Stocks Dip as Week Begins; Microsoft Announces Acquisition of Activision Blizzard

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Stocks opened the week lower after last week's declines, pressured by weakening bank earnings. In a landmark move, Microsoft Corporation (MSFT) revealed plans to acquire game developer Activision Blizzard, Inc. (ATVI) for $68.7 billion, marking its largest acquisition to date.

The Dow Jones Industrial Average (DJIA) and S&P 500 both dropped close to 1.5%, while the Nasdaq Composite edged down nearly 2%. Meanwhile, the 10-year Treasury yield surged to a two-year peak, surpassing 1.83%.

Highlights

• Stocks continued their downward trend at the start of the week amid slumping bank profits.
• Microsoft's acquisition of Activision Blizzard stands as its biggest deal ever, expanding its gaming footprint.
• The World Bank significantly lowered its global economic growth outlook, citing inflation and inequality concerns.

The recent market sell-off follows last week's pressure on financial stocks after major banks reported disappointing results. Treasury yields climbed, and oil prices reached a seven-year high due to supply limitations. Oil prices continued to rise today, while cryptocurrencies experienced sharper declines.

Investors are preparing for upcoming earnings reports from leading financial institutions. Goldman Sachs Group, Inc. (GS) missed profit expectations, and PNC Financial Services Group, Inc. (PNC) reported a drop in fourth-quarter net income.

This morning, the Federal Reserve Bank of New York released its January Empire State Manufacturing Index, which fell 33 points to -0.7. Approximately 22% of respondents noted worsening conditions, with longer delivery times and increased unfilled orders.

The National Association of Home Builders is set to publish its January Housing Market Index, with consensus estimates predicting a slight dip to 83 from December's figures. While below the November 2020 peak of 90, the index remains historically strong as builders maintain a positive outlook on the housing market.

Additional Headlines: Microsoft, 'Scream,' Netflix & More

Microsoft agreed to acquire Activision Blizzard for $95 per share in cash, representing a 45% premium over Activision's last closing price. This acquisition positions Microsoft as the third-largest gaming company globally by revenue, trailing Tencent Holdings Limited (TCEHY) and Sony Group Corporation (SNE).

Paramount's Scream earned an estimated $30 million at the North American box office this weekend, overtaking Spider-Man: No Way Home, which had dominated for nearly a month.

The U.S. Federal Aviation Administration announced new precautions for Boeing Company's (BA) 787 aircraft when landing on wet or snowy runways at airports deploying new wireless services. The FAA cautioned that 5G interference could disrupt engine and braking systems, potentially hindering the aircraft's ability to stop safely.

Netflix, Inc. (NFLX) increased its monthly subscription fees in the U.S. and Canada by $1 to $2, depending on the plan, aiming to fund new content to stay competitive in the streaming market.

According to an amended antitrust complaint filed by Texas and 15 other states, CEOs of Alphabet Inc. (GOOG) and Meta Platforms, Inc. (FB) were aware of a deal to divide parts of the online advertising market. Google has denied the allegations and plans to seek dismissal of the complaint.

A U.S. federal judge permanently barred Martin Shkreli from participating in the pharmaceutical industry. He must also return $64 million in profits gained through price gouging and monopolizing the market for the life-saving drug Daraprim via his former company, Vyera Pharmaceuticals.

World Bank Revises Global Growth Outlook

The World Bank has significantly downgraded its global economic growth forecasts, highlighting risks from rising inflation, mounting debt, and growing income inequality that threaten recovery in emerging and developing economies.

In its latest Global Economic Prospects report, the World Bank projects global growth slowing to 4.1% in 2022 and 3.2% in 2023, as countries begin scaling back unprecedented fiscal and monetary support. This follows a robust 5.5% growth rebound last year driven by surging demand post-COVID-19 lockdowns.

Advanced economies are expected to decelerate from 5% growth in 2021 to 3.8% in 2022, returning to pre-pandemic growth trends by 2023. The U.S. growth forecast was lowered to 3.7% from 5.6%, while China's growth is projected to ease to 5.1% this year from 8% last year, influenced by ongoing pandemic impacts and regulatory tightening.

The World Bank emphasized that persistent COVID-19 variants like Omicron could further dampen global growth prospects.

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