The Wall Street Journal - 28.10.2019

© 2019 Dow Jones & Company. All Rights Reserved. **** THE WALL STREET JOURNAL. Monday, October 28, 2019 |B1

TECHNOLOGY: PIONEER VENTURE CAPITALIST DIES B4

BUSINESS&FINANCE

TheS&P500onFridaymadearunonitsrecordhigh.

Sources: FactSet (S&P 500); Bank of America Merrill Lynch, FactSet (companies reporting); Dow Jones Market Data (streaks); CME Group (probability of a rate cut)

LongestS&P500streaks

withoutarecordinthepast

fiveyears,intradingdays

July11,2016

Streakended:

Aug.24,2018

April23,2019

Nov.21,2016

Oct(active)

286

146

146

69

6   

Nearly150S&P500companieswillreportquarterlyresultsintheweekendingNov.1.

60

0

10

20

30

40

50

companies reporting

Oct. 14 21 28 Nov. 1 8

147 companiesreporting

Market-impliedprobabilityof

atleastthree2019ratecuts

byendofOctober

100

0

20

40

60

80

%

July Aug. Sept. Oct.

Rate cut

3000

2400

2500

2600

2700

2800

2900

2018

Weekly

’19

Range

IMFforecastsstrongergrowth

Trumpthreatensnewtariffs

Fedsignalsflexibility

Stocks are flirting with re-

cord territory but have been

stuck in a narrow trading range

since the beginning of last year,

leaving investors grasping for a

fresh driver that could propel

the decadelong bull market to

greater heights.

The S&P 500 made a run at

its record of 3025.86 Friday but

came up just short, closing up

0.4% at 3022.55. Hopes for

lower interest rates and a reso-

lution to the long-simmering

trade dispute between the U.S.

and China have pushed the

broad equity gauge up 21% for

the year.

Most of the index’s gains

came in the first four months,

following a selloff in last year’s

fourth quarter. Stocks have

treaded water lately, averaging a

daily move of 0.4% or less in five

of the past seven weeks.

The recent muted moves re-

flect investors’ fears that a bleak

outlook for global growth and

corporate earnings will limit the

stock market’s gains. The three-

month stretch without a new

high is the S&P’s fifth longest in

the past five years, according to

Dow Jones Market Data.

Since the index leapt above

2750 for the first time in Janu-

ary 2018, it has generally stayed

between that level and 3000, a

threshold at which it has faced

resistance. It retreated the three

previous times it crossed that

PleaseturntopageB2

BYAMRITHRAMKUMAR

Stock Market Rallies in Measured Fashion

BOX OFFICE

‘Joker’ is a mega-hit,

but Warner Bros.

will have to share the

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LastWeek:S&P3022.55À1.22% S&PFINÀ1.96% S&PITÀ2.49% DJTRANSÀ3.31% WSJ$IDXÀ0.44% LIBOR3M1.928 NIKKEI22799.81À1.37% See more at WSJ.com/Markets

SoftBank said last week it

would spend $4.5 billion in

share purchases and around $5

billion on debt financing to

rescue the office-share firm.

SoftBank and its $100 billion

Vision Fund, which is backed

mainly by the company and

two Middle East sovereign-

wealth funds, had poured more

than $9 billion into WeWork.

The burden of the WeWork

rescue will fall solidly on Soft-

Bank. The funds for the buy-

back will come from SoftBank’s

cash on hand—the group said

it had around $27 billion at the

end of June—and the shares

will be on SoftBank’s balance

sheet rather than the Vision

Fund’s.

SoftBank shares fell 6.6% to

¥4,017 ($36.97) in the past

week on the Tokyo Stock Ex-

change, while credit-rating

firms have signaled concern.

The shares of SoftBank are

trading where they were at the

start of 2017, not long after it

announced the Vision Fund.

Benjamin Segal, a portfolio

manager at Neuberger Berman,

said he is concerned that Soft-

Bank’s efforts to support the Vi-

sion Fund and protect the inter-

ests of some of its big investors

could come at the expense of

SoftBank shareholders.

“There could be some shift

in value away from SoftBank

shareholders to more powerful

constituencies,” said Mr. Segal,

who sold his SoftBank shares in

2017. “Poor governance magni-
      fies poor investment decisions.”
      One person familiar with
      SoftBank’s strategy said We-
      Work was an unusual case that
      warranted the bailout.
      Masayoshi Son, SoftBank’s
      chief executive officer, has been

trying to lower the risk and im-

prove governance at the fund

and the companies it has in-

vested in, while pushing those

startups to focus on profits. At

a Vision Fund meeting in Sep-

tember that brought together

its investors and portfolio com-

panies, Mr. Son told attendees

that the fund now views the

ability to make money as im-

portant as increasing revenue

or market share, according to a

person who was present.

Another big SoftBank in-

vestment that struggled was

PleaseturntopageB9

Investors and credit-rating

firms are growing concerned

about rising risks and weak

controls atSoftBank Group

Corp. after the Japanese con-

glomerate’s nearly $10 billion

bailout ofWeWork.

BYPHREDDVORAK

ANDJUSTINBAER

SoftBank Puts Investors on Edge

WeWork rescue plan

pressures shares and

draws worries about

risks and governance

mobilesNV, under the union’s

traditional pattern bargaining.

GM workers won consider-

able gains in this latest con-

tract, including across-the-

board wage increases, an

accelerated timetable for new

hires to reach top hourly pay

and a path to full-time status

for temporary workers.

The labor agreement ap-

proved by union members Fri-

day after the UAW called a na-

tionwide strike that lasted six

weeks held steady employees’

out-of-pocket contribution for

health benefits at about 3%, a

fraction of what private-sector

workers pay.

The new contract, covering

more than 46,000 UAW-repre-

sented workers at GM, is likely

to add roughly $350 million in

annual labor costs to the com-

pany’s finances by the end of

its four-year term, Barclays

analyst Brian Johnson wrote

in an investor note. That is

equivalent to about 3% of the

annual operating profit GM

has posted in recent years.

Any such labor-cost infla-

tion would be more difficult to

absorb at Ford and Fiat Chrys-

ler, which are less profitable

than GM and operating on

thinner margins in North

America, a region that delivers

much or all of their profit, in-

dustry analysts say. The UAW

said Friday it will bargain with

Ford next, saving Fiat Chrysler

negotiations for last.

Ford has the second-highest

labor costs of the three Detroit

car makers, spending an aver-

age of $61 an hour on wages,

benefits and other expenses

for the company’s unionized

workforce, according to the

Center for Automotive Re-

search. Fiat Chrysler spends

$55 an hour, and GM, $63.

Ford shares came under

pressure last week after the

company cut its profit forecast

for the year, citing higher war-

ranty costs, weakness in China

and growing pressures in the

U.S. market. Its profit margin

in North America slipped to

7.1%, from 7.4% a year earlier.

Chief Executive Jim Hackett

PleaseturntopageB2

The new labor deal secured

atGeneral MotorsCo.toend

a 40-day strike won’t only add

to the auto maker’s labor costs

but could pose problems for

its Detroit rivals.

The United Auto Workers

will use the agreement at GM

as a template that is expected

to reach similar terms on

wages and benefits in separate

contract talks withFord Motor

Co. andFiat Chrysler Auto-

BYNORANAUGHTON

ANDMIKECOLIAS

UAW Pact Sets Up Costly Deals for Ford, Fiat

INSIDE

MicrosoftCorp.’s win of a

landmark Pentagon cloud-

computing contract adds force

to the software company’s ef-

fort to unseatAmazon.com

Inc. as the undisputed leader

in the multibillion-dollar

cloud-computing market.

For both of the technology

companies, providing cloud-

computing services—where

customers rent some of their

large computing horsepower

rather than investing in their

own—has become an impor-

tant profit driver and one of

the most closely watched

growth areas by investors.

Amazon was a pioneer in

the cloud business, propelling

it to a dominant market posi-

tion. But Microsoft CEO Satya

Nadella has bet heavily on the

cloud, spurring strong growth

for the Redmond, Wash., com-

pany.

On Friday, the Pentagon

awarded Microsoft the Joint

Enterprise Defense Infrastruc-

ture, or JEDI, contract that

could be worth up to $10 bil-

lion over the next decade. Am-

azon, which provides cloud ser-

vices to the Central Intelligence

Agency, was widely seen as the

front-runner. Microsoft’s win is

one of the most public exam-

ples, to date, showing that it

poses a serious threat to Ama-

zon’s dominance.

The award came the same

week Microsoft and Amazon

reported earnings that signal

the competitive dynamics in

the cloud are changing. Micro-

soft said sales for its Azure

cloud business grew 59% in

the quarter compared with the

year prior. For Amazon Web

Services, or AWS, quarterly

sales grew 34.7% from a year

earlier—a significant slow-

down from the past—helping

spur a sharp drop in its share

value.

Microsoft isn’t the only

tech giant trying to challenge

Amazon’s cloud position.Al-

phabetInc.’s Google has been

ramping up its efforts. It last

year hired Thomas Kurian to

run its cloud business from

Oracle Corp., another cloud

competitor with big ambitions.

International Business

MachinesCorp. also has pri-

oritized cloud growth. It

splashed out $34 billion to buy

open-source software giant

Red Hat Inc. to strengthen its

hand.

AWS sales are still far

larger than Microsoft’s Azure

revenue or any of the other ri-

vals, according to reported fig-

ures and analysts estimates,

but the gap is narrowing. Am-

azon had 31.5% of the cloud

PleaseturntopageB2

BYAARONTILLEY

Microsoft

Gains On

Amazon

In Cloud

New Technology Forces Older Workers to Retrain

MOVE FROM MAINFRAMES: When a credit-card payment processor shifted to the cloud, it gave its

more than 4,500 tech employees a choice: Reskill, or prepare for possible obsolescence. B4

DUSTIN CHAMBERS FOR THE WALL STREET JOURNAL

square feet. The firm also has

warehouse holdings in Austra-

lia, Canada and China.

Shopping online has be-

come a part of everyday life

for many, as bricks-and-mor-

tar stores close their doors

and consumers opt for the

convenience and selection of

the internet. Blackstone thinks

there is even more opportu-

nity in the sector than meets

the eye.

All told, Blackstone owns

about 800 million square feet

of industrial warehouses, with

nearly half of its 443 million

square feet in the Americas

having been acquired this

year. The majority is concen-

trated in rapidly growing mar-

kets close to densely popu-

lated urban areas such as

Dallas, Atlanta, Los Angeles,

Miami and San Francisco,

where tenants promising

speedy delivery to their cus-

tomers want to be located.

Last week, Amazon.com

Inc. said shipping costs

PleaseturntopageB7

Blackstone GroupInc. is

betting that the rise of online

shopping will remain a bright

spot in the face of slowing

global economic growth. But

it isn’t buying retailers—it is

buying warehouses.

The private-equity com-

pany’s real-estate funds have

done some of the year’s big-

gest buyouts, announcing an

$18.7 billion purchase of ware-

houses from Singapore-based

GLP in June and signing a

deal in September to buy a

portfolio of warehouses from

Colony Capital Inc. for $5.9

billion. Both price tags in-

cluded debt.

Blackstone, one of the

world’s largest real-estate in-

vestors, with $157 billion of

investor capital, has a similar

strategy in Europe. Last

month, it announced the for-

mation of a logistics company

called Mileway, comprising

around 1,000 warehouses to-

taling roughly 30 million

BYMIRIAMGOTTFRIED

Blackstone’s Retail Bet

Focuses on Warehouses

BUSINESS

Popeyes bringing back

spicy chicken sandwich

after its scarcity made

customers squawkB3

SCOTT MCINTYRE FOR THE WSJ