The daily business briefing: October 26, 2018

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1. Amazon shares plunge as holiday sales projections fall short
2. Stocks rebound, then futures fall as volatility continues
3. Google shares drop as sales fall short of expectations
4. Trump unveils proposal to cut Medicare prescription drug costs
5. Google says it fired 48 people over two years for sexual harassment

published 26 October 2018

1. Amazon shares plunge as holiday sales projections fall short

Amazon shares dropped by as much as 9 percent in after-hours trading on Thursday after the online retail giant forecast disappointing sales in the highly competitive holiday season. Amazon said its fourth-quarter revenue growth would rise by 10 percent to 20 percent to $72.5 billion, short of the $73.9 billion expected by analysts. The company's projected revenue growth would be its slowest in years. Third-quarter sales also fell short of estimates, although the company's third-quarter earnings were more than $2 a share better than Wall Street expected. Profits were 10 times greater on a per-share basis than in the same quarter last year, while analysts had expected them to be just six times greater, but investors focused on the negative outlook for the Thanksgiving to Christmas holiday sales.

U.S. stocks surged on Thursday, bouncing back with a lift from strong corporate earnings reports after suffering big losses a day earlier. Tech shares jumped after Microsoft, Visa, and Xilinx made solid gains after reporting strong earnings. Twitter and Comcast led internet and media companies higher, and Ford's better-than-expected earnings gave consumer-focused stocks a lift. The S&P 500 gained 1.9 percent, the Dow rose by 1.6 percent, and the Nasdaq Composite surged by 3 percent. "It's certainly reassuring to see stocks bounce back today on stronger earnings, but I would expect that we continue to see a lot of day to day volatility," said Kate Warne, an investment strategist for Edward Jones. U.S. stock futures dropped early Friday, pointing to a lower open.

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Shares of Google parent Alphabet dropped by 3 percent overnight after the company reported better-than-expected earnings but revenue that fell short of projections. The company reported quarterly profits of $9.19 billion or $13.06 a share, smashing analysts' average expectations of $10.42 a share, according to FactSet. As in previous quarters, a significant part of the profit — $1.38 billion — came from Alphabet's investments. The Google unit accounted for most of the company's ad revenue, with Google's properties bringing in $24.05 billion, while the company's network of non-Google sites reported ad sales of $4.9 billion. Google's non-ad businesses, such as cloud computing and Pixel phones, reported $4.6 billion in revenue, falling short of expectations of $4.8 billion in sales, according to FactSet.

President Trump on Thursday announced a plan to lower drug prices, proposing Medicare pay for certain prescription drugs based on prices in other advanced industrial countries. The proposal calls for a demonstration project covering half the country in which Medicare would set an "international pricing index" as a benchmark for how much to pay for drugs covered by Part B of Medicare. "This is a revolutionary change," Trump said in a speech at the Department of Health and Human Services. "Nobody's had the courage to do it, or they just didn't want to do it." Trump has long promised to bring down drug prices. His announcement comes just ahead of Nov. 6 midterm elections at a time when many voters are focused on health care.

Google CEO Sundar Pichai said Thursday in an email to employees that the company had fired 48 people for sexual harassment over the last two years. Thirteen of the employees Google let go were "senior managers and above," and none received any kind of exit package, he said according to CNBC, which obtained a copy of the email. The email was sent out after a New York Times report that Google had praised Andy Rubin, the creator of Android mobile software, and paid him $90 million when he left the company in October 2014, while failing to make public that another employee had accused him of sexual misconduct and that an investigation had found the claim credible.

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Harold Maass is a contributing editor at The Week. He has been writing for The Week since the 2001 debut of the U.S. print edition and served as editor of TheWeek.com when it launched in 2008. Harold started his career as a newspaper reporter in South Florida and Haiti. He has previously worked for a variety of news outlets, including The Miami Herald, ABC News and Fox News, and for several years wrote a daily roundup of financial news for The Week and Yahoo Finance.