If you feel like the second quarter began badly, you’d be right.
U.S. stocks had their worst April start since 1929, according to data compiled by Bloomberg. The S&P 500 index slumped 2.2 percent, a rout exceeded only by its 2.5 percent decline 89 years ago, a prelude to the devastating crash later that year that brought on the Great Depression. (Back then, the index only comprised 90 stocks.)
China’s retaliatory trade tariffs combined with President Donald Trump’s criticism of Amazon.com Inc. to send equities into a tailspin Monday. Shares in the online retailer tumbled, encouraging a sell-off in consumer discretionary and technology stocks. The S&P 500 closed below its 200-day moving average — a key technical support — and volatility climbed.
The stock slide also looked pretty bad when compared to the beginning of other quarters. Equities lost more than on any other quarterly first day since October 2011, when stocks plummeted 2.8 percent, Bloomberg data show.
U.S. officials warn of attacks, including on nuclear plants
Cyber-attacks underway since at least March 2016, U.S. says
Russian hackers are conducting a broad assault on the U.S. electric grid, water processing plants, air transportation facilities and other targets in rolling attacks on some of the country’s most sensitive infrastructure, U.S. government officials said Thursday.
The announcement was the first official confirmation that Russian hackers have taken aim at facilities on which hundreds of millions of Americans depend for basic services. Bloomberg News reported in July that Russian hackers had breached more than a dozen power plants in seven states, an aggressive campaign that has since expanded to dozens of states, according to a person familiar with the investigation.
Critical manufacturing sectors and commercial facilities also have been targeted by the ongoing "multi-stage intrusion campaign by Russian government cyber actors."
Cyber-attacks are "literally happening hundreds of thousands of times a day," Energy Secretary Rick Perry told lawmakers during a hearing Thursday. "The warfare that goes on in the cyberspace is real, it’s serious, and we must lead the world."
Separately Thursday, the U.S. sanctioned a St. Petersburg-based “troll farm,” two Russian intelligence services, a close ally of Russian President Vladimir Putin and other Russian citizens and businesses indicted by Special Counsel Robert Mueller on charges of meddling with the 2016 U.S. presidential election.
A joint analysis by the FBI and the Department of Homeland Security described the hackers as extremely sophisticated, in some cases first breaching suppliers and third-party vendors before hopping from those networks to their ultimate target. The government’s report did not say how successful the attacks were.
The Russian hackers "targeted small commercial facilities’ networks where they staged malware, conducted spear phishing, and gained remote access into energy sector networks," according to the Homeland Security alert.
An industry-government partnership provided potential indicators of compromise for electric companies following Thursday’s announcement, said Scott Aaronson, vice president of security and preparedness at the utility trade group Edison Electric Institute. The federal government alerted grid operators to a threat targeting the energy and manufacturing sectors last summer, but the incident didn’t affect operations, he said.
The hackers deliberately selected targets and methodically went after initial victims as a way to reach their ultimate prizes, including industrial control systems used by power plants and other infrastructure. Their tactics included sending spear-phishing emails and embedding malicious content on informational websites to obtain security credentials they could then leverage for more information and access.
And once they obtained access, the attackers "conducted network reconnaissance," and moved within the systems to collect information on industrial control systems.
The government’s alert on Russian cyber-attacks does not cover suspected meddling by the country in the 2016 election.
An October report by researchers at Symantec Corp., cited by the U.S. government Thursday, linked the attacks to a group of hackers it had code-named Dragonfly, and said it found evidence critical infrastructure facilities in Turkey and Switzerland also had been breached.
The Symantec researchers said an earlier wave of attacks by the same group starting in 2011 was used to gather intelligence on companies and their operational systems. The hackers then used that information for a more advanced wave of attacks targeting industrial control systems that, if disabled, leave millions without power or water.
The disclosure comes amid mounting calls from lawmakers to step up protection of the nation’s electric grid. Senator Maria Cantwell, the top Democrat on the Energy and Natural Resources Committee, pushed for a cyberthreat assessment of the grid last year, to better defend the infrastructure against potential attacks.
"I hope today’s belated response is the first step in a robust and aggressive strategy to protect our critical infrastructure," Cantwell, a Democrat from Washington state, said in an emailed statement.
U.S. intelligence officials have long been concerned about the security of the country’s electrical grid. The recent attacks, striking almost simultaneously at multiple locations, are testing the government’s ability to coordinate an effective response among several private utilities, state and local officials, and industry regulators.
Many of the targeted power plants are conventional, but the attacks included at least one nuclear power plant in Kansas, Bloomberg News reported in July. While the core of a nuclear generator is heavily protected, a sudden shutdown of the turbine can trigger safety systems. These safety devices are designed to disperse excess heat while the nuclear reaction is halted, but the safety systems themselves may be vulnerable to attack.
The operating systems at nuclear plants also tend to be legacy controls built decades ago and don’t have digital control systems that can be exploited by hackers.
Snap Inc.’s flagship platform has lost some luster, at least according to one social-media influencer in the Kardashian-Jenner clan.
Shares of the Snapchat parent company sank 6.1 percent on Thursday, wiping out $1.3 billion in market value, on the heels of a tweet on Wednesday from Kylie Jenner, who said she doesn’t open the app anymore. Whether it’s the demands of her newfound motherhood, or the recent app redesign, the testament drew similar replies from her 24.5 million followers. Wall Street analysts too have begun to notice, citing recent user engagement trends noticed since the platform’s redesign.
sooo does anyone else not open Snapchat anymore? Or is it just me… ugh this is so sad.
Jenner’s tweet was followed late Thursday by one from Maybelline New York, asking its followers if it should stay on the Snapchat platform. The beauty-product brand owned by Paris-based L’Oreal SA said its “Snapchat views have dropped dramatically,” but it still wanted to connect with its followers.
Citigroup analyst Mark May downgraded the stock to sell from neutral earlier this week after seeing a “significant jump” in negative reviews of the app’s redesign. He expects the reviews could cause user engagement to fall, hurting financial results.
Meanwhile, as the app takes criticism, Chief Executive Evan Spiegel may become one of the highest paid executives in the U.S. After the company’s IPO last March, Spiegel got a $636.6 million stock grant that will be payable through 2020.
"Still love you tho snap," Jenner hedged in a later tweet.
U.S. regulators are scrutinizing one of the world’s largest cryptocurrency exchanges as questions mount over a digital token linked to its backers.
The U.S. Commodity Futures Trading Commission sent subpoenas on Dec. 6 to virtual-currency venue Bitfinex and Tether, a company that issues a widely traded coin and claims it’s pegged to the dollar, according to a person familiar with the matter, who asked not to be identified discussing private information. The firms share the same chief executive officer.
Tether’s coins have become a popular substitute for dollars on cryptocurrency exchanges worldwide, with about $2.3 billion of the tokens outstanding as of Tuesday. While Tether has said all of its coins are backed by U.S. dollars held in reserve, the company has yet to provide conclusive evidence of its holdings to the public or have its accounts audited. Skeptics have questioned whether the money is really there.
“We routinely receive legal process from law enforcement agents and regulators conducting investigations,” Bitfinex and Tether said Tuesday in an emailed statement. “It is our policy not to comment on any such requests.”
Erica Richardson, a CFTC spokeswoman, declined to comment.
Bitcoin, the biggest cryptocurrency by market value, tumbled 10 percent on Tuesday. It fell another 3.2 percent to $9,766.41 as of 9:19 a.m. in Hong Kong, according to composite pricing on Bloomberg. The virtual currency hasn’t closed below $10,000 since November.
While Tether and Bitfinex don’t disclose on their websites or in public documents where they’re located or who’s in charge, Ronn Torossian, a spokesman for the firms, said in a Dec. 3 email that Jan Ludovicus van der Velde is the CEO of both. Phil Potter is a Tether director, according to documents — dubbed the Paradise Papers — recently leaked by the International Consortium of Investigative Journalists. He’s also the chief strategy officer at Bitfinex.
Last year, Wells Fargo & Co. ended its role as a correspondent bank through which customers in the U.S. could send money to bank accounts held by Bitfinex and Tether in Taiwan. The firms sued the lender, but later withdrew the complaint. Torossian previously declined to identify the banks used by Bitfinex unless a non-disclosure agreement was signed, which Bloomberg News refused.
While little public information exists about how tethers are created, market pricing suggests traders believe that each coin is worth $1. Trading the token for Bitcoin at Bitfinex has helped drive up Bitcoin prices, Barry Leybovich, a product manager at IPC Systems Inc. who creates risk and compliance products for financial institutions interested in blockchain applications, said last month.
A document on Tether’s website, compiled by accounting firm Friedman LLP, shows it had $443 million and 1,590 euros ($1,970) in bank accounts as of Sept. 15. Tether tokens were valued at $420 million that day, according to Coinmarketcap.com. Tether hasn’t identified the banks where that money was held, and their names were blacked out in the document.
Friedman said in its report that it didn’t investigate the reliability of Tether’s records. The accounting firm and Tether have recently cut ties, Tether said in a separate statement Monday.
“Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable timeframe,” Tether said.
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Friedman didn’t reply to messages seeking comment.
Bitcoin faced one of its biggest tests this week, losing almost 20 percent of its value after the world’s largest cryptocurrency reached a record high Monday.
The digital currency plunged as much as 30 percent on Friday, before paring losses, as this week’s selloff extended to a fourth day. The weekly decline is the biggest in almost three years. Other cryptocurrencies also tumbled: ethereum dropped as much as 36 percent and litecoin slumped as much as 43 percent, according to composite prices on Bloomberg.
Michael Novogratz, the former Goldman Sachs Group Inc. and Fortress Investment Group LLC macro trader, said he’s shelving plans to start a cryptocurrency hedge fund and predicted that bitcoin may extend its plunge to $8,000.
“We didn’t like market conditions and we wanted to re-evaluate what we’re doing," Novogratz said in a phone interview. He predicted last week that bitcoin could reach $40,000 within a few months.
Bitcoin dropped to as low as $10,776, before recovering to $14,303 at 4:04 p.m. in New York. It last traded below $10,000 on Dec. 1, when the U.S. Commodity Futures Trading Commission agreed to allow trading in bitcoin futures. The price of the digital coin had more than doubled in the prior three weeks.
The losses represent a major test for the cryptocurrency industry and the blockchain technology that underpins it, which have rapidly entered the mainstream in recent weeks. Bears cast doubt on the value of the virtual assets, with UBS Group AG this week calling bitcoin the “biggest speculative bubble in history.” Bulls argue the technology is a game changer for the world of investment and finance. Both will be closely watching the outcome of the current selloff.
“The sharks are beginning to circle here, and the futures markets may give them a venue to strike,” said Ross Norman, chief executive officer of London-based bullion dealer Sharps Pixley Ltd., which offers gold in exchange for bitcoin. “Bitcoin’s been heavily driven by retail investors, but there’ll be some aggressive funds looking for the right opportunity to hammer this thing lower.”
Traders who bought the currency on futures exchanges using collateral may start facing margin calls following the price decline. Two venues launched products in recent weeks that required hefty security, with Cboe needing 44 percent to clear contracts, and the CME 47 percent. Brokers set safety nets even higher.
Coinbase, one of the world’s largest cryptocurrency exchanges, said all buying and selling was temporarily disabled during today’s rout, after having delays in processing wire transfers and verifying new customers for the past week due to higher traffic. Bitcoin transaction volume jumped more than 30 percent on Coinbase’s GDAX exchange, while fees to approve and record the transactions on the blockchain surged to a record $55, according to Bit Info Charts.
Many of the recent news stories and market moves connected to cryptocurrencies appear to carry hallmarks of the mania phase of a bubble. Long Island Iced Tea Corp. shares rose as much as 289 percent on Thursday after the unprofitable Hicksville, New York-based company rebranded itself Long Blockchain Corp. Bank of Japan Governor Haruhiko Kuroda said on Thursday bitcoin isn’t functioning like a normal means of payment and is being used for speculation.
Still, cryptocurrencies are attracting established players. Goldman Sachs Group Inc. is setting up a trading desk to make markets in digital currencies such as bitcoin, according to people with knowledge of the strategy. The bank aims to get the business running by the end of June, if not earlier, two of the people said.
For related news and information: XBT Curncy GP for bitcoin VCCY for a cryptocurrency monitor
Bitcoin plunged as much as 20 percent hours after a rally past $11,000 generated a surge in traffic at online exchanges that led to intermittent outages.
The plunge capped a wild day for the largest cryptocurrency that included a breakneck advance to a high of $11,434 before the reversal took it as low as $9,009. As of 3:36 p.m. in New York, it traded at $9,911.10, virtually unchanged from where it began the session.
The heaviest selling came amid reports of service outages and delays on some of the largest online exchanges. The extent of the problems on platforms such as Coinbase and Gemini remained unclear, with several saying massive spikes in traffic had caused unspecified problems. Coinbase remained unavailable to some users.
Bitcoin had rallied 20 percent in just four days, topping $10,000 for the first time earlier this week in a runup that drew increased warnings it was in a bubble. The cryptocurrency ended September at $4,171.25.
“After doubling in such a short period of time, people are taking profits,” said David Mondrus, chief executive of Trive, a blockchain-based research platform. “Issues in the exchanges add to it without a doubt. When you have a lack of ability to exit, then people dump in order to exit faster.”
While not uncommon, outages at online exchanges have earlier led to selloffs in cryptocurrencies. Coinbase, one of the biggest platforms, earlier tweeted traffic was at an all-time high after bitcoin surged to a record $11,434 at 9:11 a.m. in Bloomberg composite pricing.
The cryptocurrency is extremely volatile and susceptible to major dips — it’s fallen by at least 25 percent on three separate occasions in 2017 already.
In the U.S., Walmart Stores members-only warehouse chain, Sams Club, offers a wide array of products, from bulk groceries to patio furniture, at discounted prices in cavernous, no-frills stores where goods are stacked on metal shelves. Walmart is doing the same thing in China but with some pricey twists, including $3,200 Zojirushi rice cookers and $295,000 diamond rings.
Over the past two years, the retailer has repositioned the 14 Sams Clubs in the country to offer more expensive products. Shoppers can pick up $500 Dyson hair dryers, $1,700 bottles of 1995 Chteau Lafite Rothschild red wine, and $7,000 high-tech massage chairs, in addition to imported pistachios and desserts conjured up by Michelin-rated chefs. Theres even a $4,100 Laurastar ironing system that comes with four hours of in-home instruction. Unlike its small business focus in America, Sams Club on the mainland is all about catering to the whims and preferences of an emerging middle and upper class willing to spend more for premium items.
Our member is a very aspirational shopper, says Andrew Miles, chief operating officer of Sams Club in China. Their desire is for a better life and to show their wealth to their family and friends, to show that they are a smart, savvy shopper. Thats the ambition we want to fill.
Walmart sees big potential in China: Its Sams Club in Shenzhen, a fast-growing urban center in the southeast, is the chains best-performing outlet globally. Walmart, which posted $482 billion in revenue for its fiscal year ended Jan. 31, doesnt break out China sales, but it says the growth of clubs there is among its fastest globally. Chinese memberships now number 1.8 million and are growing 10 percent to 12 percent annually.
In addition to rolling out a premium product lineup, the retailer almost doubled its annual membership fee in April, to 260 yuan ($40), to attract more upscale shoppers, those earning at least $25,000 in yearly household income, roughly three times the nations average in 2014. Miles says members remaining after the fee increase spent 8 percent more on average per visit.
Sams Clubs potential in China is greater than anywhere, says Walmart Chief Executive Officer Doug McMillon. Members want a fine bottle of wine, they want a great fresh-food experience, they want a 4k television, he says, referring to the latest high-resolution technology. Even a $15,000 price point can be a great value for what you are getting.
That upmarket tackfrom a Samsung curved TV for $26,000 to a 61-bottle collection of Mdoc wines, complete with its own cooler, for $14,472capitalizes on a Chinese bias toward imports. They see them as higher-quality and safer after domestic suppliers experienced some recent well-publicized food-safety concerns. I dont have to go through online channels to get foreign brands now, says He Lihui, a 35-year-old sales executive who was shopping at the Shenzhen Sams Club for Wonderful brand pistachios from the U.S. and waffles made with European ingredients.
Sams Clubs own brands, such as its Members Mark private-label oatmeal and kitchen towels, or the Asda brand developed for Walmart stores in Britain, arent perceived as high-end in their home markets, according to Jack Chuang, OC&C Strategy Consultants Greater China partner. But Sams Club has been pitching the foreign provenance of its house-branded items and selling them for less than what imports generally cost in China. What theyve done in China is a rebranding exercise using the fact that to Chinese shoppers, imported is a badge for premium, he says.
Walmart aims to more than double the number of Sams Clubs there to 35 in three years, and its built an entire mall with a 1,900-car parking lot for a 5,000-square-meter (54,000-square-foot) store in Zhuhai, near the casino island of Macau. The investment in the new mall, which has leased space to Starbucks, Uniqlo, and other big brands, became necessary because other potential retail sites lacked adequate parking. Similar projects with malls anchored by Sams Clubs are planned in Jiangxi and Guizhou provinces.
Sams Clubs success is in sharp contrast to the performance at the 412 Walmart-branded stores on the mainland, where McMillon says sales are flat. Big brick-and-mortar retailers such as Walmart and Frances Carrefour have struggled as Chinese consumers increasingly turn to e-commerce platforms for electronics and other non-perishable goods, both of which are high-margin categories at Walmarts large stores in China, says Wai-Chan Chan, a senior partner in the Asia-Pacific retail and consumer practice at consultant Oliver Wyman.
In an attempt to remedy that, Walmart on Oct. 20 announced a distribution partnership with JD.com, Chinas second-largest e-commerce company after Alibaba Group. Customers can now order Walmart items from around the world through a store on JD.com; theyre delivered using the e-commerce companys sprawling fulfillment system, which reaches homes in 90 percent of the country. Already, customers living near 20 Walmarts can get purchases delivered within two hours; more stores will be added later.
Sams Club has also opened a flashy online storefront on JD.com, making its items available to nonmembers for the first time, albeit at a 10 percent premium. Were indifferent as to the format, McMillon says. Our job is to make sure that we are there to serve customers however they want to be served. One bonus from boosting online access: Sams Club can use the geographic data from e-commerce sales to identify where it should set up warehouses next, says Walmart Chinas senior vice president for e-commerce, Ben Hassing.
Sams Club has no major club rivals in China. Its biggest American competitor, Costco Wholesale, doesnt operate brick-and-mortar stores there. That could change: Costco opened a store on Alibabas Tmall online platform last year, a move OC&Cs Chuang describes as dipping their toes into the water. For now, Sams Club has the pooland the growthto itself.
The bottom line: Sams Club in China, whose membership is growing at 10 percent to 12 percent annually, is repositioning itself to sell pricier goods.