Happy 2019!
The first day of trading in 2019 was filled with ups and downs for the major indexes as the markets staved off any major declines by day’s end but failed to experience a major swings into the black.
Stocks did tiptoe into positive territory on Wednesday, Jan. 2 after falling sharply earlier in the session following weaker-than-expected manufacturing data from China that suggested the ongoing trade dispute between Washington and Beijing would continue to take its toll on global economic growth.
The stock market’s reversal began in conjunction with a spike in oil prices Wednesday. Global bench mark Brent crude prices jumped 2.3% to $55.03, while U.S. benchmark West Texas crude rose 2.6% to $46.60 per barrel.
The Dow Jones Industrial Average rose 19 points, or 0.08%, to 23,291 – at its session low the blue-chip index had declined 398 points. The S&P 500 gained 0.13%, and the Nasdaq gained 0.46%.
Netflix Poaches Activision CFO
Spencer Neumann, who had served as CFO at Activision Blizzard since May 2017, was placed on leave on Monday, Dec. 31 and ultimately terminated from the gaming group, TheStreet’s Annie Gaus reported. Within days, Netflix announced that it had hired Neumann as CFO. Neumann will start at Netflix later this month, according to the company.
In a press release, Activision wrote that Neumann was “terminated for cause for violating his legal obligations to the Company.” In a regulatory filing, Activision said the firing was unrelated to the company’s financial reporting and controls; it was unclear if the move was related to Neumann’s negotiations with Netflix. Reuters initially reported on the hiring on Tuesday night.
From a financial point of view, one of Neumann’s tasks will be to properly manage Netflix’s debt burden, according to Wedbush’s Michael Pachter.
“The challenge for him will be managing the balance sheet, with a ballooning content library that has spurious value and a ballooning debt burden,” Pachter said. “I think they’re going to hit a debt ceiling in the next few years, and he is going to have a challenge in balancing the company’s capital requirements with its financing capability.”
Neumann previously worked in private equity and held various executive roles at Disney to joining Activision, serving at one point as CFO and EVP of Global Guest Experience at Walt Disney Parks and Resorts.
Netflix’s previous CFO, David Wells, announced his departure in August 2018 after 14 years at the company.
Tesla Misses on Delivery Estimates
TheStreet’s Jacob Sonenshine reported that the electric car maker announced fourth-quarter deliveries that disappointed Wall Street.
Tesla said it delivered 90,700 cars in the quarter, up 8% from the previous quarter, but below analysts’ expectations of roughly 92,000. Although the delivery numbers disappointed, they set a fresh record high for the company. Meanwhile, production grew in the fourth quarter to 86,555 cars, also 8% above its previous record high in the third quarter.
Tesla said it would be cutting prices of the Model S, Model X, and Model 3 by $2,000 in the U.S., starting immediately. The electric vehicle tax credit for customers dropped to $3,750 from $7,500 on Jan. 1.
“We are taking steps to partially absorb the reduction of the federal EV tax credit (which, as of January 1st, dropped from $7,500 to $3,750),” Tesla said Wednesday.
“Tesla announced a $2k price cut this morning on its US sold vehicles to help soften the blow from the EV tax credit cut, a potential positive for demand but not what the bulls wanted to hear on the impact to profitability and ultimately the bottom line,” wrote Wedbush Securities analyst Daniel Ives in a note on Wednesday.
Tesla closed down nearly 7% to $310.12 a share.
The Government Shutdown Impact on Investors
One of the focuses of TheStreet’s Trading Strategies podcast this week was the government shutdown.
TheStreet’s Martin Baccardax believes that some of the coverage on the partial shutdown is overdone, he still thinks that investors should be paying attention.
“The fact that we may not know exactly how some economic data points are playing out because of the government shutdown that could change the tone and the tenor of the way that the Fed communicates with us over the next week or so. And that of course could confuse investor perception about where the central bank is headed,” Baccardax said. “So from my perspective I see that as the more important component of the shutdown alongside the political machinations. But nonetheless I still feel it’s getting a little bit overplayed.”
“If we are looking at two to three weeks in terms of shutdowns we have the concern over the day of delay and also what I think might be underrated at the moment might become an issue going forward is the fact that you could have significant delays on tax rebates for a whole host of Americans and that could have spillover implications into consumer spending as well,” he said.
