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Dow Industrials sink into bear market on virus fears – BNNBloomberg.ca

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Stocks plunged around the world, oil tumbled and the stress in U.S. credit markets deepened after the World Health Organization called the virus spread a pandemic and the Trump administration remained unable to detail any stimulus measures to combat the economic fallout.

The latest bout of virus-fomented turmoil tipped Dow Jones Industrial Average into a bear market, ending the longest bull run in the history of American equities. The blue-chip slumped 5.9 per cent Wednesday and ended 20 per cent below its February closing record. The S&P 500 dipped into bear territory before closing 19 per cent below its high.

The WHO declaration and no comments on stimulus from President Donald Trump rattled markets. Trump said late in the market session that he’d make a statement Wednesday night on the administrations plans. European officials signaled a growing willingness to move soon to combat the virus’s effects on the region’s economy.

Signs that companies in the hardest-hit industries were drawing down credit lines to battle the effects of the virus on their businesses added to anxiety.

“We have no idea when the coronavirus, the spread, is going to subside. That uncertainty is going to continue to create a lot of volatility,” said David Spika, the president of GuideStone Capital Management. “We have no idea how to model it, we have no idea what to expect from it.”

Here are the main moves in global markets:

  • Private equity titan Blackstone Group Inc. asked companies it controls to draw down their bank credit lines to help prevent any liquidity shortfalls.
  • All but 10 stocks in the S&P 500 retreated Wednesday, with every industry down at least 3.9 per cent.
  • Boeing plunged 18 per cent after it said it plans to draw down all of a US$13.8 billion loan. Hilton Worldwide lost 9 per cent when it said it would draw some of its credit line.
  • An index of consumer services providers that includes hotels, cruise operators, Starbucks and Chipotle plunged 8.3 per cent.
  • European equities wiped out a 2.3 per cent advance sparked by an emergency rate cut in the U.K.
  • Municipal bonds tumbled, sending rates on 10-year benchmark state and local government debt higher by 22 basis points, the most since records began in 2011.
  • The yen surged 1 per cent, while the euro advanced with the pound.
  • Crude sank 4.2 per cent to sink below US$33 a barrel.
  • Asian equities lost 1.7 per cent.

U.S. stocks extended their three-week slide as investors grappled with the potential economic hit from the virus that is upending daily routines around the world. Policy makers are seeking to assure traders they’re on alert, with the ECB indicating it may move as soon as this week, the Bank of England cutting rates and German Chancellor Angela Merkel pledging to do “whatever is necessary” to bolster the economy.

In the U.S., the Trump administration continues to promise “major” stimulus, but details remain uncertain. Democrats plan to urge the president to declare a national state of emergency. Markets are now growing worried that whatever does come will not have the ability to stave off a major blow to the world’s largest economy.

“Every day we get whipsawed back and forth, and what we’re seeing today is general disappointment that fiscal policy is not at all clear in how it’s going to stimulate the economy,” said Michael Reynolds, an investment strategy officer at Glenmede Trust Co.

Meanwhile, Joe Biden cemented his position as front-runner for the U.S. Democratic presidential nomination with primary victories Tuesday, further easing concerns among those opposing Bernie Sanders’s progressive platform.

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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