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Dow Sinks, Zoom Video and Five9, Ackman and Universal, J&J - 5 Things You Must Know

Stock futures fall as investors weigh what impact higher inflation and rising COVID-19 cases may have on the economic recovery; IBM reports earnings Monday; Zoom Video agrees to buy Five9 for $14.7 billion.

Here are five things you must know for Monday, July 19:

1. -- Stock Futures Fall Sharply on Worries of Higher Inflation and COVID Spread

Stock futures declined sharply Monday as investors weighed what impact  higher inflation and rising COVID-19 cases may have on the global economic recovery. 

Contracts linked to the Dow Jones Industrial Average dropped 395 points, S&P 500 futures fell 42 points and Nasdaq futures declined 113 points. The yield on the benchmark 10-year Treasury fell Monday to 1.245%.

Stocks finished lower Friday after surging inflation led to an unexpected decline in U.S. consumer sentiment in early July. For the week, the Dow fell 0.5%, the S&P 500 declined 1% and the Nasdaq dropped 1.9%.

It was the first weekly loss for the S&P 500 following three weeks of gains.

The delta variant of COVID-19 has been spreading rapidly in parts of Asia, including Japan where the Olympics will begin Friday, and in the United States.  

Delta is the most transmissible COVID variant yet, U.S. Surgeon General Dr. Vivek Murthy told CNN. Experts said it was exacerbating the rise in cases among unvaccinated Americans.

Second-quarter earnings season will ramp up this week and next. Profits for companies in the S&P 500 are expected to jump 64% from a year earlier, according to FactSet.

2. -- This Week's Calendar: IBM, Netflix, AT&T and Intel Earnings

Earnings reports are expected Monday from International Business Machines  (IBM) , Prologis  (PLD) , PPG Industries  (PPG) , AutoNation  (AN) , Tractor Supply  (TSCO)  and J.B. Hunt Transport Services  (JBHT) .

Reports are expected later in the week from Netflix  (NFLX) , Philip Morris  (PM) , Lockheed Martin  (LMT) , Johnson & Johnson  (JNJ) , Coca-Cola  (KO) , Verizon  (VZ) , Texas Instruments  (TXN) , Intel  (INTC) , Abbott Laboratories, AT&T  (T) , Union Pacific  (UNP) , Chipotle Mexican Grill  (CMG) , Snap  (SNAP) , Honeywell  (HON) , American Airlines  (AAL) , Twitter  (TWTR)  and American Express  (AXP) .

Abbott Laboratories, Union Pacific and Honeywell are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells the stocks? Learn more now.

5 Stocks Jim Cramer Is Watching as Earnings Season Kicks Off

The economic calendar in the U.S. Monday includes the NAHB homebuilders' index for July at 10 a.m. ET.

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Data also is expected this week on housing starts, existing home sales and jobless claims.

3. -- Zoom Video to Buy Five9 for $14.7 Billion

Zoom Video Communications  (ZM)  agreed to acquire call center provider Five9  (FIVN)  for about $14.7 billion in stock.

The purchase of Five9 is Zoom Video's largest-ever

The deal values Five9 at $200.28 a share. Shares of Five9 rose 8.34% to $192.41 in premarket trading Monday. Zoom Video fell 1.96% to $354.87.

Zoom Video has benefited from the shift to work from home during the pandemic and remote schooling. But growth is expected to slow as offices reopen and schools return to in-person learning.

Zoom said in a statement that the acquisition of Five9 will help expand its offerings to enterprise customers and "allow it to accelerate its long-term growth opportunity by adding the $24 billion contact center market."

4. -- Bill Ackman Drops SPAC Plan for Universal Music

Hedge-fund billionaire Bill Ackman will buy a stake in UniversalMusic Group with his hedge fund rather than a special purpose acquisition company after the proposed deal was questioned by shareholders and regulators.

Ackman’s SPAC, Pershing Square Tontine Holdings (PSTH), will withdraw its offer for a 10% stake in Universal Music Group, he said in a letter on Monday. Ackman's hedge fund, Pershing Square Holdings, instead will buy 5% to 10% of the music label.

"Our decision to seek an alternative initial business combination (“IBC”) was driven by issues raised by the (Securities and Exchange Commission) with several elements of the proposed transaction - in particular, whether the structure of our IBC qualified under the NYSE rules," Ackman wrote in the letter.

Universal Music Group is the home of musicians Taylor Swift and Drake. It is owned by France's Vivendi.

5. -- J&J Reportedly Explores Plan to Put Talc Liabilities Into Bankruptcy

Johnson & Johnson  (JNJ)  is exploring a plan to offload liabilities from widespread Baby Powder litigation into a newly created business that would then seek bankruptcy protection, Reuters reported, citing seven people familiar with the matter.

The healthcare giant hasn't yet decided whether to pursue the bankruptcy plan and could ultimately abandon the idea, some of the people said. Reuters said it couldn't determine whether J&J has retained restructuring lawyers to help the company explore the bankruptcy plan.

The company faces thousands of lawsuits claiming its baby powder contained asbestos and caused cancer. J&J in mid-May said it was discontinuing its talc-based baby powder in the U.S. and Canada amid a larger review of products prompted by the COVID-19 pandemic.