stock, trading above $400 a share Friday morning, is splitting up.
Thursday evening, the tech behemoth announced a split—four shares for every current share—when it reported earnings.
The combination of strong results and the stock split sent shares up 6% in after-hours trading. Six percent adds roughly $100 billion to Apple’s market value.
Stock splits aren’t supposed to matter to stock market returns—except they kinda do. The reason: $100 is less than $400. Lower prices put shares within reach of more investors.
Professional fund managers with billions to invest probably don’t care about the absolute level a stock trades at, but there is something to a stock split. Academic research is littered with papers with titles like “impact of splits on clientele” and “split impact on valuation.”
Fidelity even pioneered a product called “stocks by the slice” for investors looking to buy small stakes in high priced stocks such as
—which is trading for $3,232 Friday morning—for as little as $5.
Fidelity appears to believe the absolute level of a stock price matters.
Trump Suggests Postponing Election
President Donald Trump suggested Thursday that the 2020 election be postponed from its November 3 date because of the risk of fraud from mail-in voting. “Delay the Election until people can properly, securely and safely vote???” he wrote on Twitter. Hong Kong legislative elections will be postponed for a year, Chief Executive Carrie Lam announced Friday, citing a recent surge in coronavirus cases.
- The president does not have the authority to move the date of federal elections, which requires an act of Congress. There is also no evidence that mail-in voting causes widespread fraud. The suggestion comes as Trump trails presumptive Democratic nominee Joe Biden in numerous state and national polls.
- The two highest ranking Republicans in Congress immediately rejected the idea. Senate Majority Leader Mitch McConnell (R., Ky.) shot it down and House Minority Leader Kevin McCarthy (R., Calif.) said “we should go forward with our election.”
- Democrats voiced opposition too. “Only Congress can change the date of our elections, and under no circumstances will we consider doing so to accommodate the president’s inept and haphazard response to the coronavirus pandemic,” Rep. Zoe Lofgren (D., Calif.), the chair of the Administration Committee that oversees elections, said Thursday.
- The move to delay elections in Hong Kong, which were originally scheduled for September 6, is likely to increase tensions with the U.S. and other countries opposing the city’s recently enacted national security law. On Thursday, U.S. Secretary of State Mike Pompeo urged for the election to proceed as planned.
- Word that Herman Cain, the former Godfather’s Pizza CEO and GOP presidential candidate who was rallying black support for Trump’s re-election effort, died of coronavirus came Thursday as well.
What’s Next: Despite Trump’s repeated criticism of mail-in voting, it is likely to be more prevalent than ever this fall as Americans continue to eschew large public gathering spaces to reduce their chances of catching the coronavirus. More than three-quarters of Americans will be eligible to vote by mail in November.
U.S. GDP Contracts at Fastest Rate on Record
America’s economy took an unprecedented tumble in the second quarter, as gross domestic product contracted at an annualized rate of 32.9%. The result comes as the initially promising signs of an economic recovery faded in recent weeks with the explosion of coronavirus cases across the South and West.
- The drop was staggering but economists had been bracing for an even worse result. Among those polled by FactSet, the consensus was for a 34.6% fall. And on a quarter-to-quarter basis, the drop was 9.5%, suggesting there is still a chance for things to turn around later this year.
- Consumer spending on things like food, recreation and transportation plunged—not particularly surprising given state lockdowns and large-scale shift to working at home.
- Spending on health care dropped more than 20% as elective procedures and routine appointments were put on hold. As a result, the very hospitals and doctors’ offices needed to help combat the coronavirus are under increasing financial strain.
- Economic data coming out of Europe on Friday was equally gloomy, as eurozone GDP fell a record 12.1% in the second quarter. Spain’s 18.5% slump and France’s 13.8% drop were also record falls, despite the latter beating expectations. Italy’s GDP fell 12.4% but also beat consensus estimates.
What’s Next: With many states rolling back their reopenings—particularly regulations regarding bars and indoor dining—consumer spending in a variety of categories will likely remain depressed. As the Federal Reserve said Wednesday, the key restraint on the U.S. economy right now is the spread of the coronavirus.
No Deal on Federal Unemployment Benefits as Job Losses Rise
The $600 a week federal unemployment benefit is set to expire today after Democrats and Republicans failed to agree to an extension. As a result, millions of jobless American will see a sharp reduction in their unemployment payments as federal data released Thursday showed a stalling rebound in the labor market.
- Some 1.43 million Americans filed for unemployment benefits for the first time during the week ending July 25, the Labor Department said Thursday, with roughly an additional 830,000 who previously were not eligible for unemployment, such as gig-economy workers, filing for the first time.
- Continuing claims, which effectively represents the number of Americans who already filed and still don’t have a new job, declined slightly to 30.2 million.
- This was the second straight week that the number of initial jobless claims rose, an indication that the bounceback in the labor market has petered out.
- Senate Republicans, who just four days ago unveiled a $1 trillion coronavirus recovery package after days of intense internal party talks, tried to push through a narrow measure that temporarily extended federal unemployment benefits at a reduced $200 a week level. That effort, however, was blocked by Democrats.
What’s Next: Congressional leaders met Thursday night to try to hammer out a compromise, but as has been the case during the more than two months since the House passed its $3 trillion package, they couldn’t find common ground. Both sides said they expected to continue the negotiations today.
Big Tech Goes Big With Earnings
- Apple’s revenue hit $59.7 billion, with an especially strong quarter for Macs and iPads. It could have sold even more had supply not been constrained. Apple’s board declared a four-for-one stock split, effective Aug. 31.
- Ad boycott? Facebook said such efforts aren’t materially impacting July revenue. For the June quarter, revenue topped expectations at $18.7 billion. The company said 40% of the Earth’s population use at least one of its platforms like Facebook, WhatsApp, Instagram and Messenger.
- Though Alphabet reported a year-over-year revenue decline, $38.3 billion is nothing to scoff at—especially when estimates call for $37.3 billion. Its YouTube ad business grew 6% and Google Cloud revenue jumped 43%. And it plans to buy back $28 billion in stock.
- Amazon.com’s $88.9 billion in sales beat its prior guidance by $8 billion. Earnings of $10.30 a share was five times Wall Street’s consensus estimate.
What’s Next: Even with tech giants soaring to record valuations, there’s apparently room to run. Apple and Facebook shares were up more than 6% in after-market trading. Amazon stock, 4.9%. Alphabet was the laggard, with an after-hours again of 0.9%.
—Connor Smith and Eric Savitz
Fight for Survival in the Skies
European airlines have intensified measures to secure their long-term future as the sector faces up to record losses and concerns that the industry’s recovery will be far from smooth.
- British Airways owner
said it will tap investors for €2.75 billion ($3.26 billion) to strengthen its balance sheet and has already secured support from its largest shareholder Qatar Airways Group. The company reported a record €1.4 billion operating loss in the second quarter and warned passenger demand would not recover before 2023.
said its plan to cut capacity by 20% in 2021 was only a minimum level, standing ready to deepen the cut if the coronavirus recovery stalls. The Franco-Dutch airline swung to a €2.61 billion second quarter net loss on Thursday.
- The U.K. government’s decision to impose a 14-day quarantine on those returning from Spain, following a spike in cases in some regions, spooked investors earlier this week and led to airlines canceling flights again.
What’s Next: The airlines are doing everything they can to stay in the air and IAG’s equity raise, if successful, should provide some breathing space for the company. However, only a sustained recovery in demand can turn around the sector’s fortunes. Signs of coronavirus cases picking up in Spain, Italy and France, could mean more pain for airlines is just around the corner.
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Do you remember this week’s news? Take our quiz below and tell us how you did by emailing firstname.lastname@example.org.
1. NASA launched a rover on Thursday that will travel 309 million miles to reach Mars in February and is carrying the first helicopter to be flight-tested on another planet. What is the name of the rover?
2. Authorities are urging people not to plant seeds mysteriously received in the mail, fearing they may harm native plants and animals. Where do the seeds appear to be shipping from?
3. AMC announced a deal with which company to shorten the time movies play in theaters before appearing online from 75 to 17 days?
a. Warner Bros.
b. Paramount Pictures
d. Universal Pictures
4. Which of the following technology CEOs was not present at the Congressional antitrust hearing on Wednesday?
a. Jeff Bezos
b. Sundar Pichai
c. Mark Zuckerberg
d. Jack Dorsey
e. Tim Cook
5. A scenic postcard from the early 1900s helped identify the location of an 1890 painting by Vincent Van Gogh, believed to have been painted hours before his death. What is the name of the painting?
a. Tree Roots
b. Thatched Cottages at Cordeville
d. Farmhouse with Two Figures
—Bonnie Bennett Slater
—Newsletter edited by Stacy Ozol, Anita Hamilton, Mary Romano