️ Holiday bonus

MARKETS

  • U.S. markets: It was a bad day to check your Robinhood app. More on that below.
  • Energy: U.S. crude continued what can only be described as an epic tumble to hit a 17-month low yesterday. Oversupply concerns do not mess around.

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STOCKS

The Stock Market Mourns the Last Brew for 2018

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Stub your toe getting out of bed this morning? Burn your tongue on your cappuccino? Could be worse—you could be the stock market.

It was another face palm-inducing day on Wall Street, where volatility has become as commonplace as Patagonia vests. Let's survey the damage.

  • The S&P 500 is now at a 15-month low, and member companies have shed a combined $2.39 trillion in market cap...just this month.
  • The Dow has now lost more than 1,700 points in the last five sessions and sits at a 14-month low.
  • The tech-heavy Nasdaq flirted with bear market territory (down close to 20% from its recent high).

So what caused the headache?

Well, (as always) it was likely a mix of symptoms.

First up? The possibility of a government shutdown. House Speaker Paul Ryan said President Trump will not sign a temporary funding bill to avoid a partial government shutdown without the promise of funding for a U.S.-Mexico border wall.

  • The House did approve a bill complete with more than $5 billion for the wall late Thursday, but it's unlikely the measure will make it through the Senate.

Making matters worse? The market's still reeling from the Fed's decision to raise interest rates Wednesday. Fed chief Jerome Powell cited strong economic data, but that wasn't enough to keep investors from longing for the easy-money, low-interest-rate days.

  • "We've been living on this morphine drip that is now being taken away," Fort Pitt Capital's Charlie Smith told the WSJ.

Feels fitting to cap the year this way

Remember the good ol' days? When we were talking markets-at-new-highs, record-earnings? Those days are gone. Unfortunately, your last Brew of the year tastes a little bitter.

Rip off the Band-Aid: The trade war has actually come to pass, the nearly decade-long bull market is losing steam, and global economic expansion isn't what it used to be. That's spooked investors...who've taken their worries out on growth-sensitive stocks.

E-CIGS

Altria Plays Hype Man for Juul

Marlboro-maker Altria Group (-1.87%) has invested $12.8 billion for a 35% stake in e-cigarette leader Juul Labs.

This wasn't really a surprise. An Altria/Juul deal had been rumored for weeks, as Altria has aimed to expand its portfolio outside of cigarettes for awhile. The real kicker, then? The valuation this deal gives Juul—$38 billion.

Want some context? The e-cig startup is now worth more than some of the most valuable VC-backed firms this side of Palo Alto, including...

  • Pinterest ($15 billion)
  • SpaceX ($30.5 billion)
  • Airbnb ($31 billion)

Aside from slapping on a monster valuation, Altria, which is the largest tobacco company in the U.S., will also give Juul shelf space near its own products and access to a retail footprint of about 230,000 stores.

Plus, Altria's paying a $2 billion bonus to Juul's 1,500 employees as part of the deal...which averages out to roughly $1.3 million each.

INTERNATIONAL

Today in Economic Espionage...

No need for Bravo TV when the drama at the U.S. Justice Department is this juicy. The DOJ has criminally charged two Chinese nationals for allegedly attempting to pilfer sensitive information from both technology service providers and U.S. government agencies.

The DOJ also accused China of violating a 2015 bilateral pact under which both countries pinky promised not to engage in state-sponsored hacking for economic gain.

  • FYI, the charges drew distinct links between the alleged hackers and China's Ministry of State Security.

So who got hit? The hackers allegedly infiltrated at least 45 U.S. firms, including commercial and defense tech companies, in an "extensive" campaign. They also targeted firms in at least a dozen other countries.

Zoom out: This is yet another bid from the Trump administration to punish China for cyberattacks. Per Deputy AG Rod Rosenstein, more than 90% of the DOJ's cases investigating economic espionage in the last seven years have involved China.

TECH

Amazon Hears Footsteps in the Smart Speaker Race

Did you find your Alexa curled up in bed listening to Alanis Morissette on full blast? Give her some space—eMarketer predicts Amazon Echo will drop under two-thirds of U.S. smart speaker users for the first time next year.

Let's break down the user penetration numbers for 2019:

  • Amazon Echo: 63%
  • Google Home: 31%
  • Other (including Sonos One and Apple HomePod): 12%

Also, before you aspiring Pythagorases start firing off emails...we know these percentages add up to more than 100—some people use more than one device.

So why is Alexa sliding? Mostly due to increased competition, as most tech giants have introduced in-home devices to capture more ad and commerce dollars. Plus, notes Axios's Sara Fischer, there are "billions of dollars at stake in smart speaker hardware sales."

A few more interesting numbers:

  • Nearly 75 million people in the U.S. will use a smart speaker in 2019, up 15% from 2018.
  • But they rarely use it for shopping. Voice commerce in 2018 will account for 0.4% of U.S. e-commerce sales.

QUIZ

The Brew’s Weekly News Quiz

TEXT
Higher Rotten Tomatoes score than "Roma." More hyped than legal weed in NY. Known for very little inflation. It's the final weekly news quiz of the year.

1. Amazon has reportedly been axing CRaP products. What does that acronym stand for?

2. Fill in the blank: The _______ is a benchmark index that measures the performance of small cap stocks.

3. Who said this? "We're going to do our jobs the way we've always done them...nothing will cause us to deviate from that."

4. This guy just won the "Person of the Year" award from the Financial Times. What's his name?
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5. Which country did FedEx CEO Fred Smith not blame for his company's international woes?

a) The U.S. for slapping tariffs on China

b) China for its state intervention

c) Russia for meddling in the U.S. election

d) The UK for Brexit

6. What is the Dugout Loop?

Answers: 1) "Can't Realize a Profit" 2) Russell 2000 3) Fed Chair Jerome Powell 4) George Soros 5) Russia 6) Elon Musk's plan for an underground tunnel between LA neighborhoods and Dodger Stadium

WHAT ELSE IS BREWING

  • Apple (-2.52%) will stop selling some iPhone models in German stores after nemesis Qualcomm won another injunction against the company.
  • Walgreens (-5.02%) announced plans to slash annual costs by $1 billion within three years.
  • Airbus stock fell 2.9% after a French paper reported the U.S. is joining the UK and France in investigating the company for corruption.
  • More than 100 flights at London's Gatwick Airport (one of the busiest in Europe) were delayed after two drones deliberately tried to disrupt travel.
  • Nike stock jumped as much as 8% after hours following an earnings report that topped analyst forecasts.

BREAKROOM

Friday Headlines
We know, we usually do this on Saturday. But since we're off tomorrow we decided to bump this up a day. Not only that, we decided to get creative this time and make up our own headline. Can you tell which one?

  • Woman charged with witchcraft just 2 days before offence scrubbed from
  • "The only thing Fed Chair Jerome Powell enjoys more than raising rates? His pet turtle."
  • "Federal court says NY ban on nunchucks unconstitutional"
  • "Ex-NASA engineer creates glitter bomb trap for package thieves"

(Answer located at bottom of newsletter)

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Breakroom Answers


Friday Headlines
"The only thing Fed Chair Jerome Powell enjoys more than raising rates? His pet turtle" has Brew written all over it

 

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