Microsoft Buying Activision Blizzard

Microsoft

Stocks fall to start the week following last week’s decline as bank profits slipped. Meanwhile, Microsoft Corporation (MSFT) announced a $68.7 billion purchase of game maker Activision Blizzard, Inc. (ATVI), its largest deal ever.

The Dow Jones Industrial Average (DJIA) and S&P 500 both fell nearly 1.5%, with the Nasdaq nearing a 2% decline. The yield on the 10-year Treasury note hit a two-year high, topping 1.83%.

Today’s sharp sell-off follows last week’s declines, when the Dow was dragged down by financial stocks after big banks posted disappointing results. Treasury yields climb last week, and oil prices hit a seven-year high, boosted by supply constraints. Today, oil climbed further, and declines in cryptocurrencies from last week steepened.

Investors are bracing for the latest round of earnings reports from major financial firms. The Goldman Sachs Group, Inc. (GS) missed estimates on profits, and The PNC Financial Services Group, Inc.’s (PNC) fourth quarter net income fell as well.

The Federal Reserve Bank of New York this morning released its Empire State Manufacturing Index for January. The headline general business conditions index dove 33 points to -0.7, with 22% of respondents saying conditions had worsened over the month, as delivery times continued to lengthen and unfilled orders increased.

The National Association of Home Builders will also release its Housing Market Index for January. The consensus estimate is for a reading of 83, slightly less than in December. The index is below its record high of 90 from November 2020 but remains elevated historically, as builders continue to be very bullish on the housing market.

Microsoft, ‘Scream,’ Netflix: Other News

Microsoft agreed to buy troubled videogame giant Activision Blizzard for $95 per share in cash, a 45% premium to Activision’s last closing price. The deal makes Microsoft the world’s third largest gaming company by revenue, behind Tencent Holdings Limited (TCEHY) and Sony Group Corporation (SNE), according to a release.

Paramount’s Scream notched an estimated $30 million at the North American box office this weekend and dethroned Spider-Man: No Way Home, which has been at the top of the box office for roughly a month.

The U.S. Federal Aviation Administration will require operators of The Boeing Company’s (BA) 787 to take additional precautions landing on wet or snowy runways, at airports where new wireless services are deployed. The FAA said that a 5G interference would prevent engine and braking systems from transitioning to landing mode, which could prevent an aircraft from stopping on the runway.

Netflix, Inc. (NFLX) raised its monthly subscription prices in the U.S. and Canada by $1 to $2 per month, depending on the plan. The company said that the increase is aimed at helping to pay for new programming to compete in the streaming TV market.

Google parent Alphabet Inc. (GOOG) and Meta Platforms, Inc. (FB) CEOs were aware of a deal to carve up part of the online advertising market, according to an amended antitrust complaint filed by Texas and 15 other states against Google. A spokesperson for Google called the complaint inaccurate and said the company intends to file a motion to dismiss.

A U.S. federal judge banned Martin Shkreli from the pharmaceutical industry for life. He will be required to return $64 million in profits that he and his former company, Vyera Pharmaceuticals, reaped from jacking up the price and monopolizing the market for a life-saving drug, Daraprim.

World Bank Slashes Growth Forecast

The World Bank is slashing its forecast for global economic growth, warning that a rise in inflation, debt, and income inequality could jeopardize the global recovery in emerging and developing economies.

In its latest Global Economic Prospects report, the World Bank said that global growth is expected to slow to 4.1% in 2022 and 3.2% in 2023, as more nations start unwinding unprecedented levels of fiscal and monetary policy support. The projections follow a strong rebound in global growth, as demand soared after lockdowns related to COVID-19 were lifted. The World Bank estimated that the world economy grew by 5.5% last year.

The World Bank said that advanced economies are predicted to slow from 5% growth in 2021 to 3.8% in 2022, which will return advanced economies to their pre-pandemic trend in 2023. U.S. growth is expected to slow to 3.7% from 5.6%, according to the forecast. Growth in China is set to ease to 5.1% this year from 8% a year ago, partly due to the lingering effects of the pandemic, as well as additional regulatory tightening.

The World Bank noted that COVID-19 continues to cast a shadow over growth prospects. If variants like omicron persist, it could further reduce the bank’s global growth projections.

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