US FINANCIAL MARKET
STOCKS INCH HIGHER AFTER IRANIAN STRIKE ROILED MARKETS
- U.S. stocks inched higher Wednesday, showing signs of stability after rising geopolitical tensions in the Middle East spurred a retreat from riskier assets in Asia earlier in the day.
- Tehran’s military response to the U.S.’s killing of a key Iranian general rattled markets overnight, but the moves in stocks, bonds and commodities quickly moderated as investors reassessed the chances of a broader conflict.
- Iran’s foreign minister said the country had taken “proportionate measures in self-defense” and didn’t seek escalation or war.
- Investors are awaiting a statement from U.S. President Donald Trump at 11:00 a.m. ET. Trump earlier tweeted “All is well!” and said an assessment of casualties and damage was underway.
- One source said early indications were of no U.S. casualties.
- Corporate news drove some of the bigger moves, with Boeing falling 1.4% after one of its planes operated by Ukrainian Airlines crashed in Tehran on Wednesday shortly after takeoff, killing all 176 passengers and crew on board.
- Walgreens dropped 5.7% after reporting sales and earnings for the latest quarter that fell short of analysts’ expectations.
- Lennar gained 5.3% after the No. 2 U.S. homebuilder beat quarterly profit estimates on the back of lower home prices and mortgage rates.
- In the latest upbeat U.S. data, the ADP National Employment Report showed private payrolls jumped by 202,000 jobs last month, much above the 160,000 rise expected by economists.
Walgreens Sales Rise, But Profit Falls 25%
- Walgreens Boots Alliance’s quarterly profit missed Wall Street expectations on Wednesday, hurt by lower payments from insurers on drugs sold at its U.S. pharmacies, exacerbating investor fears around its growth.
- Revenue rose 1.6% to $34.34 billion, but also missed analysts’ estimates of $34.60 billion.
- The company said comparable retail sales in the U.S.—or those at stores that have been open for at least a year—declined 0.5% because of less of an emphasis on tobacco.
- Comparable pharmacy sales in the U.S. rose 2.5%, Walgreens said.
- Net income fell to $845 million in the first quarter, from $1.12 billion a year earlier.
- The company, however, maintained its forecast of almost flat adjusted profit growth in 2020.
Lennar sees 2020 home sales above estimates as lower prices boost demand
- Lennar forecast 2020 home sales above analysts’ estimates, encouraged by strong demand on the back of lower home prices and mortgage rates, sending its shares up 3%.
- Revenue rose 8% to $6.97 billion. Analysts on average had expected revenue of $6.55 billion.
- The company sold 16,420 homes in the quarter, up from 14,154 homes a year ago, while the average price fell 6.7% to $393,000.
- Orders, which indicate future demand, rose 23.4% to 13,089 homes in the quarter.
- Net income fell to $674.3 million in the quarter, from $796.1 million a year earlier.
- Lennar expects to deliver between 54,000 and 55,000 homes in 2020. Analysts were expecting 53,954 unit sales.
Macy’s Says Holiday Sales Fell Less Than Feared
- Macy’s said sales fell in the critical holiday quarter and it would close about 29 stores, but the sales decline wasn’t as sharp as investors had feared amid mounting competition and a shift to online shopping.
- The department store giant said comparable-store sales for November and December fell 0.6% from a year ago for its owned plus licensed merchandise.
- On that basis, sales fell 3.5% in the fall quarter. Comparable sales include stores open at least a year.
- Analysts are predicting that Macy’s same-store sales will fall 2.5% for the fourth quarter, according to FactSet.
- U.S. e-commerce sales in the period from Nov. 1 through Christmas Eve rose 18.8%, according to a Dec. 25 report by Mastercard, while overall holiday retail sales, excluding autos, rose just 3.4%.
Corona maker Constellation raises FY profit forecast after upbeat quarter
- Constellation Brands raised its full-year adjusted earnings forecast and beat Wall Street estimates for quarterly profit on Wednesday, driven by strong demand for its beers such as Corona Premier and Modelo Especial.
- Net sales climbed 1.4% to $2 billion, beating the average analyst estimate of $1.95 billion.
- Beer sales rose 8% to $1.31 billion in the quarter compared with the previous year.
- Wine and spirits dropped 10% to $689 million, the company said.
- The company reported earnings of $360.4 million for its fiscal third quarter, compared with $303.1 million a year earlier.
- The company also recognized a $534 million decrease in the fair value of its over $4 billion investment in Canopy in the quarter.
- The brewer now expects to earn $9.45 to $9.55 per share for its fiscal 2020, excluding the impact from its investment in Canadian cannabis producer Canopy Growth on a comparable basis, up from its prior forecast of $9 to $9.20.
T-Mobile gains 1 million phone customers in fourth quarter
- T-Mobile said it gained 1 million net new postpaid subscribers in during the fourth quarter, unchanged from last year.
- Analysts expected 904,000 T-Mobile postpaid phone adds, highlighting a small win for the wireless carrier.
- The U.S. phone carrier also noted that postpaid phone churn, or the rate of customer cancellations, was 1.01% during the fourth quarter, in line with analyst estimates of 0.9%.
- T-Mobile’s main focus for the fourth quarter has been launching its 5G network, which the company said now covers more than 200 million people.
Iran Strikes Reverberate Across Persian Gulf Economy
- Two major tanker operators, including Saudi Arabia’s state-controlled Bahri, suspended crossings in the Strait of Hormuz Wednesday, as the economic fallout from rising U.S.-Iranian tensions, including an Iranian military strike on a U.S. base in Iraq overnight, rippled throughout the region.
- Strikes between the U.S. and Iran now threaten to disrupt vital travel and trade routes in what would be a devastating blow for Gulf countries seeking to diversify from a dependence on oil.
- Oil giant Saudi Aramco was considering diverting tankers carrying its products to avoid the Strait of Hormuz, according to people close to the oil giant.
- Some 20% of the world’s oil supply passes on tankers through the Strait of Hormuz, a narrow waterway between the Persian Gulf and the Indian Ocean.
Ukraine-Bound Boeing Jet Crashes in Iran, Killing All on Board
- A Ukraine International Airlines jetliner crashed shortly after takeoff from Tehran on Wednesday, killing all 176 passengers and crew members on board, an incident that comes amid escalating tensions and military clashes between the U.S. and Iran.
- The Ukrainian 737 is an earlier model and doesn’t have the flight-control feature that was implicated in crashes last year and led to the MAX fleet being grounded globally.
- Iran’s state news agency said the plane crashed because of an engine fire caused by a technical fault.
- It didn’t explain how that conclusion was reached.
- Iran, meanwhile, has a relatively poor air safety record. Its airlines and infrastructure have been hobbled by sanctions that led to shortages of spare parts and the cancellation of $40 billion in new aircraft from Boeing and Airbus.
Boeing Backs MAX Simulator Training in Reversal of Stance
- Boeing recommended extra flight-simulator training for 737 MAX pilots, a humbling and costly reversal of a longstanding design principle that helped the aircraft maker minimize the time and expense for airlines to start flying the jets.
- Boeing had steadfastly argued that pilot training on personal computers or laptops alone was sufficient.
- On Tuesday, the company disclosed its new position—one that in the process jettisons a decades-old safety assumption that pilots typically respond to emergencies in mere seconds.
- The move is the latest sign that new leadership at Boeing is seeking a more conciliatory approach toward national regulators, many of whom had bristled at the company’s effort to flag when the plane would be cleared to fly.
- Last month, Boeing named David Calhoun to be its new chief executive, effective Jan. 13.
- At the same time, the training recommendation could complicate preparations by airlines to return the grounded aircraft to service once regulators give the go-ahead.
Sonos Sues Google, Alleging Theft of Speaker Technology
- Wireless-speaker maker Sonos accused Google in a lawsuit on Tuesday of stealing its technology and infringing on its patents, escalating tensions between the once-close partners.
- Sonos is seeking a ban on the sale of Google’s speakers, smartphones and laptops in the U.S., as well as financial compensation, in a suit filed with the U.S. International Trade Commission and the U.S. District Court in Los Angeles.
- The relationship between the two companies, which had matched Sonos’ speakers with Google services, has soured as Google built a growing speaker business, challenging Sonos in its own industry.
- A Google spokesman said the company disputes the claims by Sonos and is “disappointed that Sonos brought these lawsuits instead of continuing negotiations in good faith.”
Apple News users reach 100 million, App Store sales rise
- Apple’s news service has reached 100 million monthly active users and customers spent more than $1.4 billion in the App Store between Christmas and New Year, the latest signs of growing revenue from the iPhone maker’s services business.
- The company said that between Dec. 24, 2019, and Jan. 1, 2020, its customers spent $1.42 billion in the App Store, a 16% increase over the previous year, and $386 million on Jan. 1 alone, a 20% increase.
- The number of users of the News app rose nearly 18% from a year ago, although the company did not break out subscriber numbers for the Apple News+ service, which costs $9.99 per month.
- Apple keeps between 15% and 30% of the sales through its App Store, depending on whether users buy software as a one-time purchase or recurring subscription.
IBM’s Quantum-Computing Service Tops 100 Customers
- International Business Machines said Wednesday that more than 100 organizations are using its quantum-computing services, including businesses, universities and government research facilities.
- The IBM Q Network launched in late 2017 and had 40 clients as of January 2019.
- Clients of the network pay to use some of the company’s 15 early-stage quantum-computing machines via the cloud.
- Quantum computers are potentially much more powerful than traditional computers, but they are also more delicate and prone to faults.
- The technology is still in its early stages and no commercial-grade quantum computer has been built yet.
Grocers roll out plant-based burgers – at prices below Beyond Meat
- Cashing in on rising demand for imitation meat, major retailers including Kroger and Walmart recently began to carry Beyond Meat’s plant-based burgers and sausages.
- Kroger, the biggest U.S. grocer, on Wednesday rolled out its own line of plant-based imitation meat burgers nationwide under its Simple Truth in-house brand.
- German-owned discount supermarket Aldi U.S., which sells Meatless Meatballs and Chickenless patties, said it keeps its plant-based meat products at prices ranging from $3 to $4.
- In comparison, a package of two Beyond Burgers sells for about $5.99 at some major big-box stores.
- Aldi, which plans to launch more products this year and is testing a meatless breakfast sausage, told Reuters that sales of its store-brand plant-based meats were up 300% last year.
US ECONOMY & POLITICS
U.S. Private Sector Added 202,000 Jobs in December
- The nonfarm private sector in the U.S. added 202,000 jobs in December, topping economists’ expectations.
- Economists were expecting the nonfarm private sector to add 150,000 jobs in December.
- The service-providing sector drove most of the overall increase, adding 173,000 jobs, significantly higher than the 29,000 jobs added by the goods-producing sector, where all gains were in the construction industry.
- November’s nonfarm private-sector payroll was revised to 124,000, up from 67,000 jobs, according to the report, which is done by the ADP Research Institute along with Moody’s Analytics.
- The December jobs report from the Labor Department will be released Friday. Economists are expecting 160,000 new jobs and for the unemployment rate—which was at 3.5% for November—to stay the same.
Iran Threatens Further Retaliation After Missile Strikes Against U.S.
- Iranian Supreme Leader Ayatollah Ali Khamenei vowed further retaliation for the targeted killing of an Iranian commander, hours after striking military bases in Iraq that house U.S. forces, but stopped short of threatening more military action.
- Ayatollah Khamenei, Iran’s top spiritual and political authority, said Iran’s end goal was to expel U.S. forces from the region.
- Iran early Wednesday local time fired more than a dozen ballistic missiles at two bases—Erbil in northern Iraq and the large Al Asad base in western Iraq—U.S. officials said.
- A U.S. official said the attacks left no casualties but that a damage assessment was still under way.
Senate Panel Clears North American Trade Pact Despite Concern It Will Hurt U.S. Firms
- A Senate committee approved a replacement for the North American Free Trade Agreement, despite criticism from some lawmakers that it lacks sufficient protections for U.S. companies.
- The Senate Finance Committee voted 25 to 3 on Tuesday to back the U.S.-Mexico-Canada Agreement, a pact negotiated with the two neighboring nations by the Trump administration.
- Yet some U.S. senators—Democrats and Republicans—criticized the pact for scaling back provisions favored by American companies and exporters.
McConnell Says Impeachment Trial to Start Without Guarantee of Witnesses
- Senate Majority Leader Mitch McConnell said he has enough votes to set impeachment-trial rules that don’t guarantee new witnesses would be called, rebuffing demands from Democrats amid mounting signs that a deadlock over the process was beginning to loosen.
- Mr. McConnell (R., Ky.) said he has at least 51 votes from within his 53-member Republican majority for opening the trial first, then voting later on whether to issue subpoenas for witnesses and documents.
- Setting the rules with no Democratic support could make for a messy trial.
- Absent a bipartisan agreement, Minority Leader Chuck Schumer of New York said that Democrats could repeatedly call votes throughout the trial on subpoenaing new witnesses and fresh evidence.
- Such moves would force votes from Republican senators facing tough re-election fights.
EUROPE & WORLD
Samsung Expects Operating Profit to Plunge, Pins Hope on 5G
- Samsung Electronics expects a 34% drop in its fourth-quarter operating profit for 2019, affected by a continued global slump in semiconductor sales that have recently clouded the company’s earnings performance.
- The world’s largest smartphone and memory-chip maker said it anticipates an operating profit of 7.1 trillion South Korean won ($6.1 billion) for the last three months of 2019, down from 10.8 trillion won a year earlier.
- The company expects revenue to remain roughly flat from a year ago at 59 trillion won.
- The guidance topped analysts’ estimates pooled by S&P Global Market Intelligence, which forecast 6.5 trillion won in operating profit.
- In 2019, the company shipped over 6.7 million 5G-enabled Galaxy smartphones—topping its earlier forecast of 4 million—that accounted for more than half of global shipments of such handsets last year.
New Virus Discovered by Chinese Scientists Investigating Pneumonia Outbreak
- Chinese scientists investigating a mystery illness that has sickened dozens in central China have discovered a new strain of coronavirus, a development that will test the country’s upgraded capabilities for dealing with unfamiliar infectious diseases.
- The novel coronavirus was genetically sequenced from a sample from one patient and subsequently found in some of the others affected in the city of Wuhan, according to people familiar with the findings.
- Chinese authorities haven’t concluded that the strain is the underlying cause of sickness in all the patients who have been isolated in Wuhan since the infection first broke out in early December, the people said.
TODAY in HISTORY
- Woodrow Wilson outlined his Fourteen Points peace program. (1918)
- Charles de Gaulle became the first president of France’s Fifth Republic. (1959)
- The AT&T Bell System telephone monopoly agreed to divest itself of 22 Bell System companies and split itself into seven “Baby Bells.” (1982)
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