DAILY MARKET REPORTS
- A five-day rally in U.S. stocks ran out of steam on Friday as investors booked profits and reset their positions ahead of the earning season set to begin next week.
- S&P 500 companies, on average, are seen posting 14.5% growth in profit as they report December-quarter results.
- On Thursday, Federal Reserve Chairman Jerome Powell reiterated the central bank’s flexible outlook on raising rates, while Fed Vice Chairman Richard Clarida separately said low inflation should allow the bank to be patient with interest-rate increases.
- Data showed U.S. consumer prices fell for the first time in nine months in December amid a plunge in gasoline prices, but underlying inflation pressures remained firm as rental housing and healthcare costs rose steadily.
- Meanwhile, investors have become more hopeful about the trade outlook in recent weeks.
- Following midlevel trade talks held in Beijing this week, China and the U.S. are moving ahead with plans for higher-level talks, with President Xi Jinping’s economic-policy chief scheduled to visit Washington in late January.
- General Motors shares surged 8.3% after the No.1 U.S. automaker said it expects 2018 earnings per share to exceed its prior estimates and forecast upbeat profit for 2019.
- Activision Blizzard fell 10%, leading the decliners on the S&P 500, after the video game publisher transferred full publishing rights for its “Destiny” game franchise to video game developer Bungie.
US FINANCIAL MARKET
GM says 2018 earnings to top prior forecast, shares jump 7%
- General Motors said it expects 2018 adjusted earnings per share to exceed its prior estimates and forecast 2019 earnings above Wall Street expectations, sending its shares up more than 7%.
- The largest U.S. carmaker said in October it expected adjusted 2018 earnings of $5.80 to $6.20 per share.
- The company also expects adjusted free cash flow for 2018 to be above its previous guidance.
- GM forecast 2019 adjusted earnings per share in the range of $6.50 to $7.00, above the $5.86 expected by analysts.
Activision Blizzard Splits With ‘Destiny’ Studio, Sending Shares Lower
- Activision Blizzard is cutting ties with the videogame studio behind one of its biggest hits, a surprise move that knocked its stock down more than 10% and adds to questions about whether the company has a robust enough slate of games for 2019.
- Bungie, development studio responsible for the science-fiction shooter “Destiny,” is purchasing the publishing rights for the franchise, Activision Blizzard said Thursday. Terms of the deal weren’t disclosed.
- Activision Blizzard, the largest U.S. game publisher by market value, said in a securities filing that it doesn’t expect to recognize “material revenue, operating income or operating loss” from the absence of Destiny in 2019.
Apple Plans New LCD iPhone This Year Despite XR’s Stumble
- Apple is planning to release three new iPhone models again this fall, including a successor to the struggling XR, the lower priced 2018 device with a liquid-crystal display that has fallen short of Apple’s sales expectations, people familiar with the matter said.
- Apple plans to introduce some new camera features, including a triple rear camera for the highest-end model and a double rear camera for the two other models, the people said.
- For 2020, Apple is considering dropping the LCD model, some of the people said, which would mark a complete shift to the organic light-emitting diode, or OLED, display for iPhones.
China retailers slash iPhone prices after Apple sales warning
- Several Chinese electronics retailers including Alibaba-backed Suning and JD.com have slashed iPhone prices this week, after Apple recently blamed poor sales of the smartphone in the country for a rare revenue warning.
- The discounting, as steep as $118 for the recently launched 64GB iPhone XR, is the latest sign that Apple’s weak holiday sales in China may have extended to the current quarter.
- Such widespread price cuts are not uncommon around shopping festivals like Single’s Day in November, but these cuts stand out as they affect Apple’s latest XS and XR models that were released only months ago.
Amazon’s IMDb Launches Ad-Supported Streaming-Video Service
- Amazon launched its first advertising-supported streaming-video channel, the e-commerce giant’s latest effort to grab a larger share of the ad market.
- IMDb Freedive, which went live on Thursday, offers a collection of TV shows and movies on IMDb’s website or through Amazon Fire TV devices without having to purchase a subscription, said IMDb, a unit of Amazon since 1998.
- Unlike Prime Video, IMDb Freedive will be free of charge and feature advertising.
- The channel will compete directly with Pluto TV and Tubi TV, and Sinclair Broadcast is also entering the field with its STIRR streaming service.
Slack Plans to Follow Spotify on Unconventional IPO Route
- Slack is planning to go public through a direct listing, according to people familiar with the matter, potentially making it the second big technology company after Spotify to bypass a traditional IPO.
- Slack, which operates a popular workplace instant-messaging and collaboration app, is likely to debut in the second quarter, the people said. The company currently expects to do so via a direct listing, though its plans could change, they said.
- Slack as of last year had more than 8 million daily active users and 3 million paid users.
Fox says no plans to bid for sports networks Disney may sell
- Twenty-First Century Fox said here on Friday it does not plan to bid for any of the regional sports networks that Walt Disney may need to sell to win U.S. Justice Department’s approval for its purchase of Fox’s film and TV assets.
- Fox Chairman Lachlan Murdoch said in November it was still an “open question” whether the company will buy back the regional sports networks it sold to Disney in July as part of the $71 billion deal.
- After the Disney sale is completed, Fox will carve out a new company, including Fox News, Business, Sports and the Broadcasting Company which it expects to have annual revenue of around $10 billion.
J&J raises U.S. prices on around two dozen drugs
- Johnson & Johnson raised U.S. prices on around two dozen prescription drugs on Thursday, including the psoriasis treatment Stelara, prostate cancer drug Zytiga and blood thinner Xarelto, all among its top-selling products.
- Most of the J&J increases were between 6% and 7%, according to data from Rx Savings Solutions, which helps health plans and employers seek lower cost prescription medicines.
- Drugmakers kicked off 2019 with U.S. price increases on more than 250 prescription medicines by Jan. 2.
- That total has almost doubled, with pharmaceutical companies hiking prices on nearly 490 drugs by Jan. 10.
Samsung Faces Resistance from Big Pharma in the U.S.
- Samsung’s foray into the U.S. biologic-drug market is proving tougher than expected in the face of strong resistance from established pharmaceutical companies.
- Branded makers of biologic drugs have succeeded in holding off new entrants such as Samsung Bioepis by signing exclusive contracts and offering rebates to insurers, health-care providers and other payers.
- Another hurdle has been convincing doctors and patients that the cheaper biosimilars, which are near-replicas of branded biologic treatments, can work as well as the original.
- Samsung’s entry into the U.S. drug market is closely watched because biosimilar treatments have faced slow adoption in the country despite expectations of savings to the U.S. health-care system.
US ECONOMY & POLITICS
U.S. Consumer Prices Ticked Lower in December
- The consumer-price index, which measures what Americans pay for everything from medical supplies to toys, fell a seasonally adjusted 0.1% in December after posting no change in November, the Labor Department said Friday.
- Excluding the volatile food and energy categories, so-called core prices rose 0.2%, the same rate of change as in November and October. Both readings were in line with economists’ expectations.
- In the 12 months through December, overall prices rose 1.9%, the first time the index has been under 2% since August 2017 and a sign low gasoline prices are holding down inflation.
- Core prices were up 2.2% on the year, the Labor Department said, the same year-over-year change as in November. Both year-over-year readings were in line with economists’ expectations.
Government Shutdown Could End 99-Month Job Growth Streak
- U.S. employers, including private businesses and government agencies, have added jobs every month since October 2010, a streak of 99 months.
- That is the longest run on record dating back to 1939 and would come to an end, if hundreds of thousands of government workers furloughed by the partial shutdown are dropped from federal payrolls.
- Monthly payroll growth has averaged 215,000 during the past five years. About 380,000 employees were slated to be placed on unpaid leave, according to the contingency plans posted by affected federal agencies before the Dec. 22 shutdown.
- If that number were removed from the federal payroll of 2.8 million, it would very likely overwhelm all private-sector job creation and cause overall employment to fall.
Fed Releases Detailed Transcripts of 2013 Policy Meetings
- Transcripts released by the Federal Reserve on Friday revealed the extent of then-governor Jerome Powell’s misgivings about the central bank’s 2013 stimulus program of bond purchases.
- Mr. Powell had voted in 2012 to begin the purchases but with others raised concerns that the Fed’s monthly purchases of $85 billion in securities could encourage investors to take too many risks that might later prove destabilizing to the economy.
- Mr. Powell later said the economy didn’t appear to suffer from some of the risks he and others raised about the bond-buying program.
U.S. shutdown sends grain traders, farmers hunting for data
- When the U.S. Department of Agriculture announced a slew of key farm reports would not be released on Friday due to the partial government shutdown, the phones at crop forecaster Gro Intelligence blew up.
- The USDA was set to release its views on the projected size of U.S. soybean stockpiles, among other data, following a record-large domestic harvest and a trade war with China that has slowed U.S. exports.
- To fill the void on data, traders and farmers are relying on private crop forecasters, satellite imagery firms and brokerages offering analyses on trade and supplies.
- Some have been scouring Twitter for tidbits on shifting weather patterns and rumors of grain exports, but say it is difficult to replace the USDA.
Xi Jinping’s Top Trade Aide to Visit U.S. for Talks This Month, Shutdown Permitting
- China and the U.S. are moving ahead with plans to hold a round of higher-level talks to resolve their continuing trade conflict, with President Xi Jinping’s economic-policy captain scheduled to visit Washington in late January.
- For now, Vice Premier Liu He is planning to meet with his U.S. counterparts including U.S. Trade Representative Lighthizer and Treasury Secretary Mnuchin for negotiations on Jan. 30 and Jan. 31, according to people briefed on the matter.
- The next round of talks would follow midlevel trade talks held in Beijing from Monday to Wednesday this week.
White House Aides Explore Alternative Ways to Pay for Border Wall
- White House officials are divided over whether to declare a national emergency to obtain funding to build a border wall and end a partial government shutdown, but were exploring how the president could divert funding if he decides to do so.
- The White House has asked the Army Corps of Engineers to examine potentially diverting money from other projects to pay for the wall along the U.S.-Mexico border, if Mr. Trump does decide to declare a national emergency.
- The administration is also exploring having the Department of Homeland Security request the funds from the Pentagon so that it can carry out its mission.
- Inside the West Wing, Jared Kushner, the president’s son-in-law and senior adviser, has been lobbying for restraint.
- Declaring a national emergency, an option Mr. Trump has been leaning toward, shouldn’t be used to try to win a messaging war against Democrats opposed to a wall, Mr. Kushner said in a recent Oval Office meeting.
Trump Promises New Rules for Skilled-Worker Visas Soon
- President Trump on Friday sought to assure holders of skilled-worker visas that changes were soon coming that would afford them certainty and a potential path to U.S. citizenship.
- Mr. Trump reiterated his intention to pursue changes to the H-1B visa program, particularly common within the technology sector, which looks to poach trained talent that they can’t find at home.
- In November, the Department of Homeland Security released a proposed new H1-B visa process that would increase the number of H-1B visas to applicants with master’s degrees or higher-level degrees.
Sen. Kirsten Gillibrand Staffs Up for Likely 2020 Presidential Run
- New York Democratic Sen. Kirsten Gillibrand is closing in on announcing a 2020 presidential campaign, signing up key staff members and planning her first trip to Iowa, according to people familiar with the plans.
- Ms. Gillibrand, 52, coasted to re-election in 2018 and has more than $10.6 million left over from her Senate campaign, seed money that can be used in her presidential bid.
Ocasio-Cortez may take on Wall Street, fellow Democrats on finance panel
- Rep. Alexandria Ocasio-Cortez is poised to win a seat on the powerful House Financial Services Committee, in what would be a victory for progressives fighting to curb Wall Street’s clout in Washington and inside the Democratic Party itself.
- The assignment, which lawmakers say they expect her to receive, would pit the 29-year-old not only against banks that make up a major local industry but also potentially against business-friendly Democrats who have backed financial deregulation.
- Some moderate Democrats have privately raised concerns that they’ll be targeted by the former bartender-turned-progressive icon, whose willingness to challenge her party’s establishment propelled her to Congress and the national spotlight.
EUROPE & WORLD
India’s Infosys raises revenue guidance, but third-quarter profit misses estimate
- Indian IT services company Infosys raised its full-year revenue growth forecast on Friday, but reported a larger-than-expected drop in third-quarter profit, due to higher expenses.
- Meanwhile, revenue from operations in the quarter rose 20.3% to 214 billion rupees in what is usually considered a seasonally weak period for Indian IT firms.
- The country’s second-biggest software services exporter by market capitalization reported a 29.6% fall in attributable profit to 36.09 billion rupees ($511.94 million). That compared with the 41.31 billion rupees average estimate.
Chinese Huawei Executive Is Charged with Espionage in Poland
- Polish authorities detained and charged a local sales director of Huawei, a Chinese national, with conducting high-level espionage on behalf of China, amid widening global scrutiny by Washington and its allies of the technology giant.
- Officers of Poland’s counterintelligence agency this week searched the local Huawei office, leaving with documents and electronic data, as well as the home of the Chinese national.
- The Chinese individual wasn’t named, but was identified by Polish state television as a graduate of one of China’s top intelligence schools, as well as a former employee of the Chinese consulate in the port city of Gdansk.
- The arrest is another bombshell for Huawei, following the early December detention of the company’s chief financial officer in Canada, at the U.S.’s request, on charges related to Iranian sanctions.
- Unlike those allegations, the nature of the charges in Poland speak directly to suspicions by Washington and other Western governments that Huawei could be used by Beijing as a global spying tool.
Default Fears Add Fresh Stress to Chinese Private Sector
- A surge of defaults has shaken China’s $4.2 trillion corporate bond market, further disadvantaging struggling private firms against a resurgent state sector.
- Last year, 165 bonds worth 157.2 billion yuan ($23.3 billion) defaulted, just 0.6% of the entire corporate bond market—but more in both volume and value than all four years starting 2014, when China saw its first onshore default by a private company.
- China’s $12.7 trillion bond market is the world’s third largest. Debt issued by the central and local governments and the nation’s policy banks makes up about 55% of the total, with tradable certificates issued by state-run banks accounting for another 11.5%.
TODAY in HISTORY
- Amelia Earhart became the first person to fly solo from Hawaii to California. (1935)
- The first government report regarding the dangers of cigarette smoking was issued by the U.S. Surgeon General. (1964)
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