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Yum Brands suspends $2 billion buyback program amid coronavirus crisis

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Yum Brands CEO David Gibbs said Wednesday the company’s decision to suspend its $2 billion share buyback program allows it to better support employees and franchisees during the COVID-19 pandemic. 

“We can do things like we just did in the United States, which is provide a grace period for our franchisees on their royalties or suspend capital investments for them so they can have the cash to get through this crisis,” Gibbs said on “Closing Bell.” 

Yum Brands has tapped into a $525 million revolving credit facility, according to a regulatory filing Tuesday. The company also borrowed $425 million earlier in March in association with its acquisition of The Habit Restaurants. 

“We have over $1 billion of cash now. Certainly we’re in a good position,” Gibbs said. “But we want to take an abundance of caution as we manage through the challenges of this situation.” 

Yum Brands’ portfolio includes KFC, Pizza Hut and Taco Bell. 

Gibbs said Yum Brands’ footprint of more than 50,000 restaurants globally has allowed the company to respond to shifting consumer demand during the coronavirus outbreak. Yum Brands has about 7,000 restaurants closed around the world, according to the regulatory filing.  

The company has “a big presence in Asia, where the virus has already impacted the market, and we’ve had this great ability to leverage the learnings from that market and take those to the other markets as they start experiencing a little bit of this crisis,” he said. 

For example, led by CEO Joey Wat, Yum China developed a system for contact-less food delivery that has been adopted by restaurants in other markets, Gibbs said. Yum China was spun off from Yum Brands and began trading as its own entity in November 2016

Gibbs said employees at restaurants operated by Yum Brands will continue to be paid if they are closed due to government mandates. “We know that is the right thing to do. We’re working with our franchisees to take a similar approach,” he added. 

Shares of Yum Brands finished 4.6% higher Wednesday at $72.87 each. The stock is down 27.66% in 2020. 

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Futures fall after debate as stocks head for first down month since March, Disney declines

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U.S. stock futures declined early Wednesday as a contentious U.S. presidential debate raised more uncertainty around the election. The market headed for its first negative month since March.

Disney added to the negative sentiment after saying it would lay off 28,000 people in its theme parks division. The shares lost more than 2% in premarket trading.

Dow Jones Industrial Average futures lost 200 points, or 0.7%. The move indicated a drop of about 130 points at the open. S&P 500 futures fell 0.6%. Nasdaq 100 futures lost about 0.7%. Futures were off their worst levels of the session.

The S&P 500 is down 4.7% in September, on pace for its first monthly losses since March. The Nasdaq Composite is down 5.9% in September, while the Dow is off by 3.4%.

Traders were hoping that the start of the debate process will lead to a clear winner on Election Day and not a drawn-out electoral process that could hit the market. The vicious first debate did little to ease those concerns.

“It was a long night and there’s a lot that needs to be sorted out,” said Daniel Deming, managing director at KKM Financial. “It became pretty apparent that this thing is not going to be over on Nov. 3 and I think the market is probably not too crazy about that.”

“The short-term volatility pressures probably won’t abate anytime soon after this debate. In a sense, it’s creating even more uncertainty,” Deming said. 

President Donald Trump and Democratic nominee Joe Biden sparred on a number of issues, including their qualifications to manage the U.S. economy, the nomination of Amy Coney Barrett to the Supreme Court as well as the U.S.’ handling of the coronavirus pandemic.

Biden came into the debate with an average lead of 6.1 percentage points in recent polls, according to RealClearPolitics. The former vice president was also the favorite to win the election in betting markets heading into the debate.

“Most people come away from it thinking it was an ugly experience,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. “I don’t think it changed peoples’ minds really.”

Many market strategists have cited uncertainty around the election as a key headwind for the market before year-end with each outcome bringing its own risks and benefits. Some investors have raised concerns about a potential Biden win as they fear it could lead to higher corporate taxes and tighter regulations. But at the same time, it could ease concerns about the trade war and lack of stimulus to bolster the economy in the wake of the coronavirus.

Investors are also worried about the potential the Nov. 3 result is too close to call and neither candidate concedes. That uncertainty could particularly weigh on the market.

Trump frequently claims that mail-in balloting leads to voter fraud even though experts have repeatedly said there’s no proof of that ever having been a problem in the United States. Last week the director of the FBI told a Senate committee that there’s no evidence of widespread voter fraud in the United States “whether it’s by mail or otherwise.”

Regardless, on Tuesday night Trump said, “As far as the ballots are concerned, it’s a disaster. This is going to be a fraud like you’ve never seen.”

“I think we’re going to do well because people are really happy with the job we’ve done. But we might not know for months because these ballots are going to be all over” the place,” he added. 

“Questions on election fraud were raised, which will add to concerns about a volatile post-election period if there is a close or uncertain electoral outcome,” wrote Ed Mills of Raymond James in a note entitled “Dumpster Fire Debate.”

Still, positive data regarding a potential coronavirus treatment from Regeneron Pharmaceuticals kept some of the market’s losses in check.  

Regeneron said after the close Tuesday its REGN-COV2 drug reduced viral levels and improved symptoms in non-hospitalized coronavirus patients.

“The greatest treatment benefit was in patients who had not mounted their own effective immune response, suggesting that REGN-COV2 could provide a therapeutic substitute for the naturally-occurring immune response,” Regeneron Chief Scientific Officer George D. Yancopoulos said in a statement.

Regeneron shares rose 4% in early trading.

The major averages snapped a three-day winning streak on Tuesday, with the Dow falling more than 100 points, or 0.5%. Those losses came amid concerns over a virus resurgence. New York City Mayor Bill De Blasio said the city’s daily positive rate of coronavirus tests is back above 3% for the first time in months.

“Coronavirus infection rates are rising in Europe and the United States as children return to school,” Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, wrote in a note. “We expect the United States to continue its modest pace of economic improvement, though virus growth and a softer labor market are threats.”

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First U.S. presidential debate was an ’embarrassment’

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Baidu DuerOS voice assistant, smart devices unit valued at $2.9 billion

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A security personnel stands guard at the opening session of Baidu’s annual AI developers conference Baidu Create 2019 in Beijing, China, July 3, 2019.

Jason Lee | Reuters

GUANGZHOU, China — Chinese internet giant Baidu has raised an undisclosed sum of money for its business division focused on voice assistants and smart devices. 

The new funding for Baidu’s “Smart Living Group” (SLG) values that business at 20 billion yuan or $2.9 billion. CPE, Baidu Capital and IDG Capital participated in the investment round. 

Baidu runs a platform called DuerOS which it calls a conversational artificial intelligence system. DuerOS allows devices to use Baidu’s voice assistant so users can communicate with hardware by speaking to it. For example, Baidu has its own range of smart devices under a brand called Xiaodu which includes speakers and wireless earphones all equipped with its voice assistant. 

But DuerOS is also an open platform, meaning other hardware makers can also install it on their devices. 

The outside funding will give a cash injection to one of Baidu’s divisions that could be key to its long-term growth as it faces stiff competition in its core business. Baidu is China’s biggest search engine and makes money from advertising.

China’s advertising market has been hit by the coronavirus pandemic. Pre-pandemic, digital ad spending in China was forecast to rise 13% in 2020, according to eMarketer. The research firm now estimates it will rise only 5%, to $75.33 billion.

Over the past couple of years, Baidu has faced rising competition in search as Chinese internet users continue to move away from web browsers to so-called “super apps” like Tencent’s WeChat. These sorts of apps lets users access services and search all within one platform. 

Baidu has its own super app called the Baidu App which continues to grow. Daily active users reached 204 million in June. 

But part of Baidu’s strategy has been to try to diversify its revenue stream, putting an emphasis on areas from artificial intelligence to driverless cars and healthcare. Its Smart Living Group is involved in that effort with voice assistants playing a key role. 

And analysts see potential here for monetization. 

“We believe Baidu remains on-track for double-digit revenue growth over the longer-term,” Mizhuo analysts said in a note earlier this month.

Mizhuo said they “feel comfortable with that goal” as the company has yet to monetize investments such as voice search “which makes up roughly 20% of the search volume and its mini-program platform.” 

Mini-programs refer to apps within the Baidu App. It means users don’t need to go to a separate app store to use certain services. 

Baidu said the investment into the Smart Living Group is expected to be completed in the fourth quarter of 2020. The Chinese company will hold “super voting rights” in the business group and is expected to continue to consolidate the financial results of SLG, as a majority shareholder.

Meanwhile, Baidu is in talks with investors to raise up to $2 billion over three years for a new biotech company, CNBC earlier this month reported. It will be a standalone entity that would focus on using artificial intelligence to create new drugs and make early-stage diagnoses of diseases. 

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