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The Week's Top Stories: Amazon Ditches NYC, and Facebook Fine

February 15, 2019

From Wall Street to Silicon Valley, these are the top stories that moved markets and had investors, business leaders, and entrepreneurs talking this week on Cheddar.

  • Amazon Breaks Up With NYC: Amazon abruptly abandoned its plan to build a massive campus in New York City after fierce backlash erupted over the company's labor practices and the $3 billion in tax incentives it was promised by the state. New York officials and Amazon ($AMZN) struck a deal in principle last fall that would have brought an eventual 25,000 new jobs to the Long Island City neighborhood of Queens. But a concerted effort to oppose the deal by local activists and some critical state and federal officials proved too much for the e-commerce giant, which said it would instead spread those jobs across its other hubs, including the forthcoming campus it is building in the Washington, D.C. suburbs. That deal, which also involves major financial subsidies to the company, was announced in conjunction with the New York City plan, but caused considerably less blowback. See more.

  • Facebook Fine?: Federal regulators are reportedly negotiating with Facebook ($FB) over a massive fine that would settle the government's investigation into the company's multiple data privacy lapses. The multibillion-dollar fine would amount to the largest sum ever levied against a tech company. Facebook confirmed it was in discussions with the FTC but declined to further comment. The agency has been investigating Facebook since last March, when it was revealed that the political consulting firm Cambridge Analytica had improperly accessed Facebook users' dataー sparking a national conversation about the data-collection practices of the country's largest tech firms. The largest monetary penalty ever imposed by the FTC on a technology company was a $23 million fine that Google ($GOOGL) paid in 2012.

  • Activision Layoffs: Call it the "Fortnite" effect. Activision Blizzard ($ATVI), the video game publisher that owns the "Call of Duty" franchise, said it's planning a major restructuring of its business after its quarterly earnings report fell short of expectations. The company said it will cut 8 percent of staff ー around 800 jobs ー and bolster its development resources around successful franchises like "Call of Duty" and "Diablo." Activision said it wants to increase in-game content and speed up releases for those successful titles, as it faces increased competition from free games like "Fortnite: Battle Royale." See more.

  • Retail Sales Shocker: Economists were shocked when the December retail sales report, delayed due to the government shutdown, showed a decline of 1.2 percent for the month. The expectation was for a 0.2 percent gain. The drop happened despite blockbuster employment and other positive data points, like the Mastercard SpendingPulse survey, which showed the best holiday sales numbers in six years. Some economists said the data was so incongruous that it could actually be wrong ー revisions are always possible, after all ー or else it was a reflection of the end-of-the-year market volatility, the shutdown, or a combination of the two. Others worry the reading is accurate and presents a worrisome sign that the economy is slowing. See more.

  • National Emergency: President Trump declared a national emergency in order to bypass Congress and secure billions in funding for the border wall that he first proposed as a central campaign promise. The declaration, delivered in a meandering Rose Garden announcement, comes after the president said he would begrudgingly sign a spending bill that appropriated just $1.3 billion for border fencing. He had previously asked for more than $5 billion, which precipitated the longest government shutdown in U.S. history. The White House is looking to divert billions from the Pentagon's budget for wall construction, as well as hundreds of millions from the Treasury, to cobble together an additional $6.5 billion for the wall. The move is almost certain to be challenged in the courts. Markets were unfazed by the decision, which was forecast by Senate Majority Leader Mitch McConnell (R-Ky.), and held on to finish the week with strong gains. See more.

ー Carlo Versano