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Snap jumps on brightened outlook; Google, Facebook face congressional scrutiny

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Snap jumps on brightened outlook; Google, Facebook face congressional scrutiny

Snapchat parent Snap Inc.'s shares soared for the week ended June 8 over renewed optimism about the company's user growth. Elsewhere in the new media sector, Alphabet Inc. and Facebook Inc. shares slid during a week when lawmakers raised questions about the companies' dealings with Chinese phone-makers.

Deutsche Bank analyst Lloyd Walmsley said in a June 5 research note that Snap's second-quarter data showed "robust" user growth during May. The note came after Snap had faced backlash over a redesign in February, with a number of influential users saying they found the updated platform difficult to use. But Walmsley said Snap's second redesign in late April has been better received.

"We feel better about Snap [daily active user] growth ... [and] find the recent uptrend highly encouraging vis-à-vis user trends and platform relevance, seemingly removing one tail risk, at least near term," Walmsley wrote.

Walmsley said user growth has been up over 3% since the second redesign. He increased his second-quarter daily active user, or DAU, figure estimates to 192 million from 189 million, and revenue to $249 million, up from $244 million.

Snap's shares were trading at $13.29 midday June 8, up 14.3% from their June 1 close.

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Turning to Alphabet's Google Inc. and Facebook, reports circulated that both companies were involved in congressional probes regarding their respective dealings with Chinese phone makers.

The Wall Street Journal on June 7 reported that U.S. lawmakers were examining Google's relationship with Chinese device manufacturer Huawei Technologies Co. Ltd., which sells phones that run on Google's Android operating system.

The objective of Google's deal with Huawei, similar to its deals with other phone-makers, was to upgrade Android phones to a newer messaging technology, but some lawmakers fear the deal could be abused by Chinese government officials interested in spying on Americans, the Journal reported. Huawei has denied this claim.

Similarly, Facebook Inc. has also recently drawn scrutiny for its data-sharing agreements with Huawei and three other Chinese electronics-makers. In a June 4 statement, House Energy and Commerce ranking member Frank Pallone Jr., D-N.J., said it was "deeply concerning that Facebook continues to withhold critical details about the information it has and shares with others." Facebook now plans to terminate its agreement with Huawei during the week of June 4, Reuters reported.

U.S. legislators this year have been heavily focused on limiting the U.S. reach of Huawei and other Chinese smartphone-makers, including ZTE Corp., which they deem to be threats to national security.

Alphabet's shares were trading at $1,132.82 around 12 p.m. ET June 8, down 0.19% from their June 1 close. Facebook's stock was trading at $189.16 midday June 8, down 2.5% for the week.

Social media giant Twitter Inc.'s shares jumped for the week. The company joined the S&P 500 before trading opened on June 7, replacing agrochemical company Monsanto Co. after its acquisition by Bayer Aktiengesellschaft for $62.5 billion.

Twitter will be added to the Internet Software & Services Sub-Industry index of the S&P 500 Global Industry Classification Standard.

Twitter's shares were trading at $41.09 at 12 p.m. ET June 8, up 12% from their June 1 closing price.

Microsoft Corp.'s shares also rose slightly during the week. The tech giant on June 4 struck a $7.5 billion all-stock deal to acquire GitHub Inc., which is expected to close by the end of the calendar year 2018.

The deal is expected to pay dividends for both companies, providing GitHub with more resources and allowing Microsoft to further expand its reach into open-source software.

Microsoft has a mixed history with open-source, or publicly available, software. Microsoft CEO Satya Nadella's predecessor, Steve Ballmer, reportedly once called open-source operating system Linux "a cancer" because of its threat to intellectual property rights.

But Nadella has taken a different approach, saying on a June 4 conference call that the GitHub deal indicated the company is "all in with open source."

Microsoft's shares rose immediately following the news and settled later in the week. The stock was trading at $101.25 midday June 8, up 0.5% from its June 1 close.