Stocks, oil prices and government-bond yields slid Monday as anxiety mounted over the spread of the Delta coronavirus variant and its potential impact on the global economy.
The Dow Jones Industrial Average slumped 876 points, or 2.5%, in afternoon trading, putting the index on track for its worst one-day drop in point terms since October.
The S&P 500 fell 2%, while the technology-heavy Nasdaq Composite declined 1.3%. Monday’s losses marked an acceleration after U.S. stock indexes retreated last week, snapping a three-week winning streak.
Investors sheltered in the safety of government bonds. The yield on 10-year Treasury notes fell to 1.182%—its lowest level since February—from 1.30% Friday. Bond yields fall when bond prices climb.
Oil prices fell after the Organization of the Petroleum Exporting Countries and a Russia-led group of big producers agreed to raise production. Futures on Brent crude, the international benchmark, tumbled 6.7% to $68.68 a barrel, their lowest level in more than six weeks.
The moves were reminiscent of trading patterns that prevailed in the early days of the pandemic. Investors sold shares of companies directly affected by restrictions on movement and business, while buying government bonds and stocks that stood to benefit from renewed lockdowns.
Surging cases of the coronavirus in many parts of the world, including highly vaccinated countries such as the U.K., have prompted investors to dial down their expectations of economic growth in the coming months. Last week, some of California’s most populous counties either reimposed mask mandates or recommended wearing masks indoors to fight the Delta variant.
“The emergence of this more highly transmissible Delta variant…has brought into the question the sustainability of this reopening and the recovery,” said
a portfolio manager at Fiera Capital. Still, she said the variant would delay rather than derail a big pickup in economic activity and called the selloff a chance to scoop up shares of energy producers, industrial firms and financial companies.
Despite Monday’s selloff, the S&P 500 is up more than 12% this year and closed at a record just one week ago.
“The market has been due for a pause or pullback or, dare I say it, a correction,” said Hans Olsen, chief investment officer of Fiduciary Trust.
Some investors also are concerned that rising prices will pinch consumption and prompt central banks to withdraw stimulus, creating an environment of lower growth and higher inflation in which stocks tend to struggle.
Inflation accelerated to a 13-year high in the U.S. in June. Some evidence suggests that the price increases have started to knock consumers’ confidence in their ability to keep spending. For much of 2021, business reopenings, rising vaccination rates and government pandemic aid have helped propel rapid gains in consumer spending, the economy’s main driver.
“What you’re seeing is a sense that the consumer is starting to be affected quite significantly” by the jump in prices, said
senior macro strategist at Nordea Asset Management.
All 11 sectors of the S&P 500 dropped Monday. Energy and financials were the worst-performing groups.
plans to buy the provider of cloud-based customer-service software in a deal valuing the firm at $14.7 billion. Zoom shares shed 4.1%.
The National Bureau of Economic Research said Monday that the U.S. officially climbed out of a recession in April 2020. The pandemic-driven recession was two months long, making it the shortest on record, according to the bureau, the official arbiter of U.S. recession dates.
Looking ahead, investors will be monitoring corporate earnings this week for signs of how companies are faring amid the revival of economic activity. Air carriers American and United are among the hundreds of companies set to report quarterly results this week, along with
weighed on Hong Kong’s Hang Seng Index, which fell 1.8%.
Japan’s Nikkei 225 dropped 1.3%. More athletes and staff members attending the Tokyo Olympics have tested positive, while cases are surging in Indonesia. Sydney, Australia’s most populous city, is under lockdown because of a Delta outbreak.
David Chao, a market strategist at Invesco, said the spread of the Delta variant across Asia, coupled with low vaccination rates and expectations of additional social-distancing measures, has “taken wind out of the sail for many investors expecting an economic rebound” in the region.
Mr. Chao said he expected investors to continue to pull funds out of Asian stocks and shift them to shares in developed markets with high inoculation rates, such as the U.S. and U.K.
U.S. stock futures ticked up Wednesday ahead of testimony from Federal Reserve Chairman
Futures for the S&P 500 edged up 0.2%, while contracts for the Dow Jones Industrial Average were relatively flat, suggesting that both major indexes may tread water at the opening bell. The S&P 500 fell 0.4% on Tuesday. Nasdaq-100 futures rose 0.5% Wednesday, signaling that technology stocks will outperform for a second day.
Stocks have powered to record highs on expectations of a strong economic rebound and a bumper set of corporate results in the earnings season just getting under way. However, some investors are wary of potential hurdles for the broad market rally up ahead.
One factor making money managers cautious is uncertainty about how long the bout of higher inflation—running at its quickest pace in 13 years—will last and how the Fed will respond. Another is the spread of the delta variant of coronavirus, which on Wednesday prompted Australian officials to extend a lockdown of Sydney, while South Korea tightened curbs.
“We would not be surprised if you had a bit of a pullback,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management.
Longer term, however, Mr. Morris is bullish about the outlook for the market. “You’ve still got phenomenal growth and at the end of the day, it is earnings, earnings, earnings that drive equity prices.”
gained 2.1% premarket after the airline reported its first quarterly profit since the start of the coronavirus pandemic. Apple rose 2% after Bloomberg News reported that the company had asked suppliers to make 20% more new iPhones than in recent years.
Oil prices slid after the Organization of the Petroleum Exporting Countries reached a compromise with the United Arab Emirates over production, resolving a standoff that whipsawed energy markets this month. Brent-crude futures, the international benchmark, ticked down 0.2% to $76.36 a barrel in a choppy session.
In bond markets, the yield on 10-year Treasury notes edged down to 1.385%, from 1.415% on Tuesday. Bond yields and prices move in opposite directions.
Data showing that U.S. consumer prices jumped 5.4% in June from a year earlier have sharpened focus on Mr. Powell’s appearance before the House Financial Services Committee. Mr. Powell is due to present the central bank’s twice-yearly report on monetary policy starting at noon ET, followed by testimony to the Senate on Thursday.
Investors will be alert for any guidance about when and how the Fed plans to wind down its bond-buying program. They are also looking for clarity about the central bank’s willingness to let inflation run above target.
“What investors want to know more of is: What do you mean by average inflation targeting?” said Remi Olu-Pitan, a fund manager at Schroders. That is the new system adopted by the Fed almost a year ago, under which the central bank will allow inflation to overshoot its 2% goal to make up for periods when it lagged behind.
In overseas markets, the Stoxx Europe 600 slipped 0.2%, led lower by shares of travel, leisure and real-estate companies.
Japan’s Nikkei 225 lost 0.4% by the close of trading and China’s Shanghai Composite Index dropped 1.1%. A regulatory crackdown on consumer-technology companies is making investors nervous about the Chinese market even as the People’s Bank of China appears to be stimulating the economy, Ms. Olu-Pitan said.
New Zealand’s dollar rose 1% to $0.70 after the Reserve Bank of New Zealand said it would halt purchase of government bonds this month as the economy rebounds from the shock of coronavirus.
The Securities and Exchange Commission is considering changing rules that govern how U.S. stocks are traded, including pricing incentives that exchanges and high-speed traders use to attract orders, Chairman
Speaking to an industry conference, Mr. Gensler outlined a broader examination of market structure than he had previously described. Mr. Gensler, who took over the SEC in April, has questioned the system that results in many individual investors’ orders being routed to high-speed traders known as wholesalers, such as Citadel Securities and Virtu Financial Inc., instead of going to public exchanges.
Mr. Gensler suggested individual investors might get better prices if more trading were done on public exchanges. Only about 53% of all trading in January was done on exchanges, while the rest involved wholesalers and broker-run trading venues known as dark pools, Mr. Gensler said.
“The question is whether our equity markets are as efficient as they could be, in light of the technological changes and recent developments,” Mr. Gensler told the Piper Sandler Global Exchange and FinTech conference.
While public exchanges disclose their bids and offers and then compile the orders to publish a national best bid and offer for every stock, wholesalers and the so-called dark pools don’t reveal their pre-trade prices. Those off-exchange venues have to execute trades at prices at least as good as the national best price coming from the exchanges.
But the national best bid and offer, known as the NBBO, may be a substandard benchmark, Mr. Gensler said, because so many trades happen away from the exchanges. Even some exchange orders aren’t included in the national best price, such as those in odd-lot sizes, in which fewer than 100 shares change hands.
“I believe there are signs…that the NBBO is not a complete enough representation of the market,” Mr. Gensler said.
The SEC will consider revising how the benchmark is calculated, and will examine other potential rule changes related to how exchanges and brokers price shares, he said.
Mr. Gensler has previously criticized a system of trading incentives known as payment for order flow, in which retail brokers send clients’ orders to firms like Virtu and Citadel Securities for a fee. The wholesaler executes the order, typically at a price slightly better than the national best bid or offer.
That price improvement can be a fraction of a cent per share. Exchanges aren’t allowed to price shares at prices of less than a penny. That may give wholesalers an advantage when competing for orders, Mr. Gensler said.
Shares of Virtu dropped about 8% in the minutes after Mr. Gensler’s remarks, though they later pared their losses. Virtu handles between 25% and 30% of individual investors’ order flow in U.S. stocks, and its stock has rallied this year amid heavy trading of meme stocks like
by small investors. Citadel Securities, the only wholesaler with a larger market share, isn’t publicly traded.
The SEC will consider changes to rules governing the minimum price increments, Mr. Gensler said. Any rule changes would first be issued as proposals, giving the ability to investors and other market participants to comment on them. Mr. Gensler didn’t say when the agency would issue a proposal, but said “it should not be confused with something that is far off.”
Exchanges also use incentives, known as rebates, to attract orders from brokers. The SEC tried to force the exchanges to experiment with limiting rebates, but a federal appeals court ruled last year that regulators didn’t have the authority to mandate the planned pilot program. The regulator will consider changes to that pricing system as well, Mr. Gensler said.
“Both types of payment for order flow raise questions about whether investors are getting best execution,” Mr. Gensler said. He noted that brokers are banned from paying for order flow in the U.K., Canada and Australia.
U.S. stock futures rose and bond yields crept lower as investors grew more comfortable with the inflation outlook and the pace of the economic recovery.
Futures tied to the S&P 500 added 0.5%, pointing to a positive start to the week after the broad-market index fell moderately for two weeks in a row. Nasdaq-100 futures rose 0.7%, suggesting gains for technology stocks after the opening bell.
Investors are keeping a close eye on inflation indicators to determine whether a rise in prices will be temporary or longer-term. Companies that are able to pass along higher costs to consumers such as in energy and materials have been an increasingly popular trade, while technology companies’ shares and bonds have lagged.
“Inflation concerns have lessened, there’s more of a wider recognition that inflation will be transitory,” said Fahad Kamal, chief investment officer at Kleinwort Hambros. “This is reflecting the fact that we hit the fastest part of the recovery. Growth, while continuing, is going to be at a decelerating pace.”
In bond markets, the yield on the benchmark 10-year Treasury note declined to 1.618% Monday from 1.629% Friday. Yields fall when prices rise.
Cryptocurrencies continued a dramatic stretch of trading. Bitcoin regained some ground after touching multi-month lows Sunday and traded around $36,450, a 3.4% rise from Friday at 5 p.m. ET. The cryptocurrency has lost over 40% of its value since its mid-April peak.
“Decentralized finance is facing its first real challenge since inception. We don’t think that this is the end, the bubble has not really popped yet,” said Monica Defend, global head of research at Amundi. “Central banks are ready to play in the digital currency field, I expect with the central banks in play, there will be more regulation to come and more transparency.”
The Chicago Fed National Activity Index, which is seen as a gauge of economic activity and inflationary pressure, will be published at 8:30 a.m. ET.
Federal Reserve Gov. Lael Brainard will be speaking about digital currencies at a virtual event organized by CoinDesk at 9 a.m.
Earnings season is winding down. This week, technology companies including
put out a note on Sunday with a forecast that it will reach $80 by summer.
“It’s still kind of punching in the green light for inflation flows into commodities,” said Gregory Shearer, a commodities analyst at JPMorgan. But the Federal Reserve minutes last week, “where they began to talk about tapering, this makes people somewhat less concerned about [inflation] running away out of hand.”
Overseas, the pan-continental Stoxx Europe 600 was relatively flat, wavering between small gains and losses. Monday is a public holiday in several European countries, including Germany and Denmark.
Among European equities, IT services company Solutions 30 plunged over 70% after auditor EY declined to sign off on its accounts.
In Asia, major benchmarks were mixed. The Shanghai Composite Index advanced 0.3% while Hong Kong’s Hang Seng Index slipped 0.2%.
U.S. stock futures edged up Friday ahead of fresh data on manufacturing and services sectors that will provide more insights into the pace of the economic recovery.
Futures tied to the S&P 500 ticked up 0.3%, suggesting that the broad market gauge may end the week on a tepid note after dropping 0.4% by the close on Thursday. Nasdaq-100 futures edged 0.2% higher Friday, pointing to big technology stocks sealing their best week since mid April.
Stocks have ground lower this week on mounting concern that inflation will rise and remain elevated as the economy rebounds. Sentiment reversed on Thursday after initial jobless claims, seen as a proxy for layoffs, fell to a new pandemic low. Investors have poured back into risky assets including growth stocks and cryptocurrencies, prompting prices to rebound from the week’s lows.
“There was some relief that the labor market recovery is under way in the U.S. and we’re seeing some nervousness about inflation ebbing away,” said
a multiasset strategist at UBS Global Wealth Management.
Some money managers are betting that some sectors—such as banking and energy—could benefit in particular as the economy rebounds to pre-pandemic levels.
“If we can get a combination of confidence that inflation is under control, and signs of economic momentum coming through, I think there is still good opportunities to be had, in the reopening type of sectors in particular,” Mr. Ganesh said. Stocks that performed poorly during the pandemic could become the new drivers that lead major indexes higher, he added.
Ahead of the market opening, oat-milk maker Oatly rose over 10%. The shares jumped 19% in their trading debut on Thursday.
Preliminary surveys of purchasing managers, due to be released at 9:45 a.m. ET, are expected to show that the U.S. manufacturing and services industries expanded in May.
In bond markets, the yield on the benchmark 10-year Treasury note ticked down to 1.639%, from 1.631% on Thursday.
Bitcoin edged up 2% from its 5 p.m. ET price, trading at about $40,900. The digital asset has rebounded sharply from its Wednesday intraday low of $30,444.93, but is still down over 18% since 5 p.m. last Friday.
“The context of this week is that markets are tired,” said
head of a multiasset team at Janus Henderson. “Stocks keep losing momentum, speculative areas of the market are losing momentum. There is fatigue here.”
Surveys of purchasing managers across Europe showed that manufacturing and services activity increased in the eurozone this month. The pan-continental Stoxx Europe 600 edged up 0.5%.
In Asia, major benchmarks were mixed by the close of trading. The Shanghai Composite Index declined 0.6% while Japan’s Nikkei 225 advanced 0.8%.
U.S. stock futures edged lower Friday as investors assessed fresh waves of Covid-19 infections globally that could hamper global supply chains and drive up inflation.
Futures tied to the S&P 500 ticked down almost 0.3%, a day after it closed at a record. The broad market index remains on track for its best month since November. Nasdaq-100 futures declined 0.3%, suggesting that technology shares may be among the weakest performers after the opening bell.
Rising Covid-19 cases in Brazil and India and signs of weakening in China’s manufacturing sector are sapping some of the optimism that took the major indexes up to all-time highs earlier in the week. New variants are threatening to hobble global travel, convulse supply chains further and slow the recovery, investors say.
Signs that the U.S. growth is accelerating are also stoking concern that inflation may rise too much, driven by a persistent shortage of products like electronic chips and the prospect of more fiscal stimulus flooding markets. Persistent inflation can erode portfolio returns.
“That is where the market is, wrestling between those two,” said Edward Park, chief investment officer at Brooks Macdonald.
If the supply constraints and inflationary factors extend into next year, “the growth parts of the markets, which are supported by this ultra cheap money environment, will struggle,” he added.
New economic data from China weighed on sentiment, with official gauges for manufacturing falling short of expectations in April. China’s statistics bureau said global chip shortages, international logistics jams and rising delivery costs have weighed on factory operations.
Increased costs for businesses due to supply-chain issues could be passed on to consumers, boosting prices, investors said.
High cases of Covid-19 in India, Brazil and Japan have bolstered concerns that new variants could emerge and spread globally. A variant of the coronavirus first spotted in India has been detected in the U.S. and 18 other countries and territories. Another variant from Brazil that has been detected in more than 30 nations.
“The third wave is the big thing,” Mr. Park said. “The greater the case count, the greater the chance a new variant is created that unwinds a lot of the good work being done in the vaccine rollout program.”
In bond markets, optimism about U.S. growth prospects—stemming from better-than-expected corporate earnings, signs of the labor market’s recovery, and President Biden’s new $1.8 trillion spending proposal—have encouraged money managers to sell government bonds, considered the safest assets. There are also growing concerns that inflation could curtail the returns from fixed-income securities, and from stocks that are richly valued for their future cash flow.
The yield on the 10-year Treasury note ticked up to 1.645% from 1.639% Thursday, and is poised to extend its advance for five of the past six days. Yields rise when prices fall.
“You’re seeing a lot of companies reporting pricing pressures, supply chain disruptions, coupled with all this extra stimulus coming through from the U.S. that is why people are now really starting to focus on inflation,” said Edward Smith, head of asset allocation research at U.K. investment firm Rathbone Investment Management. “Persistent inflation beyond spring is the biggest risk to markets this year, because it could cause the Fed to taper and hike interest rates sooner than expected.”
Investors are likely to continue monitoring earnings, with energy giants
Fresh figures on U.S. consumer spending, due at 8:30 a.m. ET, are expected to show a rebound in March. Economists anticipate that Americans boosted spending as warmer weather and the vaccine rollout encouraged people to spend stimulus checks and savings.
Overseas, the pan-continental Stoxx Europe 600 edged 0.1% higher.
Most major indexes in Asia declined by the close of trading. Hong Kong’s Hang Seng shed almost 2%. The Shanghai Composite Index, South Korea’s Kospi and Japan’s Nikkei 225 each fell 0.8%.
as an existential threat to his dream of the future. So
decided to fight. He gave his dispute with the world’s biggest company a code name: Project Liberty.
The clash was a bold gambit from a man who built an empire around “Fortnite,” the online multiplayer shooter game filled with cartoonish characters that became a phenomenon beloved by teenagers around the world. The ambition of Epic Games Inc.’s chief executive was that Fortnite’s legions of devoted young fans could turn it into a thriving social network, and help realize his vision of the “metaverse,” a shared virtual world where people might one day live, work and hang out.
Mr. Sweeney saw Apple as a central roadblock to that vision, according to people familiar with his thinking and documents unveiled in a recent court proceeding, because of the iPhone maker’s tight control over how people access “Fortnite” and any other mobile apps from Epic. Apple’s App Store takes a 30% cut of Epic’s revenue from those users.
Epic circumvented Apple’s fees and rules last August by introducing its own system for processing user purchases into mobile versions of “Fortnite.” It also prepared for a larger legal and public-relations campaign, complete with a video mocking a legendary Apple ad and the social-media hashtag #FreeFortnite.
“You’ll enjoy the upcoming fireworks show,” Mr. Sweeney said in an email to an ally at
Google booted “Fortnite” from their app stores, Epic responded by suing both companies.
The fate of Epic’s fight has widespread implications for the entire technology world. It could help determine everything from how much revenue app developers are able to keep to how exposed Apple could be to potential antitrust violations. Apple has rejected claims it has monopoly power, saying that Epic broke the terms of a contract and engaged in a smear campaign.
A resolution could be drawing near. Starting May 3, the dispute goes to trial before federal Judge
Yvonne Gonzalez Rogers
in Oakland, Calif. The judge must decide whether Apple is misusing its power to quash competition or if Epic is merely trying to break its contract with the iPhone maker to boost its bottom line.
Save the world
The man at the center of this clash is a 50-year-old programmer who prefers an office uniform of cargo pants and T-shirts. He eschewed the clubby confines of Silicon Valley to locate Epic’s headquarters just outside of Raleigh, N.C. Mr. Sweeney’s previous dealings with other technology companies showcase his instincts for big and prolonged fights, as well as an eye for strategy. The Maryland native is worth more than $9 billion, according to Bloomberg’s Billionaires Index.
He launched Epic from his parents’ basement at age 20 in 1991 and evolved his company from solely building games for PCs to include those for videogame consoles and smartphones. In 2012, he sold a 40% stake of his company to
, in part to tap the Chinese tech giant’s expertise in mobile gaming and wringing money from users through small purchases known as microtransactions. (Mr. Sweeney remains Epic’s largest shareholder.) Epic also owns the video-chat app Houseparty and makes the Unreal Engine, a suite of software tools for developing games and producing special effects for television shows, movies and other types of digital content.
Epic’s biggest hit started with the 2017 launch of “Fortnite: Save the World,” then a $40 game for up to four players to fight zombies and build forts. A few months later, after disappointing results, Epic offered up a new, free-to-play mode called “Battle Royale,” in which 100 players duke it out until only one combatant or squad remains. It later sold virtual currency that players could use to acquire in-game perks such as an outfit to make their avatars appear as a Marvel Comics superhero.
To build the community, since only a small percentage of players make such purchases, Epic pushed console makers to allow users of one machine to play “Fortnite” with users of another machine, in what would be an industry first for all three major videogame systems. That meant a PlayStation player could join a match with a friend on Microsoft’s Xbox or
In the fall of 2017, Epic updated its software that briefly allowed a Sony PlayStation “Fortnite” player to compete against someone on Microsoft’s Xbox. It pulled that function back, saying it was a mistake, after online chat boards lighted up with excitement. Seeing what was possible, gamers demanded more. Players cast Sony as the villain on social media with hashtags such as #blamesony and #notfortheplayers, a harbinger for the Apple dispute.
As Sony internally debated its position, executives were worried about exposure of its consumer-behavior data and competitors taking an unfair share of their business, according to people familiar with the talks. They felt Epic had backed them into a corner and worried that finicky gamers would turn on them, the people said.
Following months of negotiations, Sony relented. Asked about it afterward, Mr. Sweeney described it simply as “an effort in international diplomacy.” Since then, the Tokyo-based company has twice invested in Epic, having most recently contributed around $200 million in a funding round that valued Epic at $28.7 billion. A spokesman for Sony declined to comment.
Mr. Sweeney’s hardball tactics with Sony helped him usher in cross-play across videogame consoles, personal computers and Apple and Android devices.
All hands on deck
The relationship with Apple was cordial for its first decade. In March 2018, “Fortnite” was launched on Apple’s App Store. A year later, Mr. Sweeney was at the annual Game Developers Conference celebrating how cross-play had helped the game grow to almost 250 million players world-wide – a smashing success. Apple’s managers were happy to help promote the new hit, offering technical and marketing assistance to Epic.
Mike Schmid, head of Apple’s games business development for the App Store, helped oversee the “Fortnite” rollout and several updates. In a court statement, he described an “all-hands-on-deck treatment to address Epic’s non-stop asks, which frequently involved middle-of-the-night calls and texts demanding short-turnaround.”
To manage the work, he assigned someone in Australia so Apple could provide 24-hour coverage.
The relationship described by Apple in court papers differs greatly from the experiences detailed by other developers on Apple’s iOS mobile operating system. Smaller software makers have complained about what they perceive as Apple’s seemingly arbitrary rules and mercurial ways.
With Epic, Apple appeared to go out of its way to help the gamemaker establish itself on the platform. Mr. Schmid said Epic employees had told him Apple represented just 7% of its revenue. He couldn’t be reached for comment through Apple.
“On a variety of occasions, Epic personnel have told me that if Apple did not comply with its demands, Epic would simply terminate its relationship with Apple and remove its games off the iOS platform,” Mr. Schmid said in court records. A core part of Apple’s antitrust defense is that Epic’s games are available on a variety of tech companies’ platforms, not just Apple’s.
By early 2020, “Fortnite” was showing signs of aging, although popularity for online games can sometimes ebb and flow due to new seasons or features. The privately held company doesn’t disclose financial records but app-analytics firm Sensor Tower Inc. estimates global consumer spending within “Fortnite” on Apple devices had fallen in the first quarter of last year to $70 million from a peak of almost $180 million in the third quarter of 2018. Epic Chief Financial Officer Joe Babcock, who departed the company in early 2020, said it expected the trend to continue, according to a deposition he gave cited by Apple. Mr. Babock couldn’t be reached for comment.
Epic disputes the notion that “Fortnite” was waning in popularity, as the company in May 2020 said it had reached 350 million registered accounts.
But for this new plan to work, the company needed to find a way it could afford to compensate its would-be partners. Apple’s 30% share, the presentation concluded, was an “existential issue” for its plan and needed to be cut so Epic could share a majority of the profit with creators.
The battle begins
Last spring Epic began sharpening its plan to wrest itself from Apple’s fees and control. Its team investigated ways to surreptitiously add an alternative payment system to the versions of “Fortnite” on Apple and Google’s app stores, according to court records. By May Epic decided it would deploy the new system through a so-called hotfix, an important software update usually reserved for security bugs, records show, and do so just before the debut of the game’s new season.
Epic executives initially considered targeting Google alone, according to court records citing internal emails. But later they decided to include Apple, which in time would become the focus of the effort.
From an early stage, the plan depended on Epic’s payment system being rejected, read an email between Epic executives disclosed in court records. At that point: “The battle begins. It’s going to be fun!”
predicted there was a greater than 50% chance Apple would immediately remove “Fortnite” from its platforms, according to an Epic employee deposition cited in court records. “They may also sue us to make an example.” Mr. Rein declined to comment.
While it worked on the technical attack, Epic also planned to cut prices on certain items in the console and PC versions of “Fortnite” by 20%— essentially creating a reason for players to eschew the mobile alternative offered by Apple.
But first, Epic would go to the front door and ask a favor of Apple and Google: The company wanted permission to run its own competing store and payment system.
In a late June email to Apple CEO
according to court records, Mr. Sweeney sought an exemption from App Store rules. Most important, he wanted to stop paying Apple’s 30% fee.
Apple rejected the request in a July 10 letter, laying out many of the same arguments it would make in defending itself against the eventual Epic lawsuit. Epic had other ways to sell its game, Apple’s lawyer added, as well as noting Epic collects royalties from games built on its software.
“Yet somehow, you believe Apple has no right to do the same, and want all the benefits Apple and the App Store provide without having to pay a penny,” the letter concluded. “Apple cannot bow to that unreasonable demand.”
Mr. Sweeney on July 17 responded with another email to Mr. Cook and others calling the response a “self-righteous and self-serving screed.” He promised to “continue to pursue this, as we have done in the past to address other injustices in our industry.”
Behind the scenes, Epic’s Project Liberty team met regularly and devised a way to present their plan to a judge and the public. The team included as many as 200 Epic staffers, outside lawyers and public-relations advisers. It developed an argument that Apple violated antitrust laws with its requirements that all apps offered on its iPhones and iPads go through its App Store and that all purchases of digital content go through the tech giant’s in-app purchase system.
It wasn’t a unique gripe. Other app makers, including
and Spotify Technology SA, have also butted heads with Apple on its slice of fees and control. Apple says the walled mobile-software garden it built in 2008 is now responsible for more than a half-trillion dollars in commerce.
Epic’s team worried it wouldn’t be a sympathetic character in a public fight and that gamers would blame the company if Apple and Google ultimately decided to yank “Fortnite.” So it strategized on how to bring in additional companies, including smaller, sympathetic developers, to advocate for its cause, records say. It also studied past Apple responses to major public fights, focusing on its battle with the Federal Bureau of Investigation over demands to create a backdoor into the iPhone of a shooter in a 2015 terrorist attack in San Bernardino, Calif. The controversy subsided when the government found an alternative way into the device.
The Epic team concluded that Apple could be thin skinned when it came to its public image. “Nothing moves Apple to change other than notable consumer pressure,” an Epic memo noted.
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As August approached, Epic’s board of directors was briefed on the project’s final pieces in a presentation dubbed “battle plan.” By this point, the board was told, Epic had spent time helping form the Coalition for App Fairness, an advocacy group, to support its crusade and it tested the payment system that would eventually be uploaded to Apple’s and Google’s app stores.
Mr. Sweeney sent emails to Sony, Microsoft and Nintendo alerting them to the upcoming price changes in “Fortnite,” a prelude to the “fireworks show.”
On Aug. 13, he lighted the fuse. “Epic will no longer adhere to Apple’s payment processing restrictions,” Mr. Sweeney wrote at about 2 a.m. in an email to Apple. Hours later, Epic flipped the switch on the new payment system and a public-relations campaign to rally gamers to its fight.
Project Liberty was in play.
Apple and Google both booted the game by day’s end, springing the second part of Epic’s plan: a legal battle.
A trial date hasn’t been set in Epic’s lawsuit against Google, though the situation is distinct. Devices that run Google’s Android operating system can download software from other app marketplaces in addition to the Google Play store. Google has said that Epic violated its app store’s policies as well, which are designed to keep it safe for users.
In the months after its lawsuit, Epic pursued complaints with regulators around the world and supported lobbying efforts among statehouses and Congress for changes that would crimp Apple’s power. It also released an online video that echoed Apple’s famous 1984 ad, a nod to George Orwell’s dystopian novel, that framed the computer maker as the underdog against the then-mighty
This time around, the image of a televised Big Brother was replaced by one of a talking Apple wearing glasses similar to those of Mr. Cook. The call to action at the end read: “Join the fight to stop 2020 from becoming ‘1984.’ ”
U.S. stock futures wobbled Wednesday as an increase in global Covid-19 infection levels led to concerns about the pace of economic recovery.
Futures tied to the S&P 500 and the Dow Jones Industrial Average wavered between gains and losses after two straight days of declines. Technology-heavy Nasdaq-100 futures slid 0.3%.
A new wave of Covid-19 infections is sweeping through a number of countries including India and Japan, raising the prospect of fresh hurdles to the anticipated global economic rebound. Health authorities are also warning that new variants may emerge that are resistant to the existing batch of coronavirus vaccines. Given those concerns, investors are putting the brakes to what has been a furious rally in stocks in recent weeks, leaving the major indexes hovering near record highs.
“There are still risks in this market, particularly as it relates to the vaccine rollout and virus mutations,” said Shoqat Bunglawala, head of international multiasset investments at Goldman Sachs Asset Management. “We’re still likely to be in an environment with some volatility.”
Investors are also closely monitoring corporate earnings to see if the current valuations of expensive stocks can be justified.
will post earnings after the New York closing bell.
“We expect earnings to surprise on the upside, but the risks are asymmetric. In an environment where markets are at record highs, any company that doesn’t deliver is really punished,” said
chief strategist at Pictet Asset Management. “Over the next few months the direction of earnings will determine the direction of the market.”
The retreat in U.S. stocks this week is simply a “normal pause” in a bull market, with investors taking the opportunity to book profits and reassess their risk appetite, Mr. Paolini said. “As long as the U.S. economy is strong, it’s not really worth the risk of betting against the equity market.”
A few weeks ago, New York hedge fund Alden Global Capital LLC was on the verge of acquiring Tribune Publishing Co. —home to the Chicago Tribune, Baltimore Sun and other U.S. metro newspapers—with seemingly no one in its way.
Then it offended one of its partners in the deal, setting off a battle that could help shape the future of local news in America.
Maryland hotel magnate Stewart Bainum Jr. had worked out a side arrangement with Alden Chief Executive Heath Freeman to buy the Sun, a paper Mr. Bainum grew up reading. Then, in Mr. Bainum’s view, Alden tried to raise the cost of a fee agreement that would substantially jack up the price, people close to the situation said.
Mr. Bainum told his advisers late on the afternoon of Friday, March 12, that he was worried he could no longer trust Alden, according to a person familiar with the matter.
That evening, the 74-year-old got on the phone with his bankers and decided to attempt a stunning 11th-hour move: his own bid for the whole company, which he announced by the end of the weekend.
Two years ago, Rebecca Mead of the New Yorker published a long article, “The Airbnb Invasion of Barcelona,” that addressed some of the challenges of unfettered tourism. Prior to the Covid-19 pandemic, Barcelona, year over year, found itself steadily drowning in foreign visitors. Short-term rentals on Airbnb, often illegally operated, filled the city’s apartment buildings and depressed the local housing supply. Barcelona’s main tourist draws, including Park Güell and the Sagrada Familia Church, were thronged by enormous quantities of visitors.
In the summer of 2014, spurred by the drunken antics of holiday-makers, protesters took to the streets to bring attention to “the pestilence of young visitors who came to Barcelona not to sample the local culture but to enact internationally recognized tropes of partying.” Three years later, 60% of Barcelona residents claimed in a survey that the city had reached or exceeded its capacity to host tourists.
Hating tourists is nothing new, as the Italian journalist Marco D’Eramo notes in “The World in a Selfie,” translated into English by Bethan Bowett-Jones and David Broder. Mr. D’Eramo quotes a British magazine article from 1848 lamenting that, for all their merits, the advent of the railroad and the steamboat had “afflicted our generation with one desperate evil; they have covered Europe with Tourists.” Adam Smith, in his “Wealth of Nations” (1776), heaped mocking scorn on the vogue of young men gallivanting around the Continent on so-called Grand Tours.
“The World in a Selfie,” first published in 2017, has been updated in this English-language edition to account for the pandemic, which shut down international travel for a year. Mr. D’Eramo highlights tourism’s paramount role in the world economy, smartly observing that Covid “proved the centrality of tourism through tourism’s omission. Once this industry ceased, not only airlines and shipping companies but aircraft manufacturers and shipyards found themselves on the verge of bankruptcy.” The book, “an inquiry into the tourist age,” is somewhat disjointed, moving distractedly at times from topic to topic and losing the thread in the philosophical weeds. But in its more focused moments, “Selfie” makes for a bracing, provocative examination of an all-too-human pastime.
One recurring theme here is our futile search, through travel, for the “authentic.” Mr. D’Eramo saves his most biting commentary for UNESCO and its “World Heritage” listings, which he likens to a “kiss of death.” “Once the label is affixed,” he writes, “the city’s life is snuffed out; it is ready for taxidermy.” That’s hyperbole, no doubt, but his commentary on the unintended consequences of preservation is compelling.