Mastercard: Newscasts - Holiday Sales Beat Prior Forecast

US benchmark equity indexes were little changed intraday as markets reopened after the Christmas holiday.

The Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite were almost flat at 43,303.1, 6,037.1 and 20,031.8, respectively, after midday Thursday. Among sectors, technology and real estate paced the gainers, while consumer discretionary saw the steepest decline.

US markets were closed Wednesday for Christmas.

The effect of a potential "Santa Rally" in the US stock market could reverse early next year amid the prospect of new trade policies or tariffs under the incoming Trump administration, Saxo Bank said. The S&P 500 has traded up 78% of the time during the Santa rally period since 1950, increasing 1.3% on average, the firm said.

The so-called Santa rally refers to the tendency for stock markets to move higher during the last week of December and the first two trading days of January, according to Saxo Bank.

US retail sales increased more than expected during the holiday season and came in above last year's growth pace, according to preliminary data from a Mastercard report.

"The holiday shopping season revealed a consumer who is willing and able to spend but driven by a search for value as can be seen by concentrated e-commerce spending during the biggest promotional periods," Mastercard Economics Institute Chief Economist Michelle Meyer said. "Solid spending during this holiday season underscores the strength we observed from the consumer all year, supported by the healthy labor market and household wealth gains."

Weekly applications for unemployment insurance in the US unexpectedly declined last week, while continuing claims rose to their highest level since November 2021, government data showed.

"There is likely still some overhanging impact from the seasonality issues surrounding Thanksgiving, especially in continuing claims," Jefferies said.

The US two-year yield was up one basis point at 4.34% intraday, while the 10-year rate was little changed at 4.58%.

In company news, Starbucks employees returned to work Wednesday after a five-day strike in which the Starbucks Workers United union claimed baristas in 43 states walked off the job, closing hundreds of stores. The coffee chain's shares were up 2.3%, among the top gainers on the Nasdaq.

Broadcom was the best performer on the Nasdaq and among the best on the S&P 500, up 2.4%.

Electric vehicle maker Tesla's shares were down 1.9%, the steepest decline on the S&P 500 and the second-worst on the Nasdaq.

West Texas Intermediate crude oil fell 0.5% to $69.82 a barrel.

Gold was up 0.7% at $2,653.60 per troy ounce, while silver added 0.2% to $30.36 per ounce.

Investors seem to be optimistic about some brick-and-mortar retailers' performance over Christmas. Shares of certain retailers with large brick-and-mortar footprints rise Thursday. Mastercard reports that value-minded consumers showed up to shop at physical locations in addition to making purchases on e-commerce sites, though online sales grew faster in the holiday period. Dollar stores and discounters' stocks, including Dollar Tree and Five Below, post over 3% gains. Stocks exposed to discretionary spending, like Best Buy and Target, also rise, as do department stores Kohl's and Macy's. (ben.glickman@wsj.com; @benglickman)

By Andy Serwer

America's introduction to the drone-delivery business can be traced back to a single, high-profile, high-drama orchestration. It was Sunday night, Dec. 1, 2013, when Amazon.com's then-CEO Jeff Bezos ushered 60 Minutes' then-correspondent Charlie Rose into a nondescript conference room promising him a big surprise. Behind the door — ta-da! — revealed for the first time were a pair of Amazon Prime Air drones. "Oh my God!" cried Rose when he laid eyes on the octocopters. "I don't want anybody to think this is just around the corner," Bezos said to Rose. "But could it be four, five years? I think so."

Instead, it has been 11 years and counting, and still Prime Air and its competitors aren't much further along with drones than Tesla and Alphabet's Waymo are with driverless cars — which is to say still mostly in the testing phase.

And yet writing off drone delivery would be shortsighted. Billions of investment dollars are at work, huge strides have been made, and the business is just now taking shape — ironically, perhaps, just as drone-sighting hysteria seems to be in full force. "There's going to be a huge transformation toward automated, zero-emission logistics," says Keller Cliffton, CEO of Zipline, founded in 2014 and now the leading drone-delivery company by miles flown. "It's very obvious that whoever succeeds will be one of the largest companies on Earth — bigger than United Parcel Service and FedEx combined."

Hyperbole aside, the drone ecosystem writ large now includes everything from hobbyists and high school drone clubs to real estate agents' beauty videos, to companies inspecting power lines, to terrifying military operations. Then there's drone delivery, which, to most of us, still smacks of sci-fi, like the pizza delivery in Steven Spielberg's 2018 movie Ready Player One. In fact, today drones are delivering medicine, sundries, snacks, and takeout food in dozens of countries.

According to PwC, drones are completing about 14,000 deliveries a day globally, or a total of five million-plus in 2024, moving $250 million of goods. In 10 years, PwC estimates, those numbers will soar to 800 million deliveries a year, with a value of $65 billion.

In America, drones are now touching down in Dallas/Fort Worth; College Station and Denton, Texas; Pea Ridge, Ark.; Christiansburg, Va.; and Fayetteville, N.C., as well as in Silicon Valley, Salt Lake City, and Phoenix. Service in Columbus, Ohio; Jacksonville, Fla.; Cleveland; Detroit; Seattle, and more should be up and running soon.

As for the mystery drones said to be flying over New Jersey and other states, the drone companies mentioned here say that if these are rogue drones, they don't belong to them. It's possible that ensuing anti-drone sentiment could impinge drone delivery through tighter federal regulation or municipalities banning drones outright, as recently happened temporarily in New Jersey and New York.

Amazon, with all of its resources and after years of effort, isn't the alpha dog here. In fact, drone delivery is evolving into a multibillion-dollar game of 3-D chess with players like Amazon, Alphabet's Google, and Walmart. Start-ups like Zipline, DroneUp, and Matternet, delivery services like DHL and DoorDash, plus restaurant chains such as Wendy's and Panera Bread are also moving pieces around the board.

Perhaps most significantly, drone delivery is another front in the battle between the nation's biggest retailers, Amazon and Walmart, both of which are stepping up drone operations. "We want to be delivering 500 million packages annually across the globe by drone by the end of this decade," an Amazon spokesperson told me. As for Walmart: "With over 4,600 stores located within 10 miles of 90% of the U.S. population, Walmart is uniquely positioned to execute drone deliveries at scale," a company spokesperson emailed.

Let the games begin!

Zipline, the subject of a case study at Harvard Business School, has almost 100 million miles flown, though the majority of them have been in Africa — Rwanda, in particular — delivering blood and medical supplies, which has served as a valuable proving ground for Zipline. Other drone companies have also chosen to develop in more regulation-friendly countries before opening for business in the U.S.

Now, Zipline is looking to deploy in some half-dozen metro areas in the U.S., where it has already completed 1.3 million commercial deliveries. It has operations in Salt Lake City, Dallas, and Pea Ridge, Ark. — the last location being a partnership with Walmart, located 10 miles northeast from Walmart's headquarters in Bentonville.

Behind the Pea Ridge Walmart, I watched the Zipline drone team load deliveries onto drones. Favorite items include rotisserie chicken, ice cream, beverages, and fresh produce. Zipline drones can carry up to four pounds and typically deliver within 15 miles away from the store, zipping around at 65 miles an hour, ranging as high as 300 feet. In this generation of Zipline's aircraft, orders are dropped by parachute. Zipline says its drones haven't caused any injuries or fatalities, and that even doggy drone anxiety is overstated.

With its next-generation drone, which Zipline is testing at its dreamy oceanside ranch in Half Moon Bay, Calif., orders will be lowered by a tether from a height of some 300 feet. Zipline's drones can receive orders from businesses like restaurants and retailers via a window — like those used for drive-through takeout — with a chute going up to a launchpad.

Walmart also has partnered with DroneUp and in Texas with Alphabet subsidiary Wing, founded in 2012, which has made over 350,000 deliveries of everything from library books to hot coffee in the U.S., Europe, and Australia. "In Dallas, we're working with Walmart on its drone-delivery aspirations, which are to cover more than 70% of the overall metroplex," says Nate Milner, Wing's head of strategy and operations. "Next year, we're going into Charlotte, where we did research and found that 84% of North Carolina residents would be interested in ultrafast grocery delivery."

What about the competition? "It's not a winner-take-all industry," Milner says. "More drone providers going live is truly a good guy for our business. It just provides more visibility and highlights drone delivery."

"There is basically unlimited demand for automated logistics," says Zipline's Cliffton. "When people look at Zipline, I think there's always that question about two of the biggest companies in the world, Amazon and Google, trying to do what Zipline does. I always assumed we would be a fast follower to Amazon. Amazon has spent many billions of dollars on that effort, and Zipline is about 10,000 times their scale." Amazon didn't respond to a request for comment on these points.

Drone delivery is a particularly complex endeavor. Imagine building a system that allows a drone — controlled by software, not a joy stick — to navigate through all kinds of weather, dodging wires, hills, buildings, and yes, increasingly other drones, and then land a package on a target the size of a picnic table.

"It's a little bit harder than people were expecting," says Cliffton. "I can buy a drone off the shelf and duct-tape a Snickers bar to the bottom and manually fly it two miles. But there's a big difference between that and building a system that can fly 100 million miles autonomously, 24/7, 365 days a year. It's like SpaceX. Everybody thought it was impossible, and then, once SpaceX was landing rockets, nobody else could do it. In other words, this stuff is difficult, and then when you do it, it's hard for others to catch up."

Cliffton says big isn't always beautiful when it comes to innovation. "There's this idea of 'resource curse,' which is that sometimes more resources are bad," he says. "Sometimes too many people, too much money, means that you're not as desperate. You're not as focused on building the minimum viable product and then getting it out into the real world and learning by doing." Has Amazon tried to buy Zipline? "Obviously, I can't answer that question," he says. "They know all about Zipline."

Zipline is competing against the giants, but it's hardly a wide-eyed naif. The company — which was most recently valued at $4.2 billion — has raised over $500 million in seven rounds from the likes of Fidelity, Temasek, Andreessen Horowitz, and Sequoia Capital. High-powered venture capitalists and Bono are on its board.

Zipline's tie to Sequoia speaks to the company's origin story as well as to Keller Rinaudo Cliffton's personal journey. Or, as he was known growing up, Keller Cliffton Rinaudo, his birth name. Keller tells me that when he and his wife, Steph, whom he met in a climbing gym in San Francisco in 2012, married, they decided to take the last name Cliffton together to honor Keller's great-uncle Cliffton, a pilot who was shot down in the Pacific theater in World War II — and because they met on a cliff.

A scrappy, iconoclastic, world-class rock climber, Cliffton is both an unusual sort and a prototypical, archetypal Silicon Valley founder/CEO. Graduating from North High School in Phoenix ("a bad high school" rife with "physical violence," he says), Cliffton worked full time for minimum wage at a California-style foodery called La Grande Orange Grocery & Pizzeria. "Keller marched to his own drummer," says his father, William Rinaudo Phillips, a trial lawyer, in an interview. "He was extremely curious, a huge reader, and seemed pretty impervious to peer pressure." On a last-minute whim, Cliffton applied to Harvard University and was accepted.

What was going to Harvard like? "It was the only school I got into, and I remember feeling very, very lucky," he says. "A lot of kids were there because they were born and bred for it, so maybe they did not appreciate it nearly as much as I did. You'd have a Nobel Prize--winning physicist begging students to come to office hours — bribing them with doughnuts and coffee. I was always the kid who would go to the office hours. Some of those professors are now investors in Zipline, and I became quite close to them."

After graduating, Cliffton had no idea what to do. He had become adept at scaling cliffs, though, honing his skills in the White Mountains around Rumney, N.H., so he became a professional rock climber. One day he picked up Delivering Happiness, a book written by Zappos founder Tony Hsieh, and had a series of epiphanies. Cliffton discovered that Hsieh and Alfred Lin, now a mover-and-shaker partner at Sequoia, both attended Harvard 10 years prior, lived in Cliffton's dorm, and had run a pizza business there. "And I had no idea that starting a company was a thing you could do. I remember reading the book and being flabbergasted. I emailed Tony and he was like, 'Yeah, just come live in Vegas.' "

Cliffton moved to Las Vegas, where Hsieh ( who later spiraled into extreme behavior and died in a house fire), was creating a start-up community. Cliffton co-founded Romotive, which produced an iPhone-controlled robotic toy called Romo, but he shut it down after finding what he considered to be a more impactful business — delivering blood by drone in rural Africa.

Along the way he bonded with Lin, a key adviser and board member of Zipline. "Alfred and I have been building this company together for years and are quite close," says Cliffton. "He has probably had the biggest impact on me in terms of growing as a leader and entrepreneur over the last decade."

Lin counseled Cliffton when the company laid off staff at Romotive, when he transitioned from robots to drones, and now as Zipline moves more into commercial delivery in the U.S. As for Zipline's business model, Lin says it could be something along the lines of how DoorDash and Uber Technologies' Uber Eats make money, which is by charging retailers and/or customers. Customers might also buy subscriptions, and even advertising could be a source of revenue. "Why do we do delivery logistics in two dimensions when we could do it in three?" he asks rhetorically.

"The main point is that this year there are over five billion same-day deliveries made by apps in the U.S.," Lin says. "Demand has never been higher for delivery to the home, and the trend continues to accelerate. Delivering by drones will be much more efficient. Roads cannot handle 100 times more traffic with 100 times more humans driving around all day long making these deliveries. We don't want the pollution. We don't want inflationary labor costs or energy costs. Drones are autonomous and have zero emissions. This is the answer for the future."

Beyond the fact that drone delivery frees up roads from traffic and could greatly reduce CO2 emissions, Lin and Cliffton point out that drones can uniquely benefit society — as they have by helping to reduce the infant mortality rate over 50% in a region of Ghana, for instance. Imagine, too, Cliffton says, getting medicine for a sick baby delivered to your house in the middle of the night in 20 minutes. Consumers might not appreciate the benefits of drone delivery until they use it, he argues, not unlike the iPhone. As for delivery drivers losing their jobs, Cliffton says that there's actually a shortage of drivers these days and that the drone business is creating new jobs.

Even though Zipline employs cutting-edge technology — including Nvidia chips — in a way it's a throwback, as for now the company is assembling its drones smack dab in Silicon Valley. "We don't have to just create Instagram for dogs," Cliffton says. "We should have the courage to work on really big, ambitious ideas that remake what modern life looks like. Companies like Tesla and SpaceX inspired us, and I'm hoping that Zipline can be a similar inspiration."

Unlike ride-hailing companies such as Uber and Lyft, which have to abide by a raft of state and local ordinances, drone-delivery companies have a single regulator — the Federal Aviation Administration, though wary local municipalities could, of course, make things difficult for a drone delivery service. The FAA has been steadily moving toward first approving drones that operate in the visual line of sight and now, the holy grail of the business, beyond the visual line of sight, or what's known as BVLOS.

Densely populated areas are the most challenging for drone companies, according to Andreas Raptopoulos, CEO of Matternet, but not impossible. "You could have drone activity in New York City," he says. "We have looked at a couple of things on the medical side, even in Manhattan. We have had operations in Zurich." In China, delivery company Meituan ( which has a new partnership with Walmart China) uses drones to navigate skyscrapers in Shenzhen.

How this plays out raises all sorts of questions. Will Zipline end up being acquired by Walmart, or Amazon, or Alphabet — or Uber, for that matter? Or will the company go public soon — or stay private forever? Bigger picture, will Keller Cliffton and his company succeed? And biggest picture, will drone delivery become as accepted and ubiquitous as the iPhone — or will it end up being more of a niche product like, say, the Segway?

Pervasive drone delivery may or may not be just around the corner, but if that day does arrive, instead of producing hysteria, drones will warrant little more than a shrug.

Write to Andy Serwer at andy.serwer@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.