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A surprise shift from the Federal Reserve
In a sharp reversal of the stance it took just week ago, the Fed’s chairman, Jerome Powell, said yesterday it had “the luxury of patience” in deciding whether to raise rates again, writes the NYT’s Binyamin Appelbaum.
The news: The Fed left its benchmark interest rate unchanged, a decision that was widely expected. What surprised markets was the indication that rates, which are in a range of 2.25 percent to 2.5 percent, would stay put for some time.
The reaction: Mr. Powell’s comments soothed Wall Street, sending stocks higher, something President Trump cheered on Twitter. But the U-turn puzzled some investors and one warned of a slowing economy.
More: In a separate statement, the Fed signaled that it might reduce “quantitative tightening,” the policy of selling its bond portfolio, which could be a challenge for Mr. Powell. Here’s a guide to what’s going on.
Today’s DealBook Briefing was written by Andrew Ross Sorkin and Stephen Grocer in New York, and Tiffany Hsu and Gregory Schmidt in Paris.
On Facebook, who knows if you’re a bot?
Advertisers pay for space expecting to reach potential spenders.
Facebook, which says it has access to 2.32 billion people, seems like a prime avenue of exposure. But how many are spammers, scammers or flat-out fakes? Jack Nicas, who explored the social media network’s fluctuating, confusing account estimates, reckons even Facebook may not be sure.
Yesterday, the company said in tiny lettering at the bottom of a slide about its earnings that it believes that there are 116 million fake accounts on its site, a 36 percent increase from 2017’s figure, which was itself 359 percent higher than the number disclosed in 2016. Its estimated number of duplicates rose 20 percent year over year, to 255 million.
How many unauthorized accounts does Facebook take down each quarter? Enough to encompass as much of 35 percent of the network’s active users, data suggests. And some analysts suspect that the company’s user counts involve more guesswork than it lets on.
But the money keeps coming in: Facebook emerged from a string of privacy scandals last year with a 30 percent boost in revenue and a 61 percent upswing in profit. Mark Zuckerberg, its chief executive, confirmed that Facebook plans to integrate the technical infrastructure of its WhatsApp, Instagram and Facebook Messenger apps by the end of the year or by early 2020.
A bot scandal reaches a conclusion: The attorney general of New York reached a settlement with Devumi, a company that sold hundreds of millions of fake followers on Twitter and other platforms before going out of business last year.
Is Apple’s Tim Cook Facebook’s privacy watchdog? After determining that the social network had violated the rules of an Apple developer program, Mr. Cook moved to block access. Our columnist Kevin Roose wonders whether Mr. Cook is becoming a technology regulator of last resort.
It is so cold …
It is so cold that shops have closed, restaurants have shuttered and petting farm owners are struggling. Any lasting effect on commerce should be slight, however.
It is so cold that, in Wisconsin, beer distributors stopped truck deliveries out of fear that their cargo would freeze solid. Amtrak canceled trains. Six in ten flights into and out of Chicago were canceled. Airlines have waived fees for changing flights. One towing company in Michigan received 40 calls for help in three hours.
It is so cold that all of Cargill’s grain plants in the Midwest are closed, some shifts at a Tyson Foods pork plant in Iowa have been canceled and the hog slaughter has paused at a Hormel Foods facility in Minnesota.
It is so cold that Disney on Ice has called off a performance in Chicago.
It is so cold that General Motors has suspended production at several plants in Michigan because of an emergency appeal by the local utility, overwhelmed with heating demand.
It is so cold that Republicans and Democrats are reaching across the aisle in Washington so they can huddle together for warmth. Just kidding.
Tech earnings are a mixed bag
Facebook had company from other tech firms when reporting its earnings yesterday.
Nokia, which now focuses on telecom equipment, warned that it would have a slow start to 2019, though it expects more business from companies building 5G mobile networks later in the year. Samsung, whose operating profit plunged 29 percent amid a decline in demand for memory chips, also said earnings this year might struggle. PayPal disappointed analysts, too, even as its revenue rose.
But Qualcomm beat Wall Street expectations and issued a forecast that assuaged some concerns about a weak smartphone market in China. Other companies also had good news.
Microsoft, often considered an indicator of the broader market, said that its commercial and consumer businesses were doing well, with revenue and profit increasing more than 10 percent from a year earlier. Its continued shift to cloud computing has placed it within striking distance of Amazon, which leads the field.
Alibaba, China’s largest e-commerce business, said that its earnings growth sank last quarter and that its revenue, which rose 41 percent, had increased at its slowest pace since early 2016. Executives said that, while “the slowdown of macro might cause concerns in the market,” the company had minimal exposure to the trade war with Washington and e-commerce was healthier than the overall Chinese economy.
Tesla, the electric carmaker, reported its second straight quarterly profit, but said that its $139 million in fourth quarter earnings was less than what it brought in during the third quarter. The company expects to deliver as many as 400,000 cars this year, up from 245,000 last year. And it said it had $3.7 billion in cash to carry it through a $920 million bond payment in March.
Foxconn shifts course in Wisconsin
Foxconn, the Taiwanese electronics behemoth, is rethinking its plan to build a $10 billion plant in Wisconsin with 13,000 jobs, a proposal that was hailed by President Trump. It’s now considering a shift toward research, underscoring the difficult economics of manufacturing in the United States, write the NYT’s Natalie Kitroeff, Patricia Cohen and Monica Davey:
That turn runs counter to Mr. Trump’s vision for the project, which he had cited as a milestone in reversing the decline in factory jobs. The twist also brought new friction in Wisconsin, where the initiative has been politically fraught from the start because of its billions of dollars in tax subsidies.
Foxconn said that it remained committed to creating 13,000 jobs, but economists questioned how such a large work force could be created if the plant’s focus was on other areas.
British companies scramble to prepare for Brexit
A lack of clarity over the terms of Britain’s looming departure from the European Union has British businesses stockpiling products and delaying investments, writes the NYT’s Peter Goodman.
The options: Parliament may yet approve Prime Minister Theresa May’s unpopular exit deal — she survived a critical vote on Tuesday that could have derailed it — especially if the alternative is a tumultuous no-deal departure.
The reaction: Companies must plan for outcomes both wildly unknown and potentially damaging. They are making backup plans while having no idea how it will end.
The cost: By one estimate, the British economy is already 2.3 percent smaller than it would have been if voters had backed E.U. membership in a 2016 referendum. The main culprit is uncertainty. Investment in the auto industry plunged last year. The cost of separation is apparent in finance, housing and other areas, too. Food retailers have warned of delays and shortages.
More European news: Two engines of the eurozone economy, France and Germany, are cooling, a trend that threatens to deepen the pain across the Continent. Italy fell into a recession in the last quarter of 2018 after its economy shrank by 0.2 percent.
Zach Kirkhorn will become Tesla’s chief financial officer after Deepak Ahuja retires. (Bloomberg)
The speed read
• General Electric said it would merge its battery storage and electrical grid units into its wind turbine and hydropower business, and suitors are gathering for the jet leasing unit of its lending business, GE Capital. (Reuters, WSJ)
• United Natural Foods accused Goldman Sachs of improperly extracting more than $200 million while advising it on its acquisition of the grocery chain Supervalu. (WSJ)
• Elliott Management, an activist hedge fund, is making a push into full-blown takeovers. (WSJ)
• Apple is said to be planning a more powerful 3-D camera for iPhones, to help with augmented reality plans. (Bloomberg)
• Lyft sued New York State over its minimum wage for drivers. (WSJ)
Politics and policy
• Jamie Dimon, the chief executive of JPMorgan Chase, approves of higher taxes for the rich, if the revenue is spent in a way that he considers wise. (Bloomberg)
• President Trump called top intelligence officials who had contradicted him “naïve.” (NYT)
• Starting in April, 5,340 more immigrants with an advanced degree from an American university may be selected for a coveted visa. (WSJ)
• Lawmakers introduced legislation to limit Mr. Trump’s power to impose import tariffs. (Reuters)
Best of the rest
• Muslims have petitioned Nike to recall its Air Max 270 shoes, which are said to feature a design on the sole that resembles “Allah” in Arabic script. (Bloomberg)
• Nearly 30 percent of company directors in Australia are women, up from 19.4 percent in 2015, leapfrogging the U.S., Britain and Canada in female representation in the boardroom. (FT)
• More than $4 billion was paid out over the past decade to members of the Sackler family, which owns the drugmaker Purdue Pharma, even as sales of the opioid painkiller OxyContin waned, according to court documents. (WSJ)
• Beer companies, casinos and other corporations are funneling record amounts into the U.S. wind and solar power industry, taking advantage of plunging costs, favorable tax breaks and a public relations boost. (WSJ)
• Hedge funds are displaying levels of risk aversion that would be expected after a financial crisis. (Bloomberg)
• Former U.S. intelligence operatives helped the United Arab Emirates spy on its enemies using technological techniques taught by the federal government. The secret operation was known as Project Raven. (Reuters)
• It’s an election year in India. Gold consumption is likely to increase. (Bloomberg)
• Sri Lanka’s constitutional crisis — in which the president and prime minister have faced off — has forced it to borrow heavily from China. (WSJ)
• Phillips, a boutique auction house, sold $916.5 million of art and collectibles last year, the most in its 220-year history. A 1932 painting by Pablo Picasso fetched $57.8 million; a Rolex watch known as “The Unicorn” sold for $5.9 million. (Bloomberg)
• A breakdown of the Super Bowl ad market, with a look at the beer company that spends the most. (WSJ)
• Chinese consumers and their desire for handbags, Hennessy and other luxury products from LVMH helped add $4.3 billion to its chief executive Bernard Arnault’s fortune. (Bloomberg)
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