop operator Whitbread.

The blue chip FTSE 100 index .FTSE ended the session down 0.9 percent at 7,198.20 points, with traders across Europe remaining cautious, fearing that the weekend’s missile strikes in Syria could increase tensions between the United States and Russia.

Relief over the lack of an immediate escalation pushed oil prices lower and UK energy stocks followed suit. BP (BP.L) was down 1.6 percent and Royal Dutch Shell (RDSa.L) 0.7 percent.

Shares in WPP ended 6.5 percent down as investors gauged how the world’s biggest advertising agency would do without its founder, gone after an allegation of personal misconduct.

“It is not clear whether the current margin targets or dividend payout will survive management change,” Citi analysts said in a note, adding that the stock’s loss of a third of its value in the past year could attract “value” investors.

Analysts have speculated that the group, which was being restructured after a year of lower spending from some clients, could now sell some assets if led by different management.

WHITBREAD JUMPS

Shares in Whitbread (WTB.L) led the FTSE with a 7.2 percent rise after activist hedge fund Elliott Management revealed that it had increased its stake in Britain’s biggest hotel and coffee-shop operator to more than 6 percent.

“Its reported push for a (coffee-shop) Costa demerger differs from the company’s current strategy, likely leading to further speculation, which should support the shares,” Morgan Stanley analysts said.

The disclosure came nearly three months after Reuters reported that another activist investor, Sachem Head, wanted Whitbread’s management to examine a break-up to boost the value of its individual businesses.

Shares in Shire (SHP.L), the London-listed pharmaceuticals company that specialises in rare diseases, rose before paring gains to end 1.3 percent down after announcing plans to sell its oncology business to French drug maker Servier for $2.4 billion.

Shire, has also been flagged as a possible bid target for Japan’s largest drug maker Takeda Pharma.

“Oncology was an area Takeda had specifically highlighted in its rationale for a deal, so whether by accident or design Shire’s latest move could undermine the logic behind the transaction,” said AJ Bell investment director Russ Mould.

Steelmaker Evraz (EVRE.L) fell by 7 percent as jitters over U.S. sanctions against Russia continued to weigh on companies with exposure to the country.

Sage (SGE.L) was still trading in negative territory, down 3 percent after Friday’s decline of about 8 percent on a cut to the company’s full-year revenue growth forecast.


 

Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author’s Julien Ponthus, Kit Rees

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