Market Outlook – April 26, 2018

Mixed Mid-Week Session

 

Wednesday’s session was mixed overall with the consumer goods sectors leading advancers while the technology stocks extended their decline. The majority of reporting companies during this earnings season have beaten consensus estimates.

However, the positive numbers have been a disappointment with regards to equity prices. Sellers are advantage of the opportunity to cash in on gains amidst fears over rising rates and geopolitical tensions.

The Dow Jones Industrial Average advanced by 59.7 points (+0.25%) while the S&P 500 Index inched 4.84 points higher (+0.18%). The tech-heavy Nasdaq Composite Index finished in the red, dropping by a slim 3.61 points (-0.05%).

U.S. Prosecutors Investigating China’s Huawei

 

According to sources, U.S. prosecutors in New York have been investigating whether Huawei Technologies violated U.S. sanctions in relation to Iran. Following the sales ban to ZTE Corp., the focus shifts to another Chinese telecom giant.

On Thursday, a foreign ministry spokeswoman in Beijing said that China opposes the use of a country’s domestic laws to control others. The comment was made by Hua Chunying at a daily briefing. China’s foreign ministry is urging the U.S. not to do anything else that would harm the openness of international trade.

Facebook Rides Out the Storm

Despite the Cambridge Analytica scandal and the mishandling of personal data, the shares of Facebook Inc. (FB) rose on Wednesday. The social media giant surprised Wall Street with a strong 63% rise in profit as well as an increase in users.

FB’s earnings report showed a 49% jump in quarterly revenue that outpaced the 39% rise in expenses from the previous year. Also, the world’s largest social network was able to reverse the 4th quarter’s decline in the number of daily active users in the U.S. The number of users even increased to 185 million users during the 1st quarter of 2018.

Their monthly active users in the first quarter went up by 13% to 2.2 billion compared to a year earlier. With the earnings report handily beating analysts’ estimates, it appears Facebook has weathered the storm and will eventually get over it. Investors didn’t mind the higher spending to ensure account privacy.

Comcast Bids for UK’s Sky

 

Comcast Corp. (CMCSA) has wrecked the plan of 21st Century Fox Inc. (FOXA) to buy 61% of Sky it does not already own. The U.S. cable TV giant made a formal £22bn bid for the U.K.-based pay-television company.

An independent Sky committee withdrew its recommendation of the £10.75-a-share offer by Rupert Murdoch who owns the media mogul 21st Century Fox. Comcast’s offer is higher at £12.50 a share.

The sudden offer by Comcast threatens Sky founder Rupert Murdoch in his Sky’s attempts to take full control of the U.K. broadcaster. Comcast owns the NBC network and Universal Pictures and its bid offered translate to a premium of about 16% to Fox’s share offer. A bidding war is likely to ensue as Sky awaits for the response of 21st Century Fox.

Snapchat Changes App Anew

 

Snap Inc. (SNAP) is changing the Snapchat app again. On Wednesday, the shares of the social media company closed down 7% lower. The drop brought its price to more than 15% below the price when it went public in 2017.

Snapchat changed its app a few months. That redesign was intended to differentiate between a user’s personal friends and media superstars that a user follows. Many users and celebrities were angered by the change.

A Snapchat spokesman said, “We are always listening to our community and will continue to test updates that we hope will give Snapchatters the best possible experience on our platform.”

The constant app changes worry investors. It could endanger the profitability of Snap. User growth is uncertain because of the growing disenchantment with Snapchat.

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