Major benchmarks accelerated last week's declines on Monday amid escalated trade tensions between the U.S. and China. In an apparent response to President Trump's threat of new tariffs on imported Chinese goods, China's government not only allowed its currency to fall to the lowest level against the U.S. dollar in over a decade, but also reportedly suspended imports of all U.S. agriculture products.
Both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) lost nearly 3%.
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Data source: Yahoo! Finance.
As for individual stocks, Sohu.com (NASDAQ: SOHU) plunged after reporting disappointing second-quarter results, and Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) managed to outperform the market despite posting its own slightly weaker-than-expected quarterly update.
Sohu's underwhelming quarter
Shares of Sohu plummeted 26.8% after the Chinese internet media company said its second-quarter revenue fell 2% year over year to $475 million, below consensus estimates for closer to $482 million. That translated into an adjusted (non-GAAP) net loss of $50 million, or $1.27 per share, roughly flat from the year-ago period but missing estimates for a loss of $1.11 per share.
Chairman and CEO Dr. Charles Zhang blamed "the current challenging macroeconomic environment." The company's brand advertising revenue plunged 29% to $44 million, more than offsetting 2% growth from search ads (to $276 million) and an 8% increase from online games (to $102 million).
For the third quarter, Sohu expects revenue between $445 million and $470 million, while most analyst were modeling for $499 million.
Berkshire's cash hoard swells as operating income falls
Class B shares of Berkshire Hathaway fell 2.4% -- a modest decline given the broader market's steeper plunge -- after Warren Buffett's company said quarterly revenue climbed 2.3% year over year to $63.6 billion, below estimates for approximately $65.1 billion.
Berkshire's operating income fell 11% to $6.14 billion, hurt by a combination of a higher number of accident claims for its GEICO insurance subsidiary, the impact of tariffs on its manufacturing and retail businesses, and lower cargo volumes at Burlington Northern Santa Fe (BNSF) given higher "export competition from non-U.S. sources," unfavorable weather conditions, and "trade policy" challenges.
Berkshire's equity investments performed well. The company's net earnings of $8.6 billion, or $5.74 per share, included nearly $7.8 billion in unrealized investment gains. But with markets trading near all-time highs, Berkshire was also a net seller of stocks, selling around $1 billion more in equity securities than it acquired while repurchasing "just" $400 million of its own shares last quarter (down sharply from $1.7 billion in Q1). That left the company with a whopping $122 billion in cash on its balance sheet at the end of June.
Whether in the form of accelerated buybacks, strategic acquisitions, or resuming net purchases of stocks, we can be sure Buffett is itching to put that war chest to work as market conditions become more favorable.
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Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool has the following options: short January 2021 $200 puts on Berkshire Hathaway (B shares) and long January 2021 $200 calls on Berkshire Hathaway (B shares). The Motley Fool recommends Sohu.com. The Motley Fool has a disclosure policy.
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