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.
CHOOSE YOUR OWN ADVENTURE JOBS REPORT
U.S. employers added 1.8 million jobs in July, far fewer than the two prior months, but a sign that the economic recovery is continuing. The unemployment rate dipped to 10.2 percent. The report was enough to give ammunition for the bulls and the bears alike. On the one hand, there was significant growth in some of the sectors of the economy that have been most battered by the pandemic, such as retail, hospitality, and government. On the other hand, there are still some 13 million fewer jobs in America than there were at the beginning of the year when the unemployment rate was kicking around at a 50-year low. Stocks were little changed on the data, as investors awaited what could be a far more critical piece of news: what is the state of a second coronavirus relief bill? Headed into the weekend, Republicans and Democrats in Congress appear to be far apart on a compromise to extend enhanced unemployment benefits, eviction relief, and other measures to soften the blow of the continuing public health crisis.
TICK TOCK FOR TIKTOK
President Trump signed a pair of executive orders that will effectively ban the use of the popular Chinese social media app TikTok in the U.S. in 45 days, unless there’s a deal for an American company to acquire its U.S. assets from parent ByteDance before that deadline. The president cited national security concerns and worries that the mountains of personal data stored on ByteDance servers could be accessed by the Chinese government. Microsoft appears to be TikTok’s most likely suitor at this point and has been given the go-ahead from the White House to aggressively pursue a deal quickly. Microsoft has strategically avoided entering the messy world of social media — save for its 2016 purchase of LinkedIn — and has instead focused on its core competencies of business software and cloud computing. Still, the siren song of gaining access to TikTok’s millions of young users may prove to be too enticing to pass up.
APPLE SPLITS STOCK
When Apple announced, as part of its latest earnings report, that it would split its stock four ways as of the end of August, the company said the stock split was meant to make the shares more "accessible" to investors. With a stock like Apple, which has quadrupled in price since the last time it was split in 2014, a split does indeed broaden the company's potential investor base: a split doesn't change the inherent market capitalization of the company — it simply makes it cheaper for investors to get a piece — particularly the retail investors and day traders who have been flooding the online trading platforms like Robinhood. At $100 or so, which is roughly the price of a single share of Apple after a four-way split at its current price, "it's probably the perfect stock price" for Apple, Nasdaq Chief Economist Phil Mackintosh told Cheddar this week. The split will make the trading spreads tighter, which he said is likely to keep intraday volatility down and help the price continue to go up. Still, as Mackintosh noted, retail investors should look at stock splits as a way to build positions in companies with strong fundamentals that might have otherwise been out of reach; they should not change the calculus about whether the stock itself is a good investment.
The retail bankruptcies keep on coming. Lord & Taylor, the oldest department store in the country, filed for bankruptcy protection, joining Neiman Marcus. The parent company of Men’s Wearhouse and Jos. A Bank also filed, joining Brooks Bros. The pace of retail bankruptcies through the first half of this year has already far exceeded the entirety of 2019, and no one market is being spared. Retail behemoths like J.Crew, Ann Taylor, and JCPenney have failed, but so have niche brands like True Religion, Jeffrey, and John Varvatos. The seemingly endless parade of Chapter 11 filings now has investors wondering if the commercial real estate market can weather the wave of store closures that have already begun.
DISNEY’S RARE MISS
Disney officially threw in the towel on its tentpole movie event of the summer. Mulan, which had been delayed numerous times, will now premiere on Disney+ on Sept. 4 for $30 (that’s on top of the cost of a Disney+ subscription). Disney said in its earnings report that studio revenues for the quarter were down 55 percent, though it did see strong growth for Disney+ (the company reported its first quarterly loss since 2001). The decision to pull the plug on Mulan’s theatrical release is yet another blow to movie theaters’ hopes that they’d be reopening soon. Christopher Nolan’s Tenet, the only other major summer release that hasn’t been canceled, is still supposed to hit some U.S. theaters Labor Day weekend.