Today in the Market (7/27/2022)

Good Evening. U.S. stocks rose on Wednesday as investors digested the Federal Reserve’s significant decision to raise interest rates by 0.75 basis points and Chairman Jerome Powell’s comments suggesting the central bank may reduce the speed of its rate-hiking cycle. The mood was further improved by tech industry heavyweights’ earnings that exceeded expectations.

The Dow Jones increased by 1.37%, while the S&P 500 increased by 2.62%. The heavily tech-focused Nasdaq Composite increased by 4.06%.

THE WEEK OF EARNINGS

Meta (META) released its Q2 2022 earnings after the market closed on Wednesday. These results fell short of analysts’ expectations and significantly undershot its Q3 revenue projections. The social networking company’s first year-over-year revenue loss occurred during the third quarter. Additionally down 36% year-over-year was net income. Here are the key figures from the report compared to what analysts had predicted, as compiled by Bloomberg.

  • Revenue: $28.8 billion vs $28.9 billion expected

  • Earnings per share: $2.46 vs $2.54 expected

  • Facebook daily active users: 1.97 billion vs 1.95 billion expected

Meta’s Q3 sales prediction, which was estimated to be between $26 billion – $28.5 billion, fell short of analysts’ projections. On Wall Street, $30.32 billion was sought after. Additionally, while the number of daily active Facebook users rose by 8 million, the number of monthly active users fell by 2 million. The number of daily active users and monthly active users increased for the company’s family of apps, which includes popular ones like Instagram and WhatsApp.

The revenues from Meta come at a time when the overall digital advertising market is slowing down as a result of inflation, rising interest rates, and the conflict in Ukraine.

Companies are facing a variety of challenges, not just those related to COVID, the war, or interest rates and inflation. Meta’s ability to give marketers precise user behavior is being hampered by Apple’s App Tracking Transparency, a privacy feature that restricts apps like Facebook from tracking user activity across the web and apps.

3M LAWSUIT

Due to one of its tiniest products, earplugs, the manufacturing behemoth 3M has found itself buried beneath a pile of legal issues. Earplugs aren’t about “looking good”—they just have to function. But thousands of US soldiers claim that 3M’s earplugs didn’t work.

After three years of expensive litigation (including $300 million granted to 13 plaintiffs as of May), 3M said that it would spin off its healthcare division and file for Chapter 11 bankruptcy (involves a reorganization of a debtor’s business affairs, debts, and assets) with its earplug subsidiary, Aearo Technologies.

How did this happen? Approximately 250,000 service members and veterans are suing 3M, claiming that the firm deliberately sold defective earplugs, causing thousands of military members to suffer from tinnitus and early hearing loss. According to recent judgments and the startling number of lawsuits still pending, the business may be responsible for far more than its present market worth of almost $80 billion.

According to 3M, it has pledged $1 billion to a trust to pay off claims and would add more cash if required. However, one of the litigants who intends to contest the bankruptcy filing points out that the trust amounts to less than $5,000 for each impacted veteran.

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