How Facebook’s stocked fared through privacy scandals in 2018

Facebook is bidding farewell to a year plagued by privacy scandals and internal turmoil. On the last trading day of 2018, the stock closed at $131.09 per share, down 25.7 percent for the year. The stock ended the year lower than the previous one for the first time since its debut on the public market in 2012.

In 2018, a series of events soured public opinion on a company that has long prided itself on connecting people to one another. A movement to #deletefacebook trended on rival social media platforms, the company’s top executives were asked to testify in front of legislators from around the globe and the heads of two of Facebook’s most successful brands, Instagram and WhatsApp, stepped down. Investors took notice. Facebook’s market cap closed 2018 around $376 billion compared to nearly $513 billion the previous year.

Prior to some of the major privacy revelations, Facebook’s stock hit its first speed bump of the year in January after announcing changes to its News Feed that would prioritize content from users’ friends and family over brands they follow. Facebook’s stock plunged 4 percent the day after the announcement after CEO Mark Zuckerberg warned investors to expect engagement to decline slightly as a result of the change.

The stock really began to tumble in March when a whistleblower revealed that U.K.-based political consulting firm Cambridge Analytica collected the data of more than 50 million Facebook users without their permission and used it to target voters for Donald Trump’s campaign in the 2016 U.S. presidential election. The reports, which would prove to be the first of many privacy stumbles for Facebook, sent the stock crashing 7 percent on March 19, with its market value cratering nearly $36 billion.

Many users, feeling burned by Facebook for failing to protect their data, pledged to delete their accounts. Brian Acton, the co-founder of WhatsApp who joined Facebook by way of acquisition and announced his departure in 2017, tweeted to his 21,000 followers, “It is time. #deletefacebook.”

Acton’s departure from Facebook was followed by 10 more top executives including his own co-founder, Jan Koum. The stock fell almost 1 percent when Koum announced his departure. In September, Instagram’s co-founders Kevin Systrom and Mike Krieger announced that they would leave Facebook, sending the stock down about 0.3 percent the next day.

Facebook’s leaders, Zuckerberg and Chief Operating Officer Sheryl Sandberg, each testified in front of U.S. Congress in 2018 to explain their missteps and appeal to legislators who may be keen on regulating the social media giant. Facebook shares fell nearly 5 percent on March 27 when reports said Zuckerberg agreed to testify in front of Congress. In September, Sandberg appeared before lawmakers, sending the stock tanking close to 8 percent between Aug. 31, the trading day Sandberg released her opening statements, and Sept. 6, the day after the hearing. Facebook’s market value fell by $38 billion over that same period.

Just before Thanskgiving, Facebook was hit with another blow when the New York Times reported that Facebook used a PR firm called Definers to target liberal financier George Soros after suspecting him for funding an anti-Facebook group. After the report came to light, Facebook said it cut ties with Definers. Facebook’s share price slid share close to 9 percent from its close on Nov. 14 to its close on Monday following the report.

Zuckerberg has a tradition of making public his New Years Resolutions. In the past, he’s chosen to wear a tie every day and to only eat meat that he’s killed himself. This year, he took on a more sober challenge in a post on his public Facebook page.

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“For 2018, my personal challenge has been to focus on addressing some of the most important issues facing our community — whether that’s preventing election interference, stopping the spread of hate speech and misinformation, making sure people have control of their information, and ensuring our services improve people’s well-being. In each of these areas, I’m proud of the progress we’ve made,” Zuckerberg wrote, listing out a number of initiatives the company has taken on to tackle these issues. “I’m committed to continuing to make progress on these important issues as we enter the new year.”

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Social media detox — why quitting Instagram and Facebook made me happier

Microsoft finishes 2018 as the top public company

Microsoft has had a strong year. It continued its streak of exceeding analysts’ estimates for earnings and revenue with each of its earnings reports.

Its June GitHub acquisition, the third most expensive in the company’s 43-year history, behind LinkedIn and Skype, has been well received.

“The rationale for acquiring the asset is appealing, in our opinion,” Piper Jaffray analysts led by Alex Zukin wrote in a September note. “For Microsoft, developer mind share and wallet share is paramount. Microsoft believes that developers will have an outsized voice at the table in the age of digital transformation and that this was the most important reason for the acquisition. Secondarily, the company also believes that they can drive increased GitHub monetization.”

Meanwhile, gaming became a $10 billion business for Microsoft for the first time. The LinkedIn business doubled and is now generating more than $5 billion in annual revenue. Surface hardware revenue is approaching the $5 billion mark. And the Azure public cloud continued to gain share, picking up new business from the likes of Gap and Walmart. In the third quarter, Microsoft gained more share than Amazon, IBM, Google or Alibaba in the cloud infrastructure services market, according to Synergy Research Group.

“After another year of strong relative performance …, we believe Microsoft remains well positioned to continue to deliver steady top line and bottom line growth over the next 3-5 years given the breadth of its cloud portfolio, its growing annuity revenue base, and its strong balance sheet,” Evercore ISI analysts led by Kirk Materne wrote in a note earlier this month.

Some analysts now expect Microsoft to be worth more than $1 trillion before the end of 2019.

WATCH: Technician says Microsoft could be the new king of tech

Back-to-back down years for the stock market are rare

Worried about a down year in 2019? It’s statistically unlikely.

2018 is ending on a downer, with the S&P 500 down six percent (down four percent when dividends are included) for its first real down year since 2008 (the S&P was down 0.7 percent in 2015 on a price basis, but on a total return basis —including dividends — was up 1.4 percent).

Could 2019 see a second down year in a row? It’s certainly possible — a 10-year win streak would argue for some kind of mean reversion — but even so, consecutive down years in the S&P 500 are remarkably rare.

The last time the S&P was down two or more consecutive years on a total return basis (including dividends) was way back in 2000 to 2003, when it was down three consecutive years, according to data from the Stern School at NYU.

But that is rare: there have only been four instances since 1929 when the S&P declined two or more years in a row.

In the worst case, the S&P was down four consecutive years, from 1929 to 1932.

The S&P was down three consecutive years twice: 1939 to 1941, and 2000 to 2002.

It was down two consecutive years only once: 1973 and 1974.

Think about that: for all the worry about down markets, the S&P has dropped two consecutive years or more only four times since 1929. That’s pretty remarkable.

All other down years were one-offs (there were 12 of them), and the market was higher in the next year.

There’s something else to note about the consecutive down years: they follow big economic events, wars or big geopolitical conflicts.

The Great Depression: 1929 to 1932 declines.

Wars: World War II (1939-1941), Afghanistan/Iraq post 9-11 (2000-2002)

Geopolitical Events: Israel/Saudi oil embargo (1973-74).

“If one wants to be bearish on 2019, geopolitical issues are the only historically accurate argument,” Nicholas Colas from DataTrek tells me.

Unfortunately, there are no shortage of those for 2019. Traders are grappling with: 1) Central banks removing the stimulus of low rates, 2) a tariff war that has not been resolved, and 3) the prospect of China slowing down, with or without tariffs.

And while “political risk” is not a risk we have seen so far as a factor in consecutive down years, it could possibly mix with those other concerns to produce a toxic stew for earnings.

It’s the presence of these risks that should make students of market history hesitant to confidently declare 2019 will not be a down year.

Bill gates asked himself these questions at the close of 2018

This year, Gates shared his optimism for getting closer to eradicating polio and his delight at seeing solar and wind energy becoming cheaper, but he admitted that he’d “underestimated how hard it would be to vaccinate children” in war-torn areas and noted that he wants to “speak out more about how the U.S. needs to regain its leading role in nuclear power research.”

Science supports performing similar check-ins with yourself. One study shows that people who make time for self-reflection are happier, more productive and less burned out than people who don’t. Psychologists also highlight how self-reflection can help push you toward a purposeful change, help you reach your goals and trigger self-awareness.

Gates also notes how different his assessment looks today, at 63, than it was in his 20s, in his first days of building up Microsoft.

“Back then, an end-of-year assessment would amount to just one question: Is Microsoft software making the personal-computing dream come true?” writes Gates.

Today, with the inspiration of his wife Melinda and friend Warren Buffett, Gates now asks other questions about his life such as, “Did I devote enough time to my family?” “Did I learn enough new things?” and “Did I develop new friendships and deepen old ones?” he writes.

“These would have been laughable to me when I was 25, but as I get older, they are much more meaningful,” writes Gates.

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The stock market’s epic fourth-quarter reversal is one for the history books

Contestants in the men's race chase a Double Gloucester Cheese down the steep gradient of Cooper's Hill during the annual tradition of cheese-rolling in Brockworth, Gloucestershire, England.

Matt Cardy | Getty Images News | Getty Images

Contestants in the men’s race chase a Double Gloucester Cheese down the steep gradient of Cooper’s Hill during the annual tradition of cheese-rolling in Brockworth, Gloucestershire, England.

This volatile market year was full of historical milestones and the end of the year will be no different for a key stock index.

For the first time ever, the S&P 500 will end the year with a loss after being positive for the first three quarters. The benchmark index was up 9 percent through the first three quarters of the year. Then the October sell-off began. The S&P 500 fell 7 percent in October and accelerated those losses this month, in what is likely to be the index’s worst December performance since the Great Depression.

Read More: Here are the best and worst performing stocks of this tough and volatile year for the market

The S&P 500 is set to end 2018 down nearly 7 percent. The fourth-quarter sell off flies in the face of history, as the last three months are typically the strongest time of the year for the markets.

Oil prices are set for their worst year since 2015

But by October, forecasters were warning that demand for oil would grow more slowly than previously anticipated. The same month, the stock market plunged, hammered by a sell-off in high-flying technology equities, the ongoing U.S.-China trade dispute and rising interest rates.

Investors began dumping risk assets, and by the end of the month, oil had plunged about $11 a barrel from its Oct. 3 high. Momentum trading and the rotation out of slumping crude futures and into rising natural gas contracts also deepened losses for oil, analysts say.

Making matters worse, when the sanctions officially snapped back into place on Iran on Nov. 5, President Donald Trump surprised the market by granting generous exemptions to the Islamic Republic’s biggest customers. That meant Saudi Arabia, Russia and several other producers had been hiking output into a market where demand growth was moderating and fewer Iranian barrels than expected were lost.

At year end, the U.S.-China trade dispute remains unresolved, and the market remains concerned that a full-blown trade war between the world’s two biggest economies will dent fuel demand. Meanwhile, American crude output is growing more quickly than expected, with the United States topping Saudi Arabia and Russia to become the world’s biggest producer in the second half of 2018.

However, many U.S. producers need oil prices in the $50-$55 range to break even on the cost of new wells, which is forcing some energy companies to tap the breaks, said Neal Dingmann, oil equity analyst at Suntrust Robinson Humphrey.

Merck surges more than 30% in 2018, taking the crown as biggest Dow winner

Ken Frazier, chairman and chief executive officer of Merck & Co., speaks during an Economic Club of New York event in New York, U.S. on Wednesday, Oct. 3, 2018.

Bess Adler | Bloomberg | Getty Images

Ken Frazier, chairman and chief executive officer of Merck & Co., speaks during an Economic Club of New York event in New York, U.S. on Wednesday, Oct. 3, 2018.

2018 may have been the worst year for the Dow Jones Industrial Average in a decade, but Merck managed to easily buck that trend.

Shares of the pharmaceutical giant are up more than 30 percent for the year, on pace for their biggest annual gain since 2006. Merck is also one of six Dow stocks to have posted a gain this quarter, rising more than 6 percent. Meanwhile, the Dow has fallen 6.7 percent in 2018 to mark its worst yearly performance since 2008.

A key driver for Merck’s outperformance was the strong ramp-up in sales of Keytruda, a drug used to treat various forms of cancer. Keytruda sales surged 150 percent and 89 percent in the first and second quarter, respectively. Sales of the drug also climbed 80 percent during the third quarter on a year-over-year basis.

Vamil Divan, an analyst at Credit Suisse, said Merck and other pharmaceutical stocks also benefited from a “rotation” into defensive sectors like health care. “We expect some of that rotation to continue, but also see our companies needing to deliver innovation in order to overcome pricing pressures and drive further upside,” Divan, who has Merck pegged as a top pick, wrote in a note to clients earlier this month.

Shares Pfizer, one of Merck’s biggest competitors, were the second-best Dow performers this year with a gain of more than 18 percent, also benefiting from the rotation into more defensive names. Merck has a dividend yield of 2.9 percent, while Pfizer has a 3.3 percent payout.

Microsoft, Nike and Visa rounded out the Dow’s top five stocks as they all jumped at least 14 percent.

These strong yearly performances were outweighed by steep losses in Goldman Sachs, IBM, DowDuPont, Caterpillar and 3M, however.

Goldman Sachs was the worst-performing Dow stock of 2018, dropping about 36 percent. The stock has been under pressure this year as a scandal related to the defunct Malayan investment fund 1MDB lingers. Bank of America Merrill Lynch downgraded Goldman back in November, noting uncertainty over the scandal could fester.

IBM, meanwhile, struggled this year as it continued its transition away from enterprise technology as its main source of revenue. Caterpillar and 3M were pressured by an ongoing trade war between China and the U.S. as a large portion of their profits comes from overseas.

—CNBC’s
Michael Bloom
contributed to this report.

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Here are the retailers, including Sears, that went bankrupt in 2018

More than a dozen retailers — including major department store chains, mattress sellers and shoe companies — filed for bankruptcy protection in 2018, despite strong consumer spending that otherwise lifted the U.S. economy.

The pace of closures slowed from 2017, when more than 20 retailers including Toys R Us, Hhgregg, and Gymboree went bust. But the filings and resulting store closures are still painful for the employees and mall owners who find themselves dealing with the aftermath.

The biggest bankruptcy of 2018 was Sears, a 125-year-old business that was once the largest retailer in the U.S. The department store chain struggled to revive its business as it shut hundreds of stores and sold other assets in an attempt to raise cash. Sears’ fate is still uncertain heading into 2019, as the company’s chairman, Eddie Lampert, is in the process of trying to buy back Sears’ remaining stores and prevent them from going dark altogether. Sears employed roughly 70,000 people in the U.S. when it went bust in October.

For other businesses on the brink of bankruptcy, Sears offers a painful lesson of what can happen to a company when it fails to invest in its stores and website to keep pace with the rest of the industry. Companies like Walmart and Target doubled down on investments in their brick-and-mortar shops and e-commerce operations in 2018 — remodeling stores and adding faster shipping options. They’re expected to have had a strong holiday season as a result.

A list compiled by Moody’s shows retailers at risk of defaulting on loan payments — and therefore could be forced to file for bankruptcy in the New Year — include J.Crew, Neiman Marcus and TOMS Shoes. Analysts will be watching these names more closely, in addition to J.C. Penney, which just saw its shares fall under $1 for the first time last week. Below is a list of more than a dozen retailers that filed for bankruptcy in 2018.

The stock market is acting like earnings growth will turn negative next year

Earnings 2019: Up, flat, or down?

What happens to markets in 2019? It depends on your outlook on earnings. Fourth-quarter earnings have much less weight than usual, since everyone is concerned that the estimates for 2019 (currently 8 percent earnings growth) are too high and will be coming down.

Seventeen companies have reported earnings for the fourth quarter so far, and while the numbers of have been good, first quarter estimates have been heading lower, particularly after comments from Micron and FedEx, who noted that while the U.S. was still strong, international trends were definitely slowing.

Unfortunately, the fate of earnings may be in the hands of large macroeconomic issues that are difficult to model. Traders are weighing the following major issues:

  1. Can the Fed avoid making a policy error (hiking in a slowing growth environment with low inflation)?
  2. Other global rate risks: the ECB is ending stimulus — what impact will this have on European profits?
  3. Will there be clear progress on trade talks?
  4. How much is China slowing, with or without tariffs?

How strategists and analysts interpret the impact on earnings determines how they feel about the markets in 2019: If you think earnings growth is going to be zero, the market will be dead money to many. If you think earnings will be negative, the market will drop more.

But if you think earnings will still be growing in mid single digits, the markets should rally.

Right now, traders are in a pessimistic mood: “Earnings estimates are going down. The market is pricing in no earnings growth or even possibly negative growth for 2019,” Nick Raich, who tracks earnings at Earnings Scout, told me.

After a 14 percent drop in the fourth quarter, the S&P 500 is set to end the year down by about 7 percent, its worst performance in a decade.

Raich, who believes earnings will grow mid-single digits in 2019, believes the biggest risk to the market is a policy error by the Fed. He noted that the ECB made a similar, costly mistake in 2011: “Jean-Claude Trichet hiked rates as the European debt crisis was at its height in the summer of 2011, the markets tanked, and then a few months later Mario Draghi came in in the fall of 2011 and cut rates four months after Trichet.”

Raich does not believe the Fed will make a similar error, but it highlights the macro headwinds the market is facing for the early part of 2019.

No wonder the markets are so confused.

Throngs to pack New York’s Times Square for a mild, rainy New Year’s Eve

Rain or shine, performers will try to light up the crowd.

Bastille and New Kids On The Block will perform medleys of their hit songs on “Dick Clark’s New Year’s Rockin’ Eve,” and singer songwriter Bebe Rexha will perform John Lennon’s “Imagine” before the 60-second countdown to the midnight ball drop.

People who arrive early enough to grab a standing spot in Times Square itself may have a good view of the stages where the entertainers perform. The rest of the throngs, stuffed into pens stretching several blocks north toward Central Park, will be able to follow the action on viewing screens.

There are no public toilets in the pens, backpacks are banned and there are no garbage cans either, so picnicking for the event can be rough. But revelers will have plenty of companionship, though experts say probably well short of the 1 million to 2 million spectators claimed by city officials and organizers.

Thousands of police officers will be on hand to provide security, with the help of bomb-sniffing dogs, 1,225 security cameras and 235 “blocker vehicles” used to stop any potential vehicle attacks.

The show’s official programing begins at 6 p.m., with the lighting and raising of the New Year’s Eve Ball up a pole atop One Times Square. The Sino-American Friendship Association will flip the giant switch that lights the ball before presenting a Chinese cultural performance culminating in red and gold pyrotechnics.

The ball drops during the midnight countdown. This year, the ball is a 12-foot (3.5-meter) diameter geodesic sphere covered with 2,688 Waterford crystal triangles lit by 32,256 LEDs. The numerals “2019” will burst into light at midnight accompanied by pyrotechnics and the release of 3,000 pounds of confetti.

Mixed in with the confetti will be tens of thousands of wishes from around the world. People write their wishes on pieces of confetti posted on a mobile “wishing wall” in Manhattan or submit them online. Some of the wishes will be read onstage throughout the evening.