Google in hot EU water as Amazon nudges $1 trillion market cap
Tech stocks continue to dominate headlines, both positive and negative.
Tech stocks continue to dominate headlines, both positive and negative.
The S&P 500 hit a five-month high as solid earnings boosted financial and industrial stocks and reinforced expectations for a strong second-quarter reporting season.
The index’s earnings have increased 21.4% in the quarter ended June 30, up from 20.7% on July 1. Of the 48 companies in the index that have reported so far, 87.5% posted earnings above analyst expectations.
However, the US housing market continues to be an economic soft spot. A report showed housing starts fell 12.3% in June to a seasonally adjusted annual rate of 1.173 million units, a nine-month low, as homebuilders struggle with higher timber prices and ongoing land and labour shortages. The percentage drop was the largest since November 2016 and both single and multi-family home construction declined in June.
The Dow Jones Industrial Average rose 79.40 points, or 0.32%, to 25,199.29, the S&P 500 gained 6.07 points, or 0.22%, to 2,815.62 and the Nasdaq Composite dipped 0.67 points, or 0.008%, to 7854.44.
Berkshire Hathaway performed the best in the financial sector higher, rising 4.5% after it was announced the company eliminated a restriction on its ability to buy back its own stock. Morgan Stanley shares rose 2.5% when the investment bank reported a better-than-expected quarterly profit.
S&P 500 industrials were up 1.1% following strong earnings from railroad CSX Corp and United Continental. The Dow Jones Transport Average jumped 2.2%, on pace for its biggest daily advance in three months.
In other world markets, the UK’s FTSE 100 Index gained 0.7%, the MSCI Emerging Market Index fell 0.1% and the Stoxx Europe 600 Index rose 0.5%.
As for government securities, the yield on 10-year treasuries stayed steady at 2.86%; Italian 10-year yields rose four basis points to 2.51%; Germany’s 10-year yield fell one basis point to 0.34%.
Meanwhile, West Texas Intermediate crude rose 0.3% to $US68.25 a barrel. Gold fell 0.1% to $US1,226.78 an ounce, the fourth straight daily decline.
Will Google pay?
The European Union hit Google's parent company, Alphabet Inc, with a €4.34 billion ($7.43 billion) antitrust fine for the company's policies on its Android operating system and ordered it to stop using the system to block rivals, a ruling which the US tech company says it would appeal.
The penalty is nearly double the previous record of €2.4b, which the company was ordered to pay in 2017 over its online shopping search service. It represents just over two weeks of revenue for Alphabet, which also has cash reserves of $US151.38b.
Google chief executive Sundar Pichai warned the Android business model of not charging for use of the technology or having a controlled distribution model like Apple may change as a result of the ruling.
“We are concerned today’s decision will upset the careful balance we have struck with Android and it sends a troubling signal in favour of proprietary systems over open platforms,” Mr Pichai wrote in a blog.
The alleged illegal behaviour dating back to 2011 includes forcing manufacturers to pre-install Google Search and the Chrome internet browser together with its Play Store of apps on devices, paying them to pre-install only Google Search and blocking them from using rival Android systems. Android runs about 80% of the world’s smartphones, according to market research firm Strategy Analytics.
The European Union is often a leader in introducing and enforcing regulations on major technology companies, making its rules and fines a strong influence on the business practices of those companies worldwide.
A third EU case involves Google’s AdSense product, with the company accused of blocking third parties using its product from displaying search advertisements from Google’s competitors. Google denies this.
First trillion dollar company?
Amazon.com’s stock market value reached $US900 billion for the first time, marking a major milestone in its 21-year trajectory as a publicly listed company.
After announcing it sold more than $US100 million products during its annual Prime Day sale, despite some major technical hiccups, the Seattle-based company’s stock briefly touched $US1858.88, giving it a stock market value of $US902 billion. It later reversed, trading down 0.16% for the session.
Amazon’s stock has surged more than 57% in 2018, bringing its increase to over 123,000% since it listed on the Nasdaq in 1997. An investor who bought one share of Amazon for $US18 in the IPO would now have an investment worth more than $US22,200, including three stock splits in the 1990s.
In late 2011, Apple replaced Exxon Mobil as the US company with the largest stock market value. Its shares have risen 12% in 2018 and was recently trading at 111 times expected earnings. Amazon reports its results on July 26.
Russian spy?
A US grand jury returned an indictment against Russian woman Mariia Butina yesterday, adding a charge of acting as a Russian government agent – a charge which carries a 10-year sentence.
Ms Butina, who studied at American University in Washington and is a founder of the pro-gun Russian group Right to Bear Arms, was charged on Monday with conspiracy to take actions on behalf of the Russian government.
Her visible online presence and alleged passion for gun rights, US President Donald Trump and improved US-Russian relations was a ruse, according to federal prosecutors, who allege Ms Butina’s social media persona was a cover for her to further Russia’s agenda within the Republican Party.
The indictment alleges she served for three years as part of a low-cost, low-risk influence operation run by senior Russian official Alexander Torshin and assisted by an unnamed American operative with Republican ties.
The 29-year-old is scheduled to appear today at a bail hearing in federal court in Washington.
“I know I had dinner with [Butina] along with another member, along with a visiting delegation to Russia, is that something we should be worried about?” queried Rep Dana Rohrabacher.
Ms Rohrabacher added “it’s ridiculous ... it’s stupid ... she’s the assistant of some guy who is the head of the bank and is a member of their Parliament. That’s what we call a spy? That shows you how bogus this whole thing is.”