Stocks opened the session comfortably in the green, but a mid-session swoon in tech shares dragged the major indexes lower. The Dow managed to recover in late trading, but the S&P 500 Index and the Nasdaq remained underwater.
The Dow rose 85 points, boosted by big gains from Verizon Communications and Boeing Co. 18 of its 30 components advanced. The S&P 500 Index dropped 2, and the tech-heavy Nasdaq sank 40. Decliners led advancers by six to five on the NYSE and two to one on the Nasdaq. The prices of Treasuries weakened. Gold futures rose $10.60 to close at $1,260.00 an ounce, and the price of crude oil gained $0.29 to settle at $49.04 a barrel.
In earnings news:
- Shares of Facebook (FB) jumped 2.92% after the social media giant beat profit and revenue expectations and reported a 17% year-over-year increase in daily active users, now totaling 1.32 billion people.
- A higher volume of consumer spending helped push MasterCard Inc.’s second-quarter profit and revenue past expectations. The stock (MA) fell 1.54%, however, after closing at a record high yesterday in advance of its earnings report.
- Shares of Twitter Inc. (TWTR) tumbled 14.13% after the social media network reported its second-quarter monthly active users were flat from the first quarter at 328 million. Revenue dropped 4.7% to $573.9 million, and its net loss widened to $116.5 million.
In other business news:
- Libor, the London Interbank Offer Rate used as a benchmark for a wide variety of assets, could be replaced by 2021 by a new benchmark, according to the United Kingdom’s Financial Conduct Authority. Libor has been involved in rate-rigging scandals, where traders and banks were accused of manipulating the rate. Libor is used to price trillions of dollars of financial products such as mortgages and derivatives, and finding a new benchmark could pose challenges.
- New orders for durable goods rebounded from a 0.1% decline in May to post a strong 6.5% advance in June, according to the Commerce Department. Year over year, new orders jumped 16.1%. The gains were led by a massive 131% jump in civilian aircraft orders; excluding the entire transportation segment, durable goods orders were up a more disappointing 0.2% for the month. Core capital goods orders and motor vehicle orders both declined.
- The Nasdaq staged a mid-afternoon dive that carried into the close, with steep losses coming from Apple Inc. (AAPL), down 1.89%, Google-parent company Alphabet (GOOGL), falling 1.33%, Netflix (NFLX) sinking 3.38%, and then biotech stocks in general. The Nasdaq Biotechnology Index (^NBI) dropped 1.94%. There seemed to be no immediate catalyst for the pullback beyond general worries over high valuations.
Here’s a new twist on the phrase “currency effects.” Advanced Micro Devices (AMD), the computer-chip maker, said in its second-quarter earnings report that much of the demand for its high-powered graphics cards during the quarter came from cryptocurrency miners of the new blockchain quasi-currency Ether. Imagine reading that sentence 10 years ago and wondering what sci-fi novel you just stumbled onto. Ether, for those unfamiliar, is the latest rival to bitcoin, and bitcoin, for those unfamiliar with that, is a decentralized currency run on a blockchain; and for those unfamiliar with that, a blockchain is a peer-to-peer computer network that functions as a distributed database that can keep track of, for example, a record of financial transactions while keeping the parties to the transaction anonymous. One virtue of a blockchain is that it’s distributed across hundreds of thousands of nodes (computers and servers), which makes it more resistant to hacking and corruption.
Bitcoin was the first major application of the blockchain technology. It uses the peer-to-peer network to support a decentralized digital currency, with no central banks or state actors required. The integrity of the blockchain is maintained by digital miners, who harness their computing power to continually verify transactions across the network and perform various computing proofs. Completion of these proofs uses lots and lots of processing power (hence AMD’s bonanza), and the miners are rewarded with newly created bitcoins in the process. Yes, it’s confusing, but then so was the first time someone said, “Hey, you know what? I’ll give you 10 of these shiny gold bits I found in the ground for that cow over there.”
Bitcoin is one application of blockchain technology. Ether, by contrast, is the entryway into Ethereum, which is a software platform that allows users to create applications using the blockchain. You can use Ethereum to create all sorts of decentralized applications, and you use Ether to pay for the things on the network. Ether is the (extremely volatile) digital currency of the moment, with miners rushing to acquire as much computing power as they can to get rewarded with more Ether units. In U.S.-dollar terms, the price of Ether spiked from around $50 in April to $400 in June, and now back down to roughly $200.
I’d say more, but one of the challenges of writing about the interesting developments of blockchain technology is that you run out of room explaining what in the world blockchain technology is in the first place. It must be similar to the situation when that ancient cow-owner, accustomed to evaluating livestock in terms of the equivalent number of buckets of wheat, first considered trading for a shiny piece of metal. “So, tell me again how this ‘money’ thing works, because it all sounds so complicated.”