The daily business briefing: October 17, 2023
LinkedIn to cut 700 employees, Lululemon shares jump after addition to S&P 500, and more
1. LinkedIn to cut 700 employees
Professional social-networking site LinkedIn, which is owned by Microsoft, announced Monday that it had cut nearly 700 employees, mostly from its engineering operations. Finance and human resources employees also were affected. The cuts came after LinkedIn saw year-over-year revenue growth slow in eight straight quarters despite accelerating membership. LinkedIn executives Mohak Shroff and Tomer Cohen wrote in a memo to employees that the company needs to "evolve how we work and what we prioritize so we can deliver on the key initiatives we've identified that will have an outsized impact in achieving our business goals." Microsoft announced in January it would cut 10,000 employees. CNBC
2. Lululemon shares jump after joining S&P 500
Lululemon Athletica shares rose to a nearly two-year high on Monday, jumping by more than 10% after the Canadian sportswear company was added to the benchmark S&P 500 index. Lululemon will take the place of Activision Blizzard starting before markets opens on Oct. 18, following the videogame maker's finalized acquisition by Microsoft. The software giant paid $69 billion for Activision, publisher of the "Call of Duty" franchise. Lululemon is coming off a September deal that makes it Peloton Interactive's primary U.S. athletic-apparel maker, and Peloton the apparel maker's exclusive digital fitness content provider. Lululemon's shares jumped as high as $416.01 on Monday, but 32 analysts put its median price target at $450. Forbes, Reuters
3. Stock futures struggle as earnings season picks up
U.S. stock futures slipped early Tuesday after Monday's gains as third-quarter earnings season picks up. Futures tied to the Dow Jones Industrial Average were down 0.2% at 7 a.m. ET. S&P 500 and Nasdaq futures were down 0.3%. Dozens of S&P 500 companies report earnings this week. Early Tuesday, Johnson & Johnson reported quarterly earnings that beat expectations, and hiked its outlook. Bank of America, Goldman Sachs and Lockheed Martin also post results Tuesday morning. Several financial companies, including Charles Schwab and JPMorgan Chase, kicked off earnings season with strong reports on Friday, helping to boost sentiment dragged down by concerns that the Israel-Hamas war could spread to include Iran and other oil producers in the region. CNBC
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4. China tells banks to ease municipal debt burdens
China is telling banks to roll over local government debt to provide longer-term loans with lower interest rates to help ease the country's debt crisis, Reuters reported Tuesday. Municipalities with crushing debt loads pose a significant risk to China's economy, the world's second largest, as it faces a real estate crisis and costs stemming from the Covid-19 pandemic. Local government debt ballooned to $12.58 trillion in 2022 — roughly 76% of China's economic output — up from 62.2% in 2019. One banker said Beijing's order was risky. "A large-scale loan extension and interest rate reduction will deal a heavy blow to banks' operations," he told Reuters. Reuters
5. Survey says shoppers expect to spend more this year
Holiday shoppers are expected to spend more this year than in 2022, according to a Deloitte survey conducted in late August and early September. People with yearly household incomes between $50,000 and $99,999 said they believed they would spend $1,534 this year, 26% more than last year. Those making $200,000 or more anticipated shelling out $3,922, up 22%. Those in the middle, with yearly household income between $100,000 and $199,999, expected only a 2% increase to $2,167 as they deal with college debt and low real wage growth. "This is the group that likely is going to feel the shift from student debt coming back more than the other income groups," Deloitte's Brian McCarthy, one of the report's authors, told Bloomberg. Bloomberg
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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.
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