US FINANCIAL MARKET
U.S. STOCKS RISE AS GEOPOLITICAL RISKS ABATE
- U.S. stocks rose Monday on signs that geopolitical risks are in check as the U.S. and China prepared to sign a phase-one trade deal and authorities in Iran focused on domestic protest.
- The U.S. and China have both said they plan to sign a phase-one trade deal Wednesday, helping to defuse tensions that have roiled global markets for two years. The countries also have agreed to semiannual talks to resolve disputes.
- Tensions between the U.S. and Iran have eased in recent days, with the spotlight on the Islamic Republic after it admitted last week that it accidentally shot down a Ukrainian passenger flight, killing 176 people.
- Investors will be watching closely as U.S. companies report their latest quarterly earnings over the next several weeks.
- Fourth-quarter earnings for companies in the S&P 500 are expected to decline 2% from a year earlier, according to FactSet.
- But analysts expect earnings growth to pick up in 2020.
Lululemon raises profit, sales forecast on upbeat holiday demand
- Lululemon Athletica raised its quarterly sales and profit outlook on Monday, as the Canadian apparel maker’s efforts to ramp up its online presence and broaden its range helped drive sales during the all-important holiday period.
- Lululemon now expects profit per share for the quarter to be between $2.22 and $2.25, up from its prior range of $2.10 to $2.13.
- The company also raised its net revenue forecast to between $1.37 billion and $1.38 billion, compared with its previous estimate of $1.32 billion to $1.33 billion.
- Analysts on average were expecting a profit of $2.16 per share and revenue of $1.35 billion.
Ford Motor Says More China Trouble on the Road Ahead in 2020
- Ford said its China sales fell for the third year in a row in 2019, a drop to less than half of what it sold at its zenith in 2016, and the company said the situation for the broader market is likely to get worse in 2020.
- Ford sold 567,854 vehicles last year in China, down 26.1% from a year earlier, the company said in a statement Monday.
- While that was an improvement from 2018’s 36.9% decline, the total number of vehicles sold was less than half of the 1.27 million figure reached in its peak year of 2016.
- For 2019, GM said sales dropped 15%, its most severe annual decline in China, which is its largest overseas market.
New Boeing chief executive takes over with 737 MAX crisis unresolved
- Boeing’s new Chief Executive David Calhoun assumes the job Monday as the U.S. planemaker battles to recover from two fatal crashes of 737 MAX planes that killed 346 people in five months and led to the model’s worldwide grounding in March.
- Boeing has estimated costs of the MAX grounding at more than $9 billion to date and is expected to disclose significant additional costs during its fourth-quarter earnings release on Jan. 29.
- Boeing faces rising costs from halting production of the MAX this month, compensating airlines for lost flights and assisting its supply chain. It is also considering raising more debt.
- Calhoun, a longtime executive at Blackstone private equity group and corporate crisis manager, is already working to repair the company’s relationships with regulators, airlines and lawmakers.
- He previously headed a General Electric division that included airplane engines.
Auto Makers See SUVs, Trucks Charging Electric-Vehicle Sales
- Auto makers are thinking big with their plans for electric vehicles, focusing on sport-utility vehicles and pickup trucks to tap into consumers’ desire for larger rides.
- A barrage of new plug-in hybrid and battery-electric SUV and truck models, including electrified versions of popular nameplates like the Jeep Wrangler and Ford F-150 pickup, are expected to hit U.S. dealerships in the next few years.
- Auto executives say they are trying to better reflect consumer preferences, which in recent years have tilted heavily toward taller, more versatile vehicles such as pickups and SUVs.
- These models typically command higher profits than lower-margin sedans, helping manufacturers better absorb the still-expensive battery costs.
- By 2022, shoppers will have 78 plug-in hybrid and battery-electric SUVs to choose from, up from 38 last year and just four in 2015, according to forecasts by AlixPartners, a global consulting firm.
India orders antitrust probe of Amazon, Walmart’s Flipkart
- India ordered an investigation of Amazon.com and Walmart’s Flipkart on Monday over alleged violations of competition law in the latest setback for U.S. e-commerce giants operating in the country.
- The Competition Commission of India (CCI) said it was ordering a wider probe following a review of allegations that Amazon and Flipkart were promoting some “preferred sellers” and in turn hurting business for other, smaller sellers.
- The complaint alleged that several of Amazon and Flipkart’s preferred sellers were affiliated with, or controlled by, the companies themselves, either directly or indirectly.
- The CCI said its investigation unit should complete the probe within 60 days, but typically such cases have taken far longer.
Walmart Lays Off 56 Managers in India
- Walmart has laid off more than 50 of its managers in India as it pivots its focus to business-to-business e-commerce to take on Amazon.com and other rivals in the South Asian nation.
- Walmart said Monday that it has let go of 56 managers—eight of whom were senior—as it reorganizes operations of its more than 25 Best Price wholesale outlets in India.
- The management shake-up is part of Walmart’s plans to use the know-how, connections and talent it acquired when it bought Flipkart to grow much faster and better serve its members online, said one person familiar with its plans.
Aerospace Suppliers Woodward, Hexcel to Merge
- Aerospace suppliers Woodward and Hexcel set plans for an all-stock merger in what executives said was a response to the rising tide of climate-change pressures facing the industry.
- Woodward and Hexcel said their merger would allow them to expand spending on research and development of more efficient engines and lightweight aircraft parts.
- The combined company—which would be known as Woodward Hexcel—would rank among the aerospace industry’s largest suppliers, with combined sales of $5.3 billion last year and 16,000 staff.
- The proposed deal would be structured as a merger of equals, with Woodward shareholders owning 55% of the combined entity
‘Joker’ Leads Oscar Nominations With 11 Nominations
- The supervillain origin story “Joker” took the lead in the Academy Awards race with 11 nominations in Monday morning’s Oscar announcements, including the categories of best picture, best director, best actor and best adapted screenplay.
- Following close behind were Sam Mendes’s World War I movie ‘1917,’ Quentin Tarantino’s show-business saga “Once Upon a Time…in Hollywood,” and Martin Scorsese’s “The Irishman,” with 10 nominations each.
- After Netflix’s disappointing turn at the Golden Globes, where its film and television works earned 34 nominations but won only two, the streaming giant reemerged as a contender in the Oscar race.
- Along with the Netflix mob epic “The Irishman,” the tech giant also was recognized for its drama “Marriage Story,” with six nominations, and its tale of papal adversaries in “The Two Popes,” with three nods including one for best actor (Jonathan Pryce) and one for best supporting actor (Anthony Hopkins).
US ECONOMY & POLITICS
Trump Administration Expands Iran Sanctions
- The Trump administration expanded its sanctions campaign against Iran on Friday, as Washington’s chief diplomat said the U.S. would have been negligent not to kill a top Iranian general given what he described as intelligence of an imminent threat against Americans.
- Along with fresh sanctions blacklisting Iranian officials and companies, President Trump issued an executive order that gives giving the administration new punitive tools.
- The Treasury can now blacklist any individual or entity operating in the construction, manufacturing, textiles, and mining sectors of the Iranian economy, or anyone assisting them.
- The U.S. also blacklisted 17 of Iran’s largest steel and iron manufacturers, and three China- and Seychelles-based companies accused of buying banned Iranian metals and selling materials needed by the industry.
Manufacturers Increase Perks to Get New Hires to Move
- Manufacturers are paying relocation costs and bonuses to move new hires across the country at a time of record-low unemployment and intense competition for skilled workers.
- Half a million U.S. factory jobs are unfilled, the most in nearly two decades, and the unemployment rate is hovering at a 50-year low, the Labor Department said Friday.
- At the same time, Americans are moving around the country at the lowest rate in at least 70 years.
- Wage growth at U.S. manufacturers reached its highest level since 2016 in December, rising 3% that month from a year earlier.
Fed’s Rosengren Sees Higher Inflation Among This Year’s Biggest Risks
- Boston Fed leader Eric Rosengren warned that the biggest risks the economy faces after last year’s rate cuts are from higher inflation and financial stability problems driven by very low borrowing costs.
- While there are both positive and negative risks facing what appears to be a solid outlook, Mr. Rosengren said, “I see the potential risks to inflation and financial stability as somewhat more concerning, overall.”
- He added, if risks are contained, “we will likely have another year of good economic outcomes.”
- Mr. Rosengren, along with Kansas City Fed leader Esther George, formally dissented against all three rate cuts, saying instead they preferred to wait until actual trouble arrived before lowering short-term borrowing costs.
China’s U.S. trade deal commitments not changed in translation: Mnuchin
- China’s commitments in the Phase 1 trade deal with the United States were not changed during a lengthy translation process and will be released this week as the document is signed in Washington, Treasury Secretary Steven Mnuchin said on Sunday.
- Mnuchin told Fox News Channel that the deal reached on Dec. 13 still calls for China to buy $40 billion to $50 billion worth of U.S. agricultural products annually and a total of $200 billion of U.S. goods over two years.
- Thus far, Beijing has not confirmed those purchase commitments, and recent government actions here in the agriculture industry have raised questions over the $40 billion to $50 billion target cited repeatedly by Trump administration officials.
- Signing of the trade deal on Wednesday eases Trump’s 18-month trade war aimed at altering China’s trade and economic practices, but will leave in place tariffs on about $370 billion worth of Chinese imports per year.
Six Democrats Qualify for Final Debate Before Iowa Votes
- Six Democratic presidential candidates have qualified for Tuesday’s debate in Iowa, the final televised encounter before the state’s Feb. 3 caucuses.
- The Democratic National Committee said Saturday the participants in the debate will be: former Vice President Joe Biden, former South Bend, Ind., Mayor Pete Buttigieg, Sen. Amy Klobuchar of Minnesota, Sen. Bernie Sanders of Vermont, billionaire environmentalist Tom Steyer and Massachusetts Sen. Elizabeth Warren.
- Seven candidates debated in December, but entrepreneur Andrew Yang failed to qualify for next week’s event.
Bernie Sanders Sits Atop New Iowa Poll Ahead of Caucuses
- Iowans are closely divided among the top four candidates as Sen. Bernie Sanders of Vermont has gained momentum while the previous front-runner in the state has fallen back, a Des Moines Register/CNN/Mediacom poll released Friday evening shows.
- Mr. Sanders has the support of 20% in the Iowa Poll and is closely followed by Sen. Elizabeth Warren of Massachusetts at 17%.
- Pete Buttigieg, the former mayor of South Bend, Ind., is at 16%, while former Vice President Joe Biden recorded 15%.
- The findings of the poll, considered the gold standard in the state, are likely to give a boost to Mr. Sanders’s campaign and to come as a blow to Mr. Buttigieg, who led the field with 25% when the survey was last done, about two months ago.
- Mr. Sanders was the only candidate to post a meaningful increase in support—5 percentage points—since the November survey.
- His favorability rating has also risen 5 percentage points, while his support among liberals has increased 8 percentage points.
U.S. coal-fired power plants closing fast despite Trump’s pledge of support for industry
- U.S. coal-fired power plants shut down at the second-fastest pace on record in 2019, despite President Donald Trump’s efforts to prop up the industry, according to data from the federal government and Thomson Reuters.
- Power companies retired or converted roughly 15,100 megawatts (MW) of coal-fired electricity generation, enough to power about 15 million homes, according to the data, which included preliminary statistics from the Energy Information Administration and Reuters reporting.
- That was second only to the record 19,300 MW shut in 2015 during President Barack Obama’s administration.
- The replacement of coal with power generation from natural gas and renewables has cut total U.S. carbon emissions in four of the past five years. Gas emits about half the carbon dioxide, a leading contributor to global warming, as coal.
EUROPE & WORLD
U.S. Warns Iraq It Risks Losing Access to Key Bank Account if Troops Told to Leave
- The Trump administration warned Iraq this week that it risks losing access to a critical government bank account if Baghdad kicks out American forces following the U.S. airstrike that killed a top Iranian general, according to Iraqi officials.
- The State Department warned that the U.S. could shut down Iraq’s access to the country’s central bank account held at the Federal Reserve Bank of New York, a move that could jolt Iraq’s already shaky economy, the officials said.
- Iraq, like other countries, maintains government accounts at the New York Fed as an important part of managing the country’s finances, including revenue from oil sales.
- Loss of access to the accounts could restrict Iraq’s use of that revenue, creating a cash crunch in Iraq’s financial system and constricting a critical lubricant for the economy.
Iran Warns Protesters as It Grapples with Unrest Over Plane Crash
- Iranian authorities warned protesters not to stage further antigovernment demonstrations, as a video appeared to show security forces using tear gas to contain protests over the weekend.
- The demonstrations broke out after the Iranian military said Saturday that it unintentionally shot down a Ukrainian passenger airliner last week, killing all 176 people on board, after denying for days that it was responsible.
- Video shared by the U.S.-based Center for Human Rights in Iran and verified by the Associated Press appeared to show tear gas being used against protesters and gunshot injuries.
- While the protests over the weekend remained small, Tehran is facing a combustible mix of political and economic grievances as it braces for more demonstrations.
- Protests erupted across the country in November against austerity measures that raised fuel prices, aimed at shoring up government finances during a deep economic crisis, exacerbated by U.S. sanctions.
- Authorities responded with force, killing hundreds of people, rights groups and Iran-based reformist media say.
U.S. officials to visit Britain, pushing for Huawei 5G ban
- A delegation of U.S. officials will arrive in Britain on Monday to try to persuade Britain not to use Huawei equipment in the upgrade of its telecoms network, two people with knowledge of the matter said on Sunday.
- Britain is expected to make a final call on how to deploy Huawei Technologies equipment in its future 5G networks later this month.
- British defense Minister Ben Wallace told the Sunday Times that U.S. President Donald Trump and his advisers have threatened to cut off some intelligence to the UK if the National Security Council gives Huawei a green light.
Fragile Cease-Fire Begins in Libya
- A fragile cease-fire began in Libya on Sunday after months in which foreign military intervention intensified a civil war that has raged on Europe’s doorstep.
- If it holds, the pause in hostilities would provide relief to Libyans after fighting that has left more than 2,200 people dead, according to the U.N.
- The declared pause in fighting came after Russian President Vladimir Putin and German Chancellor Angela Merkel called for a cease-fire following a meeting on Saturday in Moscow.
- Underscoring the tensions, the Tripoli government accused Libyan military commander Khalifa Haftar’s forces of violating the truce just hours after it became effective by attacking its paramilitary forces in two locations near Tripoli.
TODAY in HISTORY
- Joseph Darby, a U.S. soldier at Iraq’s Abu Ghraib prison, reported S. abuses of Iraqi prisoners to the Army’s Criminal Investigations Division. (2004)
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