Pre-market actions: Facebook’s stock is down but not exhausted

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What’s happening: Big Tech shares fell on Monday as concerns about inflation prompted investors to reduce their exposure to the sector. But Facebook – which suffered hours of outage on all of its products, including Instagram and WhatsApp – has done the worst.
The action of the social network fell by nearly 5%. Microsoft (MSFT), for comparison, lost about 2%, while Apple (AAPL) lost 2.5%.

Facebook had already made headlines for all the wrong reasons. The Wall Street Journal recently ran a damning series revealing that the company’s own research indicated it was causing social harm. Leaked internal documents showed the company was aware of the damage Instagram was doing to teenage girls, and that changes to Facebook’s algorithm in 2018 ended up bringing up more controversial content, not less.

Former Facebook product manager Frances Haugen – the whistleblower who provided the documents – sat down for an interview with “60 Minutes” on Sunday.

“What I saw time and time again on Facebook was that there was a conflict of interest between what was good for the public and what was good for Facebook, and Facebook repeatedly chose to ‘optimize for its own interests, “said Haugen.

Clearly, none of this is good news for the company – and yet stocks rebounded 1.5% in pre-market trading on Tuesday.

Which give? While public opinion has turned strongly against Facebook in recent years, Wall Street has continued to reward its lucrative prowess.

Facebook doubled its profit in the second quarter, making $ 10.4 billion. Advertising revenue rose 56% from the same period a year earlier.

Shares have risen more than 19% so far this year, and 46% since companies like Hershey’s and Denny’s suspended ads on the platform as part of the #StopHateforProfit campaign in July 2020.

The big picture: A significant, long-term impact on Facebook’s actions would require a major shift in advertiser behavior, along with big wins from weary regulators.

It is not excluded. Facebook warned over the summer that sales growth could slow in the second half of the year, and it is fighting a serious push in the United States to dismantle the company. On Monday, his lawyers asked a court to dismiss an amended antitrust complaint filed by the Federal Trade Commission, saying there was “no plausible factual basis for calling Facebook an illegal monopolist.”

Recent developments could intensify the pressure. Democratic Representative Alexandria Ocasio-Cortez said Monday’s all-platform blackout would not have happened “if Facebook’s monopoly behavior had been brought under control when it should have been.”

“Break them,” she tweeted.

That’s not all: Haugen – who will testify before a Senate subcommittee on Tuesday – has filed at least eight complaints with the Securities and Exchange Commission alleging the company is hiding research into its shortcomings from investors and the public.

But for now, don’t expect Wall Street to start dumping large slices of Facebook stock. At least, not before announcing its third quarter results.

OPEC move sends US oil prices to their highest level in 7 years

The Organization of the Petroleum Exporting Countries is sticking to its plan to gradually increase oil production as demand picks up, defying pressures to turn on its taps more widely and causing crude prices to rebound again.

The latest: OPEC and its allies, including Russia, said Monday after an unusually quick meeting that they would stick to a previous decision to increase supply by 400,000 barrels per day in November.

This pushed up Brent crude futures, the world’s benchmark for oil, 2.5%. They continued to recover on Tuesday, reaching their highest level since 2018. West Texas Intermediate futures, the US benchmark, hit their highest level in seven years.

“It’s not that [OPEC and allies do] not recognize the upcoming supply shortage, ”said Bjornar Tonhaugen, head of oil markets at Rystad Energy. “The group is well aware of global inventories, maintenance work and growing demand, but chose to wait until later this year to take a bolder approach. approach to the offer. “

What it means: Higher prices are a positive development for crude oil producers. But for consumers, who were already worried about inflation, it’s a growing concern.

Energy prices in developed countries rose 18% in August, the fastest pace since 2008, according to data released Tuesday by the Organization for Economic Co-operation and Development.

Watch this space: Oil prices could be pushed even higher thanks to soaring natural gas and coal costs, which could trigger a rush on crude to generate electricity over the winter, a UBS analyst Giovanni Staunovo said in a note to clients.

A cold winter in the northern hemisphere or further supply disruptions could also keep prices from falling, he added.

Another Chinese real estate developer is in trouble

Global investors are increasingly concerned that the Chinese real estate market is a bubble about to burst.

Over the past few weeks, the plight of Evergrande, the heavily indebted Chinese real estate developer, has sparked many obsessions with finding the money he needs to survive.

But this is not the only weak link in the system. Fantasia, a Chinese luxury apartment developer, missed $ 315 million in payments to lenders on Monday. The company, whose shares were suspended on Tuesday, said it was assessing “the potential impact on the group’s financial and cash position.”

Take a step back: The news has rekindled fears that debt problems could worsen in China’s oversized real estate sector, reports my CNN Business colleague Laura He. The industry is vital to the Chinese economy, accounting for around 30% of its production.

“The [Chinese] The real estate sector is of concern, ”Macquarie group economists Larry Hu and Xinyu Ji wrote in a research note on Tuesday. Property sales in China’s top 30 cities fell 31% in September from a year ago, Macquarie estimated.

The fallout will depend on what Beijing does next. The government should step in to limit the consequences for homebuyers, but could be tougher on businesses themselves as it tries to send a message of financial discipline.

Following

The ISM non-manufacturing index, which tracks the U.S. service sector, arrives at 10 a.m. ET.

Also today: The testimony of whistleblower Facebook before the Senate Subcommittee on Consumer Protection, Product Safety and Data Security will also begin at 10 a.m. ET.

Coming tomorrow: earnings of Constellation brands (STZ) and Levi Strauss (LEVI).

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