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DAILY MARKET REPORTS

  • The Dow Jones Industrial Average fell Thursday, with technology shares coming under pressure after Apple announced a rare cut to its sales forecast for the crucial holiday quarter.
  • Apple lowered its quarterly revenue forecast for the first time in more than 15 years Wednesday, in a move prompted by ebbing iPhone sales in China. Apple shares dropped 9%.
  • A signal of economic gloom in the world’s second largest economy, Apple’s move followed a batch of pessimistic sentiment indicators earlier in the week.
  • Health-care shares in the broad index fell more than 1%, as Bristol-Myers Squibb announced plans to buy cancer drugmaker Celgene for roughly $74 billion.
  • House Democrats plan to put forward a package of spending bills that would lift most of the continuing government shutdown through September, as well as a short-term extension to Department of Homeland Security funding.
  • Senate Majority Leader Mitch McConnell, however, said Wednesday the Senate wouldn’t take up the House Democratic spending package.

US FINANCIAL MARKET

Apple Makes Rare Cut to Sales Guidance

  • Apple slashed its quarterly revenue forecast for the first time in more than 15 years, an unprecedented move in the Tim Cook era that was prompted by a downturn in sales of iPhones in China.
  • In a letter to investors, Tim Cook stated that “In fact, most of our revenue shortfall to our guidance, and over 100% of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”
  • Revenue for the company’s fiscal first quarter will fall at least $5 billion below the company’s previous estimates, totaling about $84 billion for the quarter. Previously Apple had estimated quarterly revenue of between $89 billion and $93 billion.
  • The surprise cut renews concerns about waning demand for Apple’s marquee product, the iPhone, which makes up the vast share of its revenue and has vaulted the company’s value and profits.
  • It also raises fresh questions about Apple’s prospects in China, the world’s largest smartphone market, which represents nearly 20% of Apple’s sales.

Bristol-Myers Squibb to Acquire Celgene for About $74 Billion

  • Bristol-Myers Squibb agreed to acquire Celgene in a deal valued at about $74 billion, bringing two of the top-selling cancer drugs under one roof.
  • Under the terms, Bristol will buy Celgene with a combination of cash and stock.
  • The deal represents a 54% premium based on Celgene’s closing stock price Wednesday.
  • Bristol agreed to pay more later, if Celgene’s labs deliver three new approved drugs.
  • When the deal is done, Bristol-Myers shareholders would own about 69% of the combined company, while Celgene shareholders would own about 31%.
  • Shares of Bristol-Myers fell more than 11% in pre-market trading Thursday, while Celgene’s rose more than 32%.

Cargill sees 20% drop in second-quarter net earnings, falling revenues amid trade fight

  • Grains trader Cargill on Thursday reported a 20% drop in its fiscal second-quarter 2019 net earnings, amid global trade tensions, challenges in the Chinese hog sector and a struggling U.S. dairy sector.
  • Cargill’s second-quarter revenues fell 4% to $28 billion, bringing the year-to-date figure to $56.7 billion.
  • Cargill said political instability in Central America and market challenges in Southeast Asia ate into its poultry efforts, and earnings for its starches business slumped as U.S. ethanol prices hit historic lows and material costs rose in Europe.
  • The privately held company said on Thursday its net earnings on a U.S. GAAP basis for the quarter were $741 million, a 20% decline from $924 million for the same period a year earlier.

Delta Spurs Plunge Among Airlines as It Cuts Revenue Forecast

  • Delta Air Lines plunged the most in more than three years, pulling rivals lower, after disappointing ticket pricing prompted the carrier to cut its revenue forecasts.
  • Total revenue will rise about 7% instead of the 7.5% that had been expected.
  • Fourth-quarter revenue from each seat flown a mile, also known as unit revenue, will rise 3% from a year earlier, the Atlanta-based airline said in a regulatory filing Thursday. Delta previously forecast a 3.5% gain.
  • Delta said, however, that demand from business and leisure travelers remainedhealthy” in the fourth quarter.
  • “Momentum continues” for average fares per mile on near-term reservations, the airline said.

Qualcomm posts court ordered bonds to stop iPhone sales in Germany

  • Qualcomm said on Thursday it posted security bonds of 1.34 billion euros ($1.52 billion) in order to be able to enforce a court order that will ban sales of some Apple iPhones in Germany.
  • The chipmaker needed to post the bonds as part of a legal requirement by a German court, which on Dec. 20 found that Apple had infringed Qualcomm patents on power saving technology used in smartphones.
  • According to the court order, Apple has to stop the sale, offer for sale and importation for sale of all infringing iPhones in Germany. Apple had said it was appealing the decision, but the order goes into effect as soon as Qualcomm posts the bond.

GM U.S. new vehicle sales fall 2.7% in fourth quarter

  • General Motors on Thursday reported that U.S. new vehicle sales fell 2.7% in the fourth quarter, with declines across most of its brands as American auto sales appear set to weaken in 2019.
  • GM posted significant declines for passenger car models as American consumers continued to abandon those models in favor of larger, more comfortable vehicles, but also reported drops for some of those more popular larger vehicles.
  • GM expects industrywide U.S. new vehicle sales to hit 17.3 million units for 2018, a slight increase versus 2017.

GM sold 200,000 electric vehicles in U.S. by 2018, triggering tax-credit phaseout: source

  • General Motors hit 200,000 total electric vehicles sold in the United States by the end of 2018, reaching a threshold that triggers a phase-out of a $7,500 federal tax credit over the next 15 months, a person briefed on the matter said Wednesday.
  • The largest U.S. automaker reached the figure in the fourth quarter of 2018, which means the credit will fall to $3,750 in April, and then drop to $1,875 in October for six months. The credit will completely disappear by April 2020.
  • The 200,000 figure covers GM’s cumulative EV sales since 2010.

KKR to Invest $1 Billion in Commercial Aircraft

  • KKR announced plans Thursday to invest an initial $1 billion in a commercial aircraft venture as part of a push by the private-equity firm into the fast-growing jet-rental business.
  • The company is targeting planes being sold by other lessors and will launch a joint venture by acquiring six widebody cargo jets, a segment attracting increasing interest from investors because of the expansion by ecommerce specialists such as Amazon.
  • More than 40% of the global airliner fleet is rented from lessors, which have become a key source of finance for carriers that are expected to spend $143 billion on new planes this year, according to Boeing.

New Netflix CFO to Tackle Cash Flow Conundrum

  • Spencer Neumann, who on Wednesday was named Netflix’s new finance chief, joins the video streaming service at a critical juncture in its evolution.
  • His main objective in the top finance post will be clear from the start: Wrestle with a cash-sucking content development pipeline while convincing investors that efforts to convert original content into more subscriptions and profits ultimately will materialize.
  • The move to create more original content has led to a funding gap at Netflix. It takes roughly two years to get a new show from production to screen, and Netflix’s investment is tied up for that period with no returns, analysts say.

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US ECONOMY & POLITICS

U.S. Private Sector Adds 271,000 New Jobs in December

  • The U.S. private sector added 271,000 jobs in December, according to a report released Thursday, driven by hirings at medium-size businesses and in the service sector.
  • Economists were expecting the report to show the private sector added 178,000 jobs.
  • The increase in private payrolls in December was up from 157,000 jobs added in November, according to payroll processor Automatic Data Processing and forecasting firm Moody’s Analytics.
  • The latest report revised downward the number of private-sector jobs added in November to 157,000 from 178,000.

Jobless Claims Increased Last Week

  • Initial jobless claims, a proxy for layoffs across the U.S., increased by 10,000 to a seasonally adjusted 231,000 in the week ended Dec. 29, the Labor Department said Thursday.
  • Economists expected 220,000 new claims last week. Claims for the week ended Dec. 22 were revised up to 221,000.
  • The four-week moving average of claims, a steadier measure, fell last week by 500 to 218,750.
  • Thursday’s report showed the number of claims workers made for longer than a week increased by 32,000 to 1,740,000 in the week ended Dec. 22. The figure, also known as continuing claims, is reported with a one-week lag.

U.S. Factory Gauge Tumbles by Most Since 2008 as Orders Cool

  • The Institute for Supply Management index (ISM) dropped to a two-year low of 54.1, missing all estimates in Bloomberg’s survey, data showed Thursday.
  • The index compiled from a survey of manufacturers has tumbled sharply from a 14-year high in August, though it remains above the 50, dividing line between expansion and contraction.
  • All five main components declined, led by new orders slumping the most in almost five years and the steepest slide for production since early 2012.
  • Thursday’s ISM report showed a gauge of imports fell to the lowest since May 2017, while an export orders index climbed from an almost two-year low for its first gain in three months.

Mortgage applications plummet nearly 10% to end 2018, despite lower rates

  • Total mortgage application volume dropped 9.8% at the end of last week from two weeks earlier, volume was 21% lower than a year ago and the lowest level in 18 years.
  • Applications to refinance a home loan decreased 12% over the two weeks and ended last week 35% below the same week one year ago.
  • The average contract interest rate for 30-year fixed-rate, conforming mortgages decreased to 4.84% from 4.86% a week earlier, with points decreasing to 0.42 from 0.47 (including the origination fee) for loans with a 20% down payment.

Shutdown Over Border Wall Drags on as Democrats Prepare to Take Control of House

  • President Trump and congressional leaders from both parties showed no sign of progress in resolving the partial government shutdown as Democrats prepared Thursday to take control of the House.
  • Republicans at the White House meeting accused Democrats of not negotiating, while Democrats focused on asking Mr. Trump to support legislation to open government agencies that have been shut for 12 days since funding ran out in December.
  • Mr. Trump, a Republican, maintained his insistence on a wall on Wednesday. “We need a physical barrier,” he said during a cabinet meeting, adding he deemed other measures such as drones “bells and whistles.”

House Democrats’ Rules Could Make It Easier to Raise Debt Limit

  • House lawmakers Thursday are set to vote on rules that would revive a measure known as the Gephardt rule, which would allow the chamber to suspend the debt ceiling at the same time it approves an annual budget.
  • The provision would allow lawmakers to avoid taking a separate, direct vote on the borrowing limit.
  • Any debt-limit measure from the House would likely need 60 votes to pass the Republican-controlled Senate, which is unlikely to adopt its own version of the Gephardt rule, Senate GOP aides said.

Democrats Set to Push Election Overhaul, Without GOP Support

  • California Rep. Nancy Pelosi is expected to be elected as speaker of the House on Thursday with two, immediate legislative priorities: ending a partial government shutdown and passing a government-overhaul package changing campaign-finance rules and government-ethics law while expanding voting rights.
  • On ethics, the package would prohibit senior government officials from lobbying their former executive-branch peers for two years after they have left government. It also calls for establishing a nationwide automatic voter-registration system.
  • On the campaign-finance front, the legislation would require several classes of politically active organizations to disclose donors who have given $10,000 or more during an election cycle.
  • Currently, those groups don’t have to disclose their donors.
  • The bill also allocates a pool of taxpayer money to match certain small-dollar donations 6-to-1; aides didn’t disclose how much money would be set aside for that initiative, which is meant to encourage grass-roots campaigning.
  • House Republicans are almost certain to oppose most if not all of the legislation, which would likely strengthen the Democrats’ small-donor advantage in political contributions.

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EUROPE & WORLD

Chinese Consumers Curb Spending, Likely Deepening Slowdown

  • A slowdown in China’s economy is piling stress on to a previously reliable growth driver—the Chinese consumer—likely deepening an economic pullback that is rattling global markets.
  • Retail sales have marched downward most of the year, with growth decelerating to 8.1% in November—the lowest level in more than 15 years.
  • Consumption accounted for more than three-quarters of economic growth last year; it will fall to just under two-thirds this year, according to Wang Bin, a Commerce Ministry official.
  • Credit-card bills unpaid for six months were up 33% at the end of September from a year earlier, according to central bank data.
  • An annual survey of households showed that about 40% Chinese families ended 2017 with no savings in that year.

China Lands Probe on the ‘Dark Side’ of the Moon

  • China successfully landed a probe on the far side of the moon, in the latest milestone for the country’s ambitious space program.
  • The Chang’e-4 touched down in the Von Kármán crater Thursday morning Beijing time, China’s state news agencies reported. Having landed intact, it will deploy a rover to gather samples that could provide insights into the moon’s internal composition.
  • The landing makes China the first country to deploy a probe on the far side of the moon.
  • To help achieve the feat, a communications-relay satellite called Magpie Bridge was positioned 50,000 miles beyond the moon last June to bounce transmissions between the Chang’e-4 and terrestrial ground stations.

French Police Arrest Key ‘Yellow Vest’ Figure, Signaling Crackdown

  • French authorities arrested a key “yellow vest” protester for organizing an unauthorized demonstration, signaling a crackdown on a movement that has upended the agenda of President Emmanuel Macron.
  • Police arrested Eric Drouet on Wednesday evening near the Champs Elysees, leading a commemoration of yellow vests who have died since the movement began, mainly hit by cars as they protested at roundabouts around the country.
  • A truck driver from the Parisian suburbs, Mr. Drouet had created a Facebook page that sparked the antigovernment protests in November and emerged as one of its most high-profile members.

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TODAY in HISTORY

  • George Washington defeated Cornwallis’s forces at the Battle of Princeton. (1777)
  • Sir Edmund Hillary reached the South Pole overland. (1958)

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