Author: Reuters

By Nell Mackenzie and Carolina Mandl

LONDON/NEW YORK (Reuters) -Global hedge funds sold tech stocks at their highest pace in almost eight months in the week to Feb. 23, Goldman Sachs said, piling into bets against the sector just as Nvidia’s latest earnings fuelled a surge in tech shares.

The tech share selling by hedge funds ranked among the highest seen in the last five years, according to the Goldman Sachs note released on Friday and seen by Reuters on Monday.

In a separate note, Morgan Stanley said tech was the most net sold sector last week.

Stock indexes, including the tech-heavy Nasdaq, have rallied to record highs on optimism about artificial intelligence. Chipmaker Nvidia added $277 billion in stock market value on Thursday, Wall Street’s largest one-day gain in history, after the company’s quarterly report beat expectations.

But in a sign that sentiment may be turning, the number of hedge funds that now have short bets that tech stock prices will fall is twice versus those with long positions, Goldman Sachs said.

Hedge funds took short bets against stocks from tech companies across the sector. They exited long positions and added short punts on manufacturing and service equipment for the semiconductor industry, tech hardware, storage and IT services, the bank said.

The speculators added short bets to software companies, Goldman Sachs said, while Morgan Stanley said hedge funds bet against semiconductor and tech hardware companies.

However, traders remained reluctant to completely sever their positive positions in tech, a separate note from Goldman Sachs said. That pointed to a two-year high in call options on Nvidia.

These are derivatives bets which only make the trader long if the stock passes a certain price threshold – a way to express a positive position in the stock but only if it rises to a certain extent.

Speculators were generally short U.S. stocks, piling into the largest net selling of the region’s equity markets in five weeks, the first Goldman Sachs note said.

Persistent price rises by U.S. service sector businesses have underscored the stickiness of inflation and pushed back expectations for interest rate cuts in 2024, denting hopes for a soft landing.

Traders ditched tech, health care and industrial stocks and instead bought the largest amount consumer staples stocks in 10 weeks, adding companies which make products that people routinely buy, Goldman Sachs said.

Morgan Stanley said hedge funds sold equities Monday through Wednesday, but changed their minds after the Thursday tech rally sparked by Nvidia and bought back all of what they previously sold, mainly in industrials, materials and financials.

(Reporting by Nell Mackenzie in London, and Carolina Mandl in New York; editing by Dhara Ranasinghe, Andrew Heavens and Leslie Adler)

By Dawn Chmielewski and Lisa Richwine

(Reuters) – David Greenbaum has been named to the newly created role of president, overseeing Disney Live Action and 20th Century studios, reporting to Disney Entertainment co-Chairman Alan Bergman, Walt Disney Studios announced on Monday.

He succeeds Sean Bailey, who oversaw Disney’s live action films since 2010, and is stepping down, the company said.

Disney struggled at the box office in 2023, marred by such flops as the theme-park-ride inspired “Haunted Mansion.” CEO Bob Iger has promised investors Disney would work to improve the quality of the company’s movies.

“The performance of some of our recent films has definitely been disappointing, and we don’t take that lightly,” Iger said on an August 2023 earnings call. “And as you’d expect, we’re very focused on improving the quality and the performance of the films that we’ve got coming up. It’s something that I’m working closely with the studio on.”

Greenbaum brings well-established filmmaker relationships to his new role. He most recently served as president of Searchlight Pictures, which released such films as Academy Award Best Picture winners “The Shape of Water” and “Nomadland,” and other critically acclaimed movies including “The Menu” and “The Favourite.”

“David has an incredible creative sensibility and eye for film,” Bergman said in a statement, lauding his track record at Searchlight Pictures and deep relationships throughout the industry.

Under Bailey’s tenure, Disney released a number of re-imagined classics, “The Lion King,” “Beauty and the Beast” and “Aladdin,” which crossed $1 billion. The most recent live-action adaptation of an animated film, “The Little Mermaid,” took in $569.6 million at global box offices, underperforming other remakes.

Disney said Bailey will serve as producer of Disney’s “Tron: Ares” and other projects.

(Reporting by Dawn Chmielewski and Lisa Richwine in Los Angeles; Editing by Leslie Adler and David Gregorio)

(Reuters) -Online travel platform Expedia said on Monday it was cutting about 1,500 jobs globally, or about 9% of its total workforce, as part of its “organizational and technological transformation”.

The restructuring comes after Expedia warned earlier this month that revenue would moderate in 2024 as air ticket prices drop and said CEO Peter Kern was stepping down.

“The business continues to evaluate the appropriate allocation of resources to ensure the most important work continues to be prioritized,” an Expedia Group spokesperson said.

Travel companies are tempering expectations for 2024, a sign that demand is expected to grow more slowly this year.

Last week, Booking Holdings forecast slower first quarter and full-year growth in bookings as U.S. travel demand normalizes.

Total pre-tax charges and cash expenditures associated with the restructuring actions are expected to be between $80 million and $100 million, Expedia said.

Shares of the company were up marginally in aftermarket trading.

(Reporting by Kannaki Deka in Bengaluru; Editing by Pooja Desai)

By Zaheer Kachwala

(Reuters) -Zoom Video Communications on Monday posted better-than-expected quarterly results helped by strong demand for its expanding product portfolio as more employers embrace hybrid work models, sending its shares up about 10% in extended trading.

Zoom also authorized a stock buyback of up to $1.5 billion of its outstanding Class A common stock.

The video-conferencing provider’s fourth-quarter results indicate Zoom’s attempts to integrate AI into its products and diversify its portfolio have paid off, as it takes advantage of a surge in hybrid working.

It reported an adjusted profit of $1.42 per share for the quarter ended Jan. 31, above analysts’ estimates of $1.15 per share, according to LSEG data. Revenue stood at $1.15 billion, beating an estimate of $1.13 billion.

“The company is doubling down on its long-term strategy to integrate generative AI rather than risk its massive cash holdings on a start-up that might more immediately drive topline growth,” said Ryan Koontz, a senior equity analyst at Needham and Co.

Zoom introduced its AI companion during its third quarter, allowing paid users to access features including meeting summaries and catch-ups, as well as email and chat composing prompts.

“We are also going to build new services and are driven by Zoom AI companion, this year we are going to double down on Zoom AI customization and also focus on monetization,” said Zoom CEO Eric Yuan on a post-earnings conference call.

The Zoom AI companion has over 510,000 accounts enabled in the past five months, CFO Kelly Steckelberg said.

The company also reported operating cash flow margin of 30.6% for the reported quarter.

Zoom forecast fiscal-year 2025 revenue of about $4.60 billion, which is below analysts’ estimate of $4.66 billion.

It also forecast first-quarter revenue of $1.13 billion, in line with analysts’ expectations.

(Reporting by Zaheer Kachwala in Bengaluru; Editing by Pooja Desai and Shailesh Kuber)

By Steve Holland and Tim Reid

WASHINGTON (Reuters) -Joe Biden and Donald Trump will visit the U.S.-Mexico border on the same day this week, highlighting how illegal immigration has become one of the most important issues as they look towards a likely general election rematch in November.

Biden will travel to Brownsville, Texas on Thursday to meet with U.S. Border Patrol agents, law enforcement, and local leaders, a White House official said.

On the same day, Republican former President Trump, who has been highly critical of his Democratic successor’s border policy and the number of illegal immigrants crossing into the U.S., will visit Eagle Pass in Texas, a Trump campaign aide said.

Trump is close to securing the Republican presidential nomination after a series of primary victories over former South Carolina Governor Nikki Haley, his last remaining rival. Trump is now focusing his attacks on Biden, with polls showing Biden vulnerable over the issue of illegal immigration.

The Democratic president’s approval rating sank to 38% in January as concerns over immigration flared, the latest Reuters/Ipsos poll showed.

The poll found rising concern about immigration, with 17% of respondents listing it as the most important problem facing the U.S. today, up sharply from 11% who cited as the most pressing issue in December. It was the top concern of Republican respondents, with 36% citing it as their main worry, above the 29% who cited the economy.

Biden’s administration has struggled to cope with a surge of asylum seekers on the U.S.-Mexico border, while Republicans in Congress, egged on by Trump, have threatened to scuttle a bipartisan attempt to tackle the problem.

Republicans in the U.S. House of Representatives are pressing ahead with an effort to impeach Biden’s top border official, Homeland Security Secretary Alejandro Mayorkas.

On Thursday, Biden will discuss the urgent need to pass the Senate’s bipartisan border security agreement, according to a White House official. Biden has been blaming Trump for urging House Republicans to block the effort.

A Trump aide said the fact the Biden is visiting the border on the same day as the former Republican president “shows just how big of a problem this is for him”.

The U.S. president will reiterate calls for congressional Republicans to provide the funding needed for additional U.S. Border Patrol agents, more asylum officers, fentanyl detection technology, and more, the White House official said.

(Reporting by Steve Holland and Tim Reid ; Writing by Doina Chiacu; editing by Chizu Nomiyama and Mark Heinrich)

By Raphael Satter and Christopher Bing

WASHINGTON (Reuters) – Hackers working for the ‘Blackcat’ ransomware gang are behind the outage at UnitedHealth’s technology unit that has snarled prescription deliveries for six days, two people familiar with the matter told Reuters on Monday.

The problems began last week after hackers gained access to Change Healthcare’s information technology systems and has led to disruptions at pharmacies across the United States.

Change Healthcare and UnitedHealth did not immediately respond to requests for comment. Blackcat, also known as “ALPHV,” did not immediately respond when asked whether it was responsible.

Alphabet’s cybersecurity unit Mandiant is handling the investigation into the breach, the two people said. In a statement, Mandiant confirmed it “has been engaged in support of the incident response” but declined to comment further.

Blackcat is one of the most notorious of the internet’s many ransomware gangs – groups of cybercriminals who encrypt data to hold it hostage with the aim of securing massive payouts. It has previous struck major businesses including MGM Resorts International and Caesars Entertainment.

In December, Blackcat was the subject of a takedown by U.S.-led international law enforcement, which seized several websites used by the group as well as hundreds of digital keys used to decrypt victims’ data.

The hackers had threatened to retaliate by extorting critical infrastructure providers and hospitals.

CISA, the U.S. cyber watchdog agency, and the FBI also did not immediately respond to emails seeking comment.

One expert said the news suggested that digital disruptions, while important, could not be counted on to knock ransomware groups out for good.

“It’s inevitable that if you have a group that’s making millions of bucks, they are going to attempt to make a comeback,” said Brett Callow, a threat analyst at the cybersecurity firm Emsisoft.

The allegation that Blackcat was behind the hack at Change Healthcare also raised questions about parent company UnitedHealth’s previous claim that it had been targeted by a “suspected nation-state associated cybersecurity threat actor.”

“I am not aware of any links between ALPHV and a nation state,” Callow said. “As far as I am aware they are financially motivated cybercriminals and nothing more.”

Reuters has not been able to gauge the full extent of the disruption.

A number of pharmacy chains, including CVS Health and Walgreens, have said the outage had knock-on effects on their businesses.

The American Pharmacists Association (APhA) said on Friday many pharmacies across the nation could not transmit insurance claims for their patients following the hack.

It said pharmacies were reporting “significant backlogs of prescriptions,” which they were unable to process.

(Reporting by Raphael Satter and Christopher Bing in Washington; Additional reporting by Pratik Jain in Bengaluru; Editing by Sriraj Kalluvila, Shilpi Majumdar and Bill Berkrot)

By Saqib Iqbal Ahmed

NEW YORK (Reuters) – Investors’ fervor for all things AI-related is leaving its mark on the U.S. options market, as traders pile in to derivatives bets to gain exposure to the red-hot investing theme.

Options on artificial-intelligence darling Nvidia accounted for 25 cents of every dollar of premium – the price of contracts – traded in U.S. single-stock options over the past month, nearly $3 billion in options premium traded in the chipmaker’s options every day on average, a Reuters analysis of Trade Alert data showed. During several recent sessions, Nvidia surpassed Tesla as the option market’s most heavily traded name for the day.

Nvidia briefly hit $2 trillion in market value for the first time on Friday – two days after it released quarterly earnings – riding on insatiable demand for its chips which feature prominently in the generative AI craze.

Nvidia recently became the third-largest U.S.-listed company as measured in market capitalization. Its shares command a weighting of 4.5% in the S&P 500, giving them an outsized influence on the broader index’s moves.

Nvidia’s options should remain popular with traders, “both from a hype and mechanical index perspective,” said Garrett DeSimone, head of quantitative research at OptionMetrics. “It represents such a large portion of S&P 500 weighting.”

The stock’s options have drawn a range of bets, including ones guarding against a drop in the stock toward $350 by March and others that would bear fruit if the stock extended its meteoric rise toward $900 and higher in coming months.

Nvidia shares were up 1.4% at $798.90 on Monday afternoon.

A host of other AI names has also drawn heavy options volume, including Super Micro Computer and Arm Holdings. Nvidia’s shares are up about 60% year-to-date, while those of Super Micro Computer have risen 200% and Arm’s have gained 77%. Nvidia is not the first company to captivate options players. Derivatives bets on electric-vehicle manufacturer Tesla accounted for around half of all equity, index and ETF options premium in October 2021, as the company’s shares soared. Tesla’s options remain a crowd-puller that still often feature on the list of any given day’s most actively traded options.

Though the frantic pace of trading in Nvidia’s options could ease now that its earnings report is in the rearview mirror, market participants said the AI theme was likely to remain popular among investors.

Some of the future demand for Nvidia’s options is likely to come from investors who may have missed the wild rally in the stock. “There are undoubtedly institutions that may not want to chase an already highly appreciated stock but don’t want to miss out on the rally,” said Steve Sosnick, chief strategist at Interactive Brokers. Buying options would “allow them to get leveraged exposure to Nvidia’s upside but with a defined cash outlay,” he said.

(Reporting by Saqib Iqbal Ahmed in New York; Editing by Ira Iosebashvili and Matthew Lewis)

By Dawn Chmielewski and Svea Herbst-Bayliss

(Reuters) -Walt Disney shareholder Blackwells Capital is calling for it to come up with an artificial intelligence (AI) strategy, saying that this could lift the U.S. media and entertainment conglomerate’s stock price by as much as 129%.

Blackwells is one of two activist investors pushing for board seats at Disney. While it has largely backed CEO Bob Iger’s leadership of one of the world’s largest entertainment companies, it has recently laid out potential changes, including a possible breakup and spinning off its park and hotel assets into a real estate investment trust.

Blackwells said in a presentation published on Monday “Disney must produce an artificial intelligence strategy, and share elements of that strategy with its shareholders.”

Since 2023, the largest technology companies have added more than $5.2 trillion to their cumulative market values after announcing major AI initiatives, Blackwells said, adding that Disney could do more if it adopted and preached the “technology native stack and mindset.”

The critique does not acknowledge Disney’s long-term investment in new technologies that span half a century, according to patent filings and current and interviews with 15 former executives, business partners and industry observers to discuss the company’s technology strategy.

Disney also formed an AI Task Force last year to study artificial intelligence and how it could be applied across the conglomerate, Reuters first reported. 

In a letter Monday to shareholders titled “Promises Made: Promises Kept,” Disney said the board was committed to what it called an “ambitious plan” to restore value to shareholders. It argued that replacing Disney board members with the nominees of two activist investors would disrupt the company’s progress.

Disney also took issue with Blackwells’ proposal that it spin off its land and hotels into a real estate investment trust, and break up the rest of the company into separate entities. That strategy, it argued, demonstrated “a complete misunderstanding of Disney’s strengths derived from the synergies across our businesses.”

Blackwells, which is pushing to win three board seats at Disney, said its share price could potentially rise $246.96 from its current level of $107.74, the presentation forecast.

“Artificial intelligences’ impact on Disney – is at minimum – comparable to its impact at large tech companies,” Blackwells said. “Disney’s potential in the AI and spatial computing spaces cannot be understated,” it added.

Blackwells also suggested that Disney hire a corporate chief technology officer to focus on technology transformation.

Nelson Peltz’s Trian Fund Management is also campaigning for board representation at Disney, asking investors to elect its two director candidates. 

VIRTUAL WORLDS

Among the 4,172 patents Disney has registered with the U.S. Patent and Trade Office since 1973, are 260 that refer to augmented reality, including one filing dating from 1997 that describes a virtual easel that would digitize an artist’s illustration.

Patents reviewed by Reuters describe technologies for generating three-dimensional virtual environments and for incorporating augmented and virtual reality into moving theme park rides. One of these technologies is on display with the Avatar Fight of Passage attraction in Disney’s Animal Kingdom, where guests ride a winged mountain banshee for a virtual 3D flight over Pandora’s landscape.

Disney’s theme parks have historically provided a showcase for the company’s technology since the first audio-animatronic robots arrived at Disneyland in 1963, in the form of tropical birds chirping and wise-cracking in the Tiki Room.

Efforts to blend the physical and digital worlds have been happening in other areas. Disney’s consumer products group partnered with Lenovo in 2017 on a Star Wars-inspired game that used augmented reality and a smartphone to bring lightsaber battles into the home.

The Walt Disney Studio, meanwhile, has explored ways to use augmented reality to lift its most popular characters off the movie screen and place them into the physical world, where they would interact with fans.

Disney has also committed to create content for the Apple Vision Pro mixed reality headset.

Its journey into the virtual future has not been without missteps.

The company created content for a half-dozen virtual worlds inspired by such popular film franchises such as Pirates of the Caribbean and Cars in the 2000s, only to shutter them less than a decade later.

It has also sold off its Avalanche Software game studio to rival Warner Bros Interactive in 2017, after failing to meet internal sales projections, according to one former Disney executive with direct knowledge of the situation.

Disney now licenses its characters and stories for games produced by other companies, a strategy which it says has produced nine games that grossed more than $1 billion in sales.

The company recently invested $1.5 billion for an equity stake in Fortnite-maker Epic Games.

(Reporting by Svea Herbst-Bayliss and Dawn Chmielewski in Los Angeles Editing by Alexander Smith, Mark Potter, Kenneth Li and Marguerita Choy)

HOUSTON (Reuters) -Oil prices gained more than $1 by midday on Monday as European diesel demand, constrained by Russian sanctions and shipping disruptions, pulled prices higher in a market jittery with U.S. refinery output limited by planned overhauls, analysts said.

Brent crude futures were up $1.41, or 1.73%, to $83.03 a barrel at 12:11 p.m. CST (1811 GMT). U.S. West Texas Intermediate crude futures (WTI) climbed $1.48, or 1.93%, to $77.97.

“We’re all watching the diesel,” said John Kilduff, partner with Again Capital LLC.

A slump in U.S. refining activity and disruptions to global trade have tightened diesel supplies in recent weeks, dampening historically high U.S. diesel exports to Europe this month.

U.S. diesel cracks briefly surged to a four-month high of more than $48 a barrel this month, crimping arbitrage opportunities to ship the fuel to Europe.

Iran-aligned Houthi rebels in Yemen narrowly missed hitting a U.S.-flagged tanker on Saturday, the U.S. Central Command said. Another vessel hit by the rebels last week was abandoned and has been seen leaking fuel in the Red Sea.

Possible disruptions “are what’s haunting this market,” Kilduff said.

While early trade on Monday was driven by fears about persistent inflation limiting demand, the focus moved to a more basic issue, said Phil Flynn, analyst and Price Futures Group.

“We seem to be slipping back to the supply side issue,” Flynn said. “Demand is very strong and at the end of the day, it’s about supply and demand.”

Refiners are also expected to begin restoring production in March following the completion of planned plant overhauls at U.S. refineries, he said.

U.S. refinery utilization has been at 80.6% of national capacity for the past two weeks, the U.S. Energy Information Administration said last week.

Oil prices have been trading between $70 and $90 a barrel since November as rising U.S. supply and concern over weak Chinese demand offset OPEC+ supply cuts despite wars raging in Ukraine and Gaza.

As the Israel-Hamas conflict continues in the Middle East, White House national security adviser Jake Sullivan told CNN on Sunday that negotiators for the United States, Egypt, Qatar and Israel had agreed on the basic contours of a hostage deal during talks in Paris but were still in negotiations.

(Reporting by Erwin SebaAdditional reporting by Noah Browning in London, Florence Tan in Singapore and Colleen Howe in BeijingEditing by David Goodman, Mark Potter and Sharon Singleton)

By David Shepardson and Jasper Ward

WASHINGTON (Reuters) -The U.S. Federal Trade Commission said Friday it filed a complaint accusing H&R Block of deceptively marketing its online tax-filing software as free when that is not true for many consumers.

The FTC also alleged the company deleted consumers’ tax data and required them to contact customer service when downgrading to more affordable products.

The FTC said H&R Block’s TV ads and promotions indicated consumers could file their tax returns for free while including language – sometimes in fine print – that the free offer only applied to simple returns.

The ads did not explain what a simple return was, and the company has changed the definition of the term “multiple times in recent years,” the commission said, saying H&R Block was aware of consumers’ frustration and confusion with the ads.

“H&R Block designed its online products to present an obstacle course of tedious challenges to consumers, pressuring them into overpaying for its products,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection.

On H&R Block’s website, it advertises alternatives to the free version that cost from $35 to $85 for a federal return. The FTC is not seeking any civil penalties.

H&R Block said in a statement it believes “we provide our clients with a great deal of value, unmatched tax expertise, and fair and transparent pricing.” The company added it has offered a free, do-it-yourself “filing option for more than 20 years to help millions of Americans file their taxes.”

Last month, the FTC barred TurboTax software maker Intuit from advertising or marketing services as free when many consumers were in fact ineligible, saying the company had engaged in deceptive practices.

Intuit said it would appeal. In 2022 it paid $141 million in restitution over similar charges.

(Reporting by Jasper Ward, Kanishka Singh and David Shepardson; Editing by Eric Beech and Cynthia Osterman)