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What Happened in the Stock Market Today

By Steve Symington - Aug 5, 2019 at 4:19PM

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See why Berkshire and Sohu kept investors on their toes on a harrowing day for the broader market.

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 (^DJI 0.08%) and the S&P 500 (^GSPC -0.40%) lost nearly 3%.

Today's stock market

Index Percentage Change Point Change
Dow (2.90%) (767.27)
S&P 500 (2.98%) (87.31)

Data source: Yahoo! Finance.

As for individual stocks, Sohu.com (SOHU 1.32%) plunged after reporting disappointing second-quarter results, and Berkshire Hathaway (BRK.A -0.16%) (BRK.B -0.34%) managed to outperform the market despite posting its own slightly weaker-than-expected quarterly update.

Falling stock charts superimposed over digital map of the world

Image source: Getty Images.

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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Stocks Mentioned

Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$464,250.00 (-0.16%) $-761.00
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$309.29 (-0.34%) $-1.07
Sohu.com Inc. Stock Quote
Sohu.com Inc.
SOHU
$14.63 (1.32%) $0.19
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$32,223.42 (0.08%) $26.76
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,008.01 (-0.40%) $-15.88

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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