Book burning

MARKETS

• U.S. markets: The big story was Facebook's miserable day (we'll get to that later)...but don't let that obscure the Dow closing at a 5-month high.
• Pakistan elections: Imran Khan, a former cricket star turned anti-establishment politician, claimed victory in Pakistan's violent election.

EARNINGS

An Earnings Bonanza

Yesterday, 74 companies on the S&P 500 (that's 14.8% for you math majors) reported earnings for the previous quarter.

• Remember: Earnings reports (released every quarter) show how companies are performing relative to expectations.

Amazon's proving it's more than just a retailer

Look no further than its profits.

• In Q2 2017, Amazon reported a profit of $197 million. This year? $2.53 billion (crushing projections).

So what's driving the high-margin growth? Amazon Web Services (AWS), its cloud computing business. With an operating income of $1.64 billion, AWS accounted for 55% of Amazon's entire operating income. Not to mention, AWS revenue jumped 49%.

What else you should know from Amazon's earnings:

• It came up just short on revenue expectations, but that didn't stop investors from bumping the stock up over 3% after hours.
• For Q3, it's projecting revenue between $54 billion and $57.5 billion.

The best of the rest...

Food & Beverage

• McDonald's (-1.73%) beat earnings estimates, but U.S. sales went stale to send revenue plummeting 12%. Mickey D's was dealt a blow by a recall of salads at ~3,000 U.S. locations following an outbreak of foodborne illness Cyclosporiasis.
• AB InBev (-5.02%) showed France it wasn't the only World Cup winner—it rode the month-long soccer tournament to a strong Q2. It's also undergoing a significant restructuring.
• Starbucks (+4.90%) reported earnings pretty much in line with analyst expectations. A 1% uptick in global same-store sales was driven by a 3% increase in average ticket prices.

Tech

• Spotify's (+4.41%) sophomore quarter on the public markets was...meh. It did reach 83 million paid subscribers (up 40% annually) and 180 million total users.
• Intel (-4.33%) beat on earnings and revenue, plus raised its guidance for the full year. Sales grew 15% annually, up from 9% growth during the same period last year.

Oil & Gas

• Shell (-3.67%) and Total (+1.07%) turned higher oil prices into eyebrow-raising profits. Reporting today, Chevron and ExxonMobil look to keep the good times rollin' for Big Oil.

Telecom

• Comcast (+3.98%) may have bowed out of the race for Fox's assets, but it crushed projections on new broadband customers. It's still struggling with cord-cutters, though.

Aviation

• Southwest Airlines (+8.43%) said April's fatal accident cost it $100 million in lost revenue...and American Airlines (+4.79%) CEO Doug Parker called this quarter the "most challenging" in five years (h/t rising fuel prices).

ECONOMY

GDP's Got That Friday Feeling

The U.S. Commerce Department. Today at 8:30 am ET. Be there.

No, it's not a morning rave or bottomless brunch. But, the U.S. will get Q2 gross domestic product (GDP) stats.

• FYI: GDP is the monetary value of all finished goods/services produced within a country's borders.

And while economic data on a Friday may not seem as exhilarating as tonight's first date that you're definitely not nervous about...this is a big moment. Experts forecast GDP will grow at an annualized rate of 4.3% in Q2—the fastest growth rate since 2014. But, some data suggest GDP could top 5.2%, the strongest showing since 2003.

So what's propelling growth?

• And while economic data on a Friday may not seem as exhilarating as tonight's first date that you're definitely not nervous about...this is a big moment. Experts forecast GDP will grow at an annualized rate of 4.3% in Q2—the fastest growth rate since 2014. But, some data suggest GDP could top 5.2%, the strongest showing since 2003.

  So what's propelling growth?

• Yes, but also...consumption is still strong with a healthy labor market and high consumer confidence.

SOCIAL MEDIA

Facebook’s Earning the Wrong Kind of Reputation

The brightest stars burn out the fastest. Hope someone told Zuck.

Just a day after Facebook stock climbed to a record high, it all came crashing down in the wake of a dismal earnings report. Facebook (-18.96%) execs let it slip that revenue growth and operating margins are set to disappoint in the coming months.

What came next was record-setting...but definitely not in a good way.

• Facebook suffered the largest one-day loss in market value (close to $120 billion) by any company in U.S. stock market history.
• No other company has ever passed the $100 billion threshold in a single session.

The records don't stop there, though.

• It was the largest single-day percentage loss in Facebook's history.
• Zuckerberg lost ~$15 billion of his own personal fortune.
• At least 16 brokerages slashed their price targets for Facebook stock.

CURRENCY

Headlines Worth a Double Take

Venezuela is taking a chainsaw to its currency, the bolívar, days after the IMF forecasted the country's hyperinflation will reach 1,000,000% this year.

Caffeinated context: Deep in the throes of an economic collapse, Venezuela has declined to release much of anything in the way of statistics. Enter: Bloomberg, with a handy indicator to track hyperinflation using the cost of a cup of joe.

• The price of a café con leche in Caracas (Venezuela's capital city) just hit 2,000,000 bolívars.
• That suggests an annual inflation rate of 86,857%.
• Since just April, the price of a cup of coffee has surged 952.6%.

QUIZ

Reintroducing...the Brew's Weekly News Quiz

Back when the Brew was just an infant, we used to quiz our readers on the news each week. Now that we've hit puberty? We're bringing it *voice cracks* back. See how closely you read this week's newsletters by answering the following questions:

1. Fiat Chrysler's legendary former CEO passed away this week. What was his name?

2. Because of a housing shortage, the median sale price for an existing home in the U.S. is up 5.2% from last year. What was the median sale price last month?

a) $178,560 b) $229,790 c) $276,900 d) $310,140

3. What stock chart are you looking at? Hint: This company bought LevelUp for $390 million earlier this week.


4. Fill in the blank: In April, China ordered foreign airlines to _________. The deadline to comply was this Wednesday (you bet they complied).

5. Who said this? "We want NAFTA done. To be torturing Mexico in this way, in my opinion, is dead wrong, and it should be fixed."

6. For extra credit...name the company: I have 200 million monthly active users. My ad revenue is on track to hit ~$1 billion this year. I'm hoping to IPO in Q2 2019.

Answers: 1. Sergio Marchionne; 2. $276,900; 3. Grubhub; 4. Stop referring to Taiwan as a separate country on their websites; 5. JPMorgan CEO Jamie Dimon; 6. Extra credit: Pinterest

WHAT ELSE IS BREWING

• WeWork China raised $500 million from SoftBank, Temasek, and more.
• Axios made a Google Sheet listing S&P 500 CEO compensation.
• Sergio Marchionne, the former Fiat Chrysler CEO who died this week, had been seriously ill for more than a year.
• Mike Novogratz's crypto firm, Galaxy Digital, took a $134 million loss in the first quarter.
• John Schnatter, the founder and ex-CEO of Papa John's (-0.51%), has sued the pizza chain to obtain internal documents.

BREAKROOM

YOUR WEEKEND TO-DO LIST
Read: Calypso by David Sedaris. If you've never picked up a Sedaris book, then you're missing out on some of the most hilarious writing that exists. This latest collection is ideal for the beach.

Listen: The Pro Rata podcast. We love Dan Primack's short, insightful snippets on all the most important business stories.

Watch: "Succession" on HBO. There's nothing quite like watching a high-stakes power struggle among family members (featuring one of the most thrilling boardroom scenes we've seen).

BRAIN TEASER
Take out a paper and pencil—you're going to need to spend some time on this one. It comes from NYT crossword editor and puzzle wizard, Will Shortz.

Here it is: Write the name of a game in small letters. Reverse the second and third letters. Turn the fourth letter upside-down. The result will name something else to play. What is it?

(Answer located at bottom of newsletter)

Breakroom Answers