Finance

The seven-day Lunar New Year holiday that ended Sunday is typically the biggest week of the year for new movie releases in China, the largest box office in the world.
However, the total holiday box office dropped by 23% versus last year, while ticket prices rose by 8%, according to online ticketing site Maoyan.
The box office slump comes amid sluggish consumer spending in China and increasing policy support for domestic films over foreign-made ones.

Moviegoers line up in front of promotional posters for Chinese Lunar New Year films in Shanghai on Feb. 1, 2022.
Costfoto | Future Publishing | Getty Images

BEIJING — Chinese consumer spending on movies plunged during the Lunar New Year holiday last week as theaters raised prices to record highs.
The seven-day holiday that ended Sunday is typically the biggest week of the year for new movie releases in China, the largest box office in the world. Eight Chinese-made films debuted this year.

However, the total holiday box office of 6.04 billion yuan ($951.1 million) marked a drop of 23% compared to 7.84 billion yuan for the same period in 2021, according to online ticketing site Maoyan.
Tickets were on average 8% more expensive this year versus last year, the data showed. The average price per ticket on one day during the holiday reached 56 yuan ($8.80), the highest on record going back to 2017.
“A lot of consumers were complaining [it was] unaffordable for the entire family to see [a] movie,” said Gao Huan, Beijing-based managing director at consulting firm Alvarez & Marsal. “Moviegoers, especially those who have a lower willingness to pay, actually decided to stay at home instead of going to the cinema.”
Covid-related travel restrictions and neighborhood lockdowns have weighed on Chinese consumer spending over the last two years.

Overall tourism consumption during the holiday was 3.9% lower than in 2021 — at 289.12 billion yuan, according to the Ministry of Culture and Tourism. That’s well below pre-pandemic levels, and about 56.3% of tourism consumption in 2019, data showed.

Ting Lu, chief China economist at Nomura, pointed out that this year’s drop in the holiday box office comes off a high base in 2021, when the Lunar New Year coincided with Valentine’s Day.
Covid-related restrictions and generally weak consumer demand made it even more difficult for ticket sales to remain so high, he said in a note. “Anecdotal evidence shows that cinemas may have intentionally raised ticket prices in anticipation of much softer sales than last year, in order to compensate for the expected loss in profits.”
Alongside a global rise in inflation, prices for consumer goods in China have edged higher. But a roughly 1% year-on-year increase in consumer prices last year is far below the 8% climb in movie ticket prices.
This year’s Lunar New Year box office of about 6 billion yuan was a touch higher than the 5.9 billion yuan recorded for 2019, the data showed. Theaters were essentially shut during the holiday in 2020 as seven films delayed their releases due to the coronavirus pandemic.

China-made films dominate

Two years into the pandemic, China’s movie theaters have had to deal with intermittent lockdown measures, as well as changes in the availability of films.
Chinese-made movies have grown their share of the local market, thanks to government policies that restrict the distribution of foreign-made films while supporting homegrown titles. The gap widened during the pandemic with the share of foreign-made films falling to about 16% since 2020, down from well over a third in years prior, according to official Chinese data.
The increasing share of locally produced content may negatively affect China’s overall box office, Gao said. “The cinemas are having much bigger pressure to break even,” she said, noting that means they need to look for other income sources or raise ticket prices.

Read more about China from CNBC Pro

The top-grossing film during last week’s holiday was the newly released “Watergate Bridge,” a sequel to last year’s high-grossing film about Chinese soldiers fighting American troops during the Korean War.
Another new release, a Chinese comedy called “Too Cool to Kill,” ranked second by gross box office, according to Maoyan data.
Foreign films that made it to Chinese theaters last year included “Fast and Furious 9” — which ranked fifth nationwide by box office — as well as “Dune” and James Bond movie “No Time to Die.” But no Marvel superhero film has come to China since 2019.
The China Film Administration announced in November it aims for domestic films to take at least 55% of the local annual box office, and about 50 Chinese-made films to gross at least 100 million yuan a year.
— CNBC’s Sarah Whitten contributed to this report.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal is the distributor of “F9” and owns Rotten Tomatoes.

WATCH LIVEWATCH IN THE APP More

U.S. stock index futures crept higher during overnight trading Monday, after the major averages moved between gains and losses during regular trading as the market awaits key inflation data later this week.
Futures contracts tied to the Dow Jones Industrial Average added 0.1%. S&P 500 futures gained 0.16%, while Nasdaq 100 futures were up 0.19%.

During regular trading the S&P 500 slid 0.37%, while the Nasdaq Composite shed 0.58%. Both traded higher earlier in the day, before reversing course during the final hour of trading. Each index managed to close above its worst level of the session, however.
The Dow Jones Industrial finished Monday’s trading session just 1 point higher. At one point the 30-stock benchmark had added 235 points. At the lows of the day, the Dow declined by about 95 points.
“U.S. stocks will struggle for direction until the latest inflation tilts market’s expectations as to how aggressive the Fed will tighten into what is still deemed as an overvalued stock market,” said Oanda’s Edward Moya.
On Thursday the Labor Department will release January’s consumer price index data. The reading follows a stronger-than-expected January jobs report, which has led to speculation that the Federal Reserve could be more aggressive when it comes to hiking rates. The inflation data is expected to show that prices rose 0.4% in January, for a 7.2% gain from one year ago.
Bank of America said Monday that the Federal Reserve could implement seven quarter-percentage-point rate hikes this year.

“The tumultuous market action continues as the combination of Fed policy uncertainty and economic transition remains in focus,” Canaccord Genuity said Monday in a note to clients.
“Unfortunately, this is the environment we are going to be in for a while as the monetary and economic mid-cycle transition unfolds.”

Stock picks and investing trends from CNBC Pro:

Communications services was the worst-performing S&P 500 sector on Monday, declining 2.2% amid a 5% dip for shares of Facebook-parent Meta. Shares of the social media giant are down 28% this month following the company’s disappointing earnings report.
Google-parent Alphabet slid 2.9%, while Twitter, Match Group and Netflix all shed roughly 2%.
“Technology stocks are no longer a one-way trade as investors cut losses and now focus on valuations, competition, and long-term outlooks,” added Oanda’s Moya.
Earnings season continues Tuesday with Pfizer, Harley-Davidson, Lyft, Chipotle and Yum China among the names set to post quarterly results.
As of Monday afternoon, 281 S&P 500 components have reported, with 78% exceeding earnings estimates and 77% topping revenue expectations, according to FactSet.
Peloton will also report earnings on Tuesday after the market closes, during what’s been a turbulent time for the company. The stock surged 20.9% on Monday following reports the company could be a takeover target.

WATCH LIVEWATCH IN THE APP More

Sequoia Capital India led a $450 million investment in Polygon, a blockchain network that serves as a support layer to Ethereum.
Polygon eventually wants to become a decentralized version of Amazon Web Services. It’s part of a movement in crypto known as “Web3.”
Hype around Web3 has attracted some of the biggest names in venture capital, including Andreessen Horowitz and Tiger Global.

The logo of cryptocurrency network Polygon.
Jakub Porzycki | NurPhoto via Getty Images

Sequoia Capital is playing catchup with arch-rival Andreessen Horowitz in the race to invest in what could be the future of the internet — so-called Web3.
The Silicon Valley venture capital firm led a $450 million investment in Polygon, a blockchain network.

Blockchains are the distributed logs of transactions that underpin many of the world’s major digital currencies. They are maintained by a network of computers, which have to reach consensus across the whole system to confirm transactions and mint new units of currency.
Polygon serves as a support layer to Ethereum, the platform behind the ether cryptocurrency, helping it process transactions at scale.
The Ethereum network is different from bitcoin’s in that it supports applications for things like non-fungible tokens (NFTs) and decentralized finance (DeFi) services, not just peer-to-peer transfers.

How Polygon works

Over the years, the Ethereum blockchain has become congested as more and more users have piled in, resulting in slower transaction times and higher processing fees. This has led to the creation of so-called “Layer 2” network like Polygon, which aim to take a load off the main blockchain.
Polygon sits on top of the Ethereum network as a proof-of-stake blockchain. Whereas Ethereum uses power-intensive crypto mining to verify transactions, participants in Polygon’s network just need to show they hold some tokens — in other words, a “stake” — to become validators.

The result is much faster transaction times — in the thousands per second, according to Polygon. In comparison, Ethereum’s network can handle about 15 transactions per second. Polygon says it’s completed over a billion transactions to date and has around 2.7 million monthly active users.
Ethereum is embarking on an upgrade, called Ethereum 2.0, that would make it faster and more efficient. The upgrade still has a way to go before becoming reality, but some experts fear it poses a threat to Polygon. For its part, Polygon says it expects demand for blockchain scaling services to remain strong even after Ethereum 2.0 is implemented.
Polygon co-founder Sandeep Nailwal says he sees the company becoming a decentralized version of Amazon Web Services, the e-commerce giant’s cloud computing arm. Polygon’s grander ambitions form part of a movement in the crypto world known as “Web3.”

What is Web3?

Web3 is a hazy concept in tech that refers to efforts to build a more decentralized version of the internet based on blockchain technology.
It’s generated quite a bit of chatter in Silicon Valley. Twitter co-founder Jack Dorsey has criticized it as a “centralized entity” controlled by venture capitalists, while Tesla CEO Elon Musk said it seems like more of a “marketing buzzword” than reality.

Read more about cryptocurrencies from CNBC Pro

“Web3 for me means ownership, censorship resistance and verified compute,” Nailwal told CNBC. Whereas companies like Facebook or Twitter control their own computations, Web3 promises “transparency” around those processes, Nailwal said.
Polygon wants to be the platform for big brands to develop their own Web3 strategies. It’s already got companies like Adidas and Prada experimenting with NFTs on its network. Nailwal says not all corporations are sold on crypto yet, but NFTs have been easier for them to digest.

Big-name investors

Hype around Web3 has attracted some of the biggest names in venture capital, including Andreessen Horowitz, Tiger Global and Sequoia.
So far, Sequoia has stayed relatively quiet about its interest in crypto, while Andreessen has its own dedicated fund for investing in the sector. Now, Sequoia is becoming more vocal.
“Thousands of developers across a range of applications are choosing Polygon and their complete set of scaling solutions for the Ethereum ecosystem,” said Shailesh Lakhani, managing director of Sequoia India. “This is an ambitious and aggressive team, one that values innovation at its core.”
Like Ethereum and other blockchains, Polygon has its own token, called matic. Rather than issuing new shares, the company sold units of token to investors in a private round. Polygon’s backers are making a bet that matic will go up in value as adoption of its network increases. The funds came from Sequoia’s India unit, with SoftBank, Galaxy Digital and Tiger Global also investing.
It echoes a similar deal involving Solana Labs, the start-up behind Ethereum-rival Solana, which raised $314 million in a private token sale backed by Andreessen Horowitz.
Polygon plans to allocate $100 million of the funding to an “ecosystem fund” supporting the development of new projects on its network. The rest will serve as  “buffer money” to help Polygon’s 240-person team continue building out the platform in the years to come.

Blockchain gaming

The company is also making a push into gaming, having recently hired former YouTube executive Ryan Wyatt as head of its game studio.
“You’re seeing a lot of really great developers leaving major established studios to come create blockchain games,” Wyatt told CNBC. “We’re going to open up a whole new type of gaming experience with the people that are developing games on the blockchain.”
“Over the next two or three years, we’re going to point to examples of high-polish, triple-A games that are built on Polygon,” he added.
Polygon says it is now valued at $2 billion.
The group doesn’t consider itself as a company in the traditional sense. A lack of clarity over who controls the platforms behind certain digital currencies has been a key source of contention for regulators scrutinizing the fast-evolving world of crypto and DeFi.

WATCH LIVEWATCH IN THE APP More

James Tahaney loads textbooks on to a pallet in preparation for shipping at the Chegg warehouse in Shepherdsville, Kentucky, April 29, 2010.
John Sommers II | Bloomberg | Getty Images

Check out the companies making headlines in after hours trading:
Take-Two Interactive — Shares of the video game company shed more than 4% during extended trading Monday following the company’s third-quarter results. Take-Two reported revenues of $866 million for the quarter, which was short of the $875 million analysts surveyed by Refinitiv were expecting.

Chegg — Chegg shares jumped 10% after the company’s fourth-quarter results topped analysts’ expectations. The company earned 38 cents per share excluding items on revenue of $207 million. Wall Street analysts were expecting the company to earn 34 cents per share on $195 million in revenue, according to estimates from Refinitiv.
Amgen — Shares of Amgen gained 1% following a mixed quarter for the biotechnology company. Amgen earned $4.36 per share excluding items, which was ahead of the $4.08 analysts were expecting, according to estimates from Refinitiv. Revenue came in at $6.85 billion, which was short of the expected $6.87 billion.
Simon Property Group — The real estate company’s shares dipped 2% after Simon Property Group’s revenue numbers missed expectations. The company reported sales of $1.22 billion during the fourth quarter, compared to the $1.24 billion analysts surveyed by Refinitiv were expecting.

WATCH LIVEWATCH IN THE APP More

A Spirit Airlines aircraft takes off at Orlando International Airport.
Paul Hennessy | SOPA Images | LightRocket | Getty Images

Check out the companies making headlines in midday trading.
Frontier Group, Spirit Airlines — Shares of Frontier Group and Spirit Airlines rose in midday trading after the companies announced they are merging in a deal valued at $6.6 billion. The two largest low-cost airlines will create what would become the fifth-largest airline in the country. Spirit Airlines surged 17.2% and Frontier Group rose 3.5%.

Peloton — Shares of the exercise bike maker soared 20.9% after reports that Amazon and Nike expressed interest in buying the company. The reports come a few days after activist investor Blackwells Capital urged Peloton’s board to consider a sale of the company. Still, CNBC reported that all talks are preliminary, and Peloton has yet to kick off a formal sales process.
Hasbro — Hasbro shares fell 1% even after the toymaker beat Wall Street estimates for its latest quarterly report. Hasbro posted per-share earnings of $1.21, well above the 88 cents a share Refinitiv consensus estimate.

Stock picks and investing trends from CNBC Pro:

Tyson Foods — Shares of Tyson jumped 12.2% after a better-than-expected earnings report. The beef and poultry producer reported earnings of $2.87 per share, beating earnings estimates. Higher meat prices helped boost profit.
Ford — Ford shares dipped 0.5% after announcing Friday it will suspend or cut production at eight of its North American factories due to the global semiconductor shortage.
Spotify — Spotify was on watch again after a compilation video of the company’s biggest podcasting star Joe Rogan using a racial slur circulated on social media. CEO Daniel Ek apologized to Spotify employees for the controversy with Rogan. Shares fell 1.7%.

Snowflake — Shares of Snowflake jumped 6.3% after Morgan Stanley upgraded the data storage stock to overweight from equal weight. The firm said Snowflake is undervalued after the stock’s roughly 30% fall from its high and has quality growth.
Netflix — The streaming stock fell 2% after Needham analyst Laura Martin reiterated an underperform rating on the stock. She said Netflix must consider drastic measures to “win the ‘streaming wars,'” such as adding a cheaper ad-supported tier and even selling itself.
Stanley Black & Decker – Shares of the tool manufacturer fell 3.3% after Citi double-downgraded the stock to sell. “We downgrade SWK to Sell (from Buy) due to recent margin dilutive acquisitions, potential m/s loss, and lack of new innovative products,” Citi said.
— CNBC’s Yun Li, Maggie Fitzgerald and Tanaya Macheel contributed reporting

WATCH LIVEWATCH IN THE APP More

Take a look at some of the biggest movers in the premarket:
Spirit Airlines (SAVE) – Spirit surged 11.4% in the premarket after announcing it would buy competitor Frontier Airlines in a stock swap deal valued at $6.6 billion including assumed debt. Shares of Frontier’s parent company Frontier Group (ULCC) fell 2.4%.

Peloton (PTON) – Peloton rocketed 28.5% higher in premarket trading, following reports that both Amazon.com (AMZN) and Nike (NKE) are mulling possible bids for the fitness equipment maker. The reports come a few days after activist investor Blackwells Capital urged Peloton’s board to consider a sale of the company.
Energizer (ENR) – The company best known for its batteries saw its stock surge 5.7% in premarket trading after reporting better-than-expected quarterly results. Energizer beat estimates by 8 cents share, with a profit of $1.03 per share. Revenue also topped Wall Street forecasts. Energizer warned the current operating environment remains “very volatile.”
Zimmer Biomet (ZBH) – The maker of orthopedic and other medical products reported quarterly earnings of $1.95 per share, missing consensus estimates by 3 cents a share. Revenue came in short of analysts’ forecasts. The company said the ongoing pandemic continued to pressure its business during the quarter, and the stock slid 5.4% in the premarket.
Hasbro (HAS) – Hasbro added 2.2% in premarket trading after the toymaker beat top- and bottom-line estimates for its latest quarter. Hasbro earned $1.21 per share, well above the 88 cents a share consensus estimate. Revenue in its television, film and entertainment business jumped 61% from a year earlier. Hasbro also increased its quarterly dividend by 3% to 70 cents per share.
Tyson Foods (TSN) – Tyson rallied 4.2% in the premarket following its quarterly earnings report. The company beat estimates by 97 cents a share, with quarterly earnings of $2.87 per share. The beef and poultry producer’s revenue also beat analysts’ forecasts. Tyson said it was on track to achieve $1 billion in productivity savings by the end of fiscal 2024.

Bumble (BMBL) – The dating service operator announced the acquisition of European dating app company Fruitz for an undisclosed amount, Bumble’s first-ever acquisition deal. Fruitz is especially popular among Gen Z consumers.
Ford (F) – Ford fell 1.1% in premarket action after announcing it will suspend or cut production at eight of its North American factories due to the global semiconductor shortage. Those changes will be in effect throughout this week.
Spotify (SPOT) – Spotify CEO Daniel Ek said he strongly condemns racial slurs used by podcaster Joe Rogan, but said removing his podcast from the Spotify platform is not the answer. A number of popular music artists have had their music pulled from Spotify amid the controversy over Rogan’s comments on Covid-19. Spotify shares fell 2% in the premarket.
Snowflake (SNOW) – The cloud data platform provider’s stock rallied 4.8% in the premarket after Morgan Stanley upgraded it to “overweight” from “equal-weight,” saying investors are undervaluing Snowflake’s potential for durability and quality of growth.

WATCH LIVEWATCH IN THE APP More

Even as 10-year Treasury yields and the U.S. dollar index rose from intra-year lows toward the end of January, the precious metal held above $1,800 per troy ounce.
Central to gold’s resilience, according to UBS, is a combination of elevated demand for portfolio hedges and a belief either that the Federal Reserve “stays behind the curve” on tackling inflation or overtightens, causing growth to falter.

A worker removes cooled 12 kilogram gold ingots from their molds in the foundry at the Prioksky non-ferrous metals plant in Kasimov, Russia, on Thursday, Dec. 9, 2021.
Andrey Rudakov | Bloomberg | Getty Images

Gold prices have remained resilient in recent weeks in the face of broad market volatility, decoupling somewhat from its typical price drivers — bond yields and the dollar.
Even as 10-year Treasury yields and the U.S. dollar index rose from intra-year lows toward the end of January, the precious metal held above $1,800 per troy ounce. As of Friday afternoon, spot gold was still trading around that $1,800/oz marker.

Despite the challenging macro backdrop of supply chain issues, surging inflation and lingering pandemic risks, Bank of America strategists have noted that some of the investment flows into gold have been very resilient.
“There are significant dislocations buried beneath headline inflation, interest rates and currency moves, raising the appeal of holding the yellow metal in a portfolio and supporting our $1,925/oz average gold price forecast for 2022,” BofA analysts said in a research note at the end of January.
Also central to gold’s resilience, according to UBS, is a combination of elevated demand for portfolio hedges and a belief either that the Federal Reserve “stays behind the curve” on tackling inflation or overtightens, causing growth to falter.
In a note Friday, UBS Chief Investment Office strategists highlighted that gold’s “tried-and-tested insurance characteristics” had again shone through versus other common portfolio diversifiers, including digital assets such as bitcoin.

“On the one hand, its overall stability in the face of a hawkish pivot by the Fed, money market participants’ shift to aggressively price numerous U.S. rate hikes in 2022 and higher U.S. real rate proxies like U.S. 10-year TIPS bonds has surprised some,” the note said.

“But, alternatively, the yellow metal’s resilience is broadly in line with our estimate generated by our fair-value model — currently it indicates a value of around USD 1,750/oz, which is a modest USD 50/oz discount to spot.”
UBS’ models indicate that higher market volatility so far this year, as signaled by the VIX index, is a key support pillar for gold prices.
“For example, if we plug in the longer-term average value of the VIX at 19.5 (all else equal) this would signal a gold price of around USD 1,575/oz. Hence, as we have argued, in 1Q22, elevated demand for portfolio hedges is supportive of our forecast of USD 1,800/oz,” said UBS strategists Wayne Gordon, Giovanni Staunovo and Dominic Schnider.

However, UBS maintains its expectation for gold to fall to the $1,650-1,700/oz range in the second half of 2022. The Swiss lender’s house view anticipates risk sentiment will improve as the dual threats of the omicron Covid-19 variant and inflation ease.
“We recommend clients to reduce tactical allocations and protect the downside of strategic holdings,” they added.
In order for gold to break further above the $1,800/oz mark, markets may need to lose a little faith in central bank policy tightening plans, according to Russ Mould, investment director at British stockbroking platform AJ Bell.
In a note Tuesday, Mould suggested that this could happen if the economy tips into recession “as the combination of global debts and higher interest rates proves too much and policy makers have to return to cutting borrowing costs and adding to QE (quantitative easing) well before inflation is reined in.”

WATCH LIVEWATCH IN THE APP More

U.S. stock index futures were little changed during overnight trading Sunday after the S&P posted its best week of 2022, boosted by quarterly earnings reports and a better-than-expected January employment report.
Futures contracts tied to the Dow Jones Industrial Average advanced 0.08%. S&P 500 futures added 0.11%, while Nasdaq 100 futures were up 0.1%.

The S&P and Nasdaq Composite advanced on Friday for their fifth positive session in the last six, and the indices also posted their best week since December. The Dow slid 0.06% on Friday, but still managed to post a 1.05% gain for the week. The Russell 2,000 meantime posted its first positive week in five and best week of 2022.
Earnings reports and a better-than-expected January jobs report pushed the major averages higher. The Labor Department said Friday that 467,000 jobs were added in January, well ahead of the 150,000 economists polled by Dow Jones were expecting.
“The increase in payrolls came as a welcome sign for the economy,” said Peter Essele, head of portfolio management at Commonwealth Financial Network. “The increase sent confirmation to investors that rate hikes are imminent, with the first occurring in the March meeting.”
Last week’s gains follow a rocky start to the year for the major averages as rising rates prompted investors to shed growth names in favor of value-oriented areas of the market.

Stock picks and investing trends from CNBC Pro:

So far 56% of S&P 500 companies have posted quarterly earnings, with 79% beating earnings estimates and 77% topping revenue expectations.

Individual performance has been different, however. Amazon shares added 13.5% on Friday, while Snap surged 58.8%. Facebook-parent Meta dropped 26% on Thursday after its quarterly update. The social media company is coming off its worst week on record.
“Overall investors continue to ‘sell the news,’ ” Wells Fargo said Friday in a note to clients. “We are getting late in the cycle. The market is becoming more selective. The tide will no longer lift all boats and the market will become less and less forgiving.”
The firm said that looking forward investors should cut losses quickly, and focus on companies’ margins rather than top- or bottom-line numbers.
Another busy week of earnings is on deck with 76 S&P 500 companies set to post results. Three Dow components will provide quarterly updates, including Disney and Coca-Cola. Amgen, Take-Two Interactive and On Semiconductor are among the names that will report earnings on Monday.
Later in the week, investors will be watching key inflation data: the consumer price index on Thursday, followed by the University of Michigan’s consumer sentiment survey on Friday.

WATCH LIVEWATCH IN THE APP More