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U.S. Stocks Tick Lower as China’s Export Growth Stalls

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US FINANCIAL MARKET

U.S. Stocks Tick Lower as China’s Export Growth Stalls

  • Stocks slipped Tuesday as China’s exports grew at the slowest pace in three years, adding to concerns about a wider global slowdown.
  • A rally in financial stocks helped offset losses in most other sectors, after JPMorgan and Citigroup reported strong fourth-quarter results to kick off the corporate earnings season.
  • Exports from China climbed by 0.5% last year, a sharp comedown from 2018’s expansion of nearly 10%, according to data released Tuesday. Imports dropped 2.8% last year.
  • While the slowdown comes amid a two-year trade war between the world’s largest economies, China’s foreign trade revived in December as tensions ebbed following signals that Washington was nearing a trade deal with Beijing.
  • China has committed to buying almost $80 billion of additional manufactured goods from the U.S. over the next two years.
  • The Asian giant would also purchase more than $50 billion more in energy supplies, and boost spending on U.S. services by roughly $35 billion, the news agency said, citing a person with knowledge of the matter.

JPMorgan Profit Jumps on Strong Trading Quarter

  • JPMorgan Chase posted its biggest-ever annual profit on Tuesday as its bond trading business bounced back in the last three months of the year, setting an upbeat tone for the big U.S. banks reporting this week.
  • Revenue rose 9% to $28.33 billion from $26.11 billion a year ago, topping analysts’ expectations for $27.87 billion.
  • Revenue from bond trading jumped 86% from a year earlier when financial markets were suffering from a selloff triggered by concerns over trade and global growth. Revenue from equity markets rose 15% to $1.5 billion.
  • Total loans, excluding home lending, rose 3% in the quarter. Home loans were down 17%.
  • Deposits grew 5% compared to a year ago.
  • JPMorgan’s net interest income, the amount it makes from lending minus the interest it pays out, slipped 1% to $14.17 billion.
  • The bank’s net income rose to $8.52 billion in the quarter from $7.07 billion a year earlier.

Wells Fargo’s Results Sink on Legal Reserves

  • Wells Fargo’s profit slumped 55% in the fourth quarter as new boss Charles Scharf set aside another $1.5 billion for legal costs related to the bank’s sales scandal and promised “fundamental changes”.
  • Revenue of $19.86 billion was down from $21 billion a year ago. Analysts had expected $20.1 billion.
  • The bank’s net interest income fell 11% from a year earlier as the U.S. central bank lowered borrowing costs three times last year in a bid to sustain the more than decade-long economic expansion amid the prolonged U.S.-China trade war.
  • The lender’s mortgage income, however, rose to $783 million from $467 million a year earlier, benefiting from the lower interest rates.
  • Net income fell to $2.55 billion in the fourth-quarter, from $5.71 billion a year earlier.

Investment Banking Propels Citigroup’s Fourth-Quarter Profit

  • Citigroup on Tuesday said fourth-quarter profit rose 15% and beat expectations on a surge in its investment-banking operations.
  • Revenue climbed 7% to $18.38 billion from $17.12 billion a year earlier. Analysts had expected $17.9 billion.
  • Trading revenue rose nearly 31% as markets steadied during the last three months of 2019, with the gains driven by a 49% surge in fixed-income trading. Equities trading fell 23% due to weak performance in derivatives.
  • Total end-of-period loans grew 2%, while deposits jumped 6%, excluding foreign-exchange fluctuations.
  • Net interest income was up 1% at Citi, compared with declines at JPMorgan and Wells Fargo.
  • Net income rose to $4.98 billion from $4.31 billion a year earlier.

Delta’s Profit Rises on Strong Demand and Cheaper Fuel

  • Delta Air Lines on Tuesday reported a fourth-quarter profit that beat estimates, boosted in part by customers it gained from rival airlines’ 737 MAX cancellations and growing air travel demand.
  • Delta’s total revenue climbed 6.5% to $11.4 billion in the fourth quarter.
  • The airline said unit revenue grew 2.4% in the fourth quarter of 2019 because of strong holiday travel.
  • Delta reported net profit of $1.1 billion in the fourth quarter, up from about $1.02 billion a year earlier.
  • Delta, the first of its peers to report quarterly results, generated $4.2 million of free cash flow for the year, and expects to repeat that this year, enabling new investments in technology to improve passenger experience.
  • In the first quarter, Delta expects revenue growth of 5% to 7% year-on-year as U.S. demand rises in spite of heightened geopolitical tensions. Revenues per available seat mile are seen flat to 2% higher and non-fuel unit costs up 2% to 3%.

Boston Scientific Shares Fall on Weak Preliminary Sales Numbers

  • Medical-device maker Boston Scientific reported preliminary fourth-quarter results that fell shy of Wall Street’s expectations, sending shares down more than 7%.
  • Boston Scientific expects to report sales of $2.9 billion, up 13% from a year earlier but below the $2.93 billion expected.
  • The company—which makes medical devices such as catheters to defibrillators—had expected sales growth of 13% to 15% for the quarter.
  • Despite the sales shortfall, Boston Scientific said it still expects to report adjusted earnings of 42 cents to 45 cents a share for the quarter. Analysts polled by FactSet, on average, are expecting an adjusted profit of 44 cents a share.

Visa to Pay $5.3 Billion for Fintech Startup

  • Visa said Monday it would buy Plaid for $5.3 billion, as part of an effort by the card giant to tap into consumers’ growing use of financial-technology apps and noncard payments.
  • More consumers over the past decade have been using financial-services apps to manage their savings and spending, and Plaid sits in the middle of those relationships, providing software that gives the apps access to financial accounts.
  • These moves are essentially a way for the giant networks to diversify, preparing for the possibility that noncard-payment forms could one day replace their cards.

PC Shipments Rose in Fourth Quarter, Boosted by Windows Upgrades

  • Personal-computer shipments rose in the fourth quarter, boosted by businesses that moved to snap up devices running a newer version of Microsoft’s Windows operating system, according to the latest data from two industry research firms.
  • The gains helped the market for PCs grow year over year in 2019 for the first time since 2011, IDC and Gartner said Monday.
  • Gartner said computer makers shipped 70.6 million units in the fourth quarter, up 2.3% from the year earlier.
  • Fourth-quarter shipments for desktops, notebooks and other computers increased 4.8% from the year earlier to 71.8 million units, the best quarterly total since the fourth quarter of 2015, IDC said.

MGM Resorts Agrees to Sell MGM Grand, Mandalay Bay to Joint Venture Including Blackstone

  • MGM Resorts agreed to sell the MGM Grand and Mandalay Bay resorts and casinos on the Las Vegas Strip to a joint venture that includes private-equity and real estate giant Blackstone.
  • The deal values the MGM Grand Las Vegas real-estate assets—the company’s largest property by square footage, as of its most recent annual financial filing—at about $2.5 billion.
  • MGM Resorts expects to receive cash proceeds of about $2.4 billion from the deal, as well as $85 million in MGM Growth partnership units.

U.S. Calls Pensacola Attack Terrorism; Pressures Apple Over Gunman’s Locked Phones

  • Attorney General William Barr called the December attack by a Saudi aviation student that killed three people at a Florida Navy base an act of terrorism, escalating pressure on Apple Inc. to help unlock a pair of the gunman’s iPhones that could provide more information about his radicalization.
  • Mr. Barr called on Apple to find a way to crack the encrypted phones in a high-profile request that ramped up a long-simmering fight between tech firms and the government over how to best balance digital security with the imperatives of criminal investigations.
  • Apple, in a statement late Monday, said it always worked cooperatively with law enforcement to help in investigations and that it rejected Mr. Barr’s characterization that it hadn’t provided substantial assistance.

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US ECONOMY & POLITICS

U.S. Drops China’s Currency Manipulator Label Ahead of Trade Deal

  • The U.S. Treasury Department dropped its designation of China as a currency manipulator just two days before negotiators from Beijing and Washington are set to sign the first phase of the trade deal between the two countries.
  • China has made enforceable commitments to refrain from competitive devaluation, while promoting transparency and accountability,” Treasury Secretary Steven Mnuchin said in a statement Monday.
  • As part of the agreement, China will commit not to depress its exchange rate and will make additional disclosures about its foreign-exchange practices.

China to ramp up U.S. car, aircraft, energy purchases in trade deal: source

  • China has pledged to buy almost $80 billion of additional manufactured goods from the United States over the next two years as part of a trade war truce, according to a source, likely giving a much-needed boost for planemaker Boeing.
  • Under the terms of the trade deal to be signed on Wednesday in Washington, China would also buy over $50 billion more in energy supplies, and boost purchases of U.S. services by about $35 billion over the same two-year period, the source told Reuters on Monday.
  • The Phase 1 agreement calls for Chinese purchases of U.S. agricultural goods to increase by some $32 billion over two years, or roughly $16 billion a year, said the source, who was briefed on the deal.
  • The numbers, expected to be announced on Wednesday at a White House signing ceremony, represent a staggering increase over recent Chinese imports of U.S. manufactured goods, raising some skepticism over how it would be achieved.

In a Year of Trade War, U.S. Deficit with China Shrank

  • President Trump’s trade war with Beijing reduced the U.S.’s trade deficit with China last year, although Chinese manufacturers still export far more to the U.S. than vice versa.
  • Chinese customs data on Tuesday showed that the country had a trade surplus with the U.S. of $295.8 billion last year, compared with a record $323.3 billion in 2018.
  • China’s 12.5% decline in exports to the U.S. last year would have narrowed the U.S. deficit more, but Chinese imports from the U.S. dropped even faster.

U.S. Consumer Prices Muted in December

  • U.S. consumer prices rose slowly in December, signaling inflation continued to moderate heading into 2020.
  • The consumer-price index (CPI) rose a seasonally adjusted 0.2% in December from a month earlier, down from a 0.3% increase in November.
  • Core prices, excluding the food and energy categories, increased 0.1% after logging 0.2% increases in October and November.
  • From a year earlier, consumer prices were up 2.3% in December, up from the 2018 increase of 1.9%.
  • Core consumer prices increased 2.3% in December from a year earlier, the third such consecutive rise.

House to Vote on Impeachment Resolution on Wednesday, Lawmakers Say

  • The House of Representatives will vote on Wednesday to name the managers of the Senate impeachment trial of President Trump and transmit the articles of impeachment to the Senate, lawmakers said Tuesday.
  • The managers will likely be members of the Democratic caucus who played central roles in the House’s impeachment inquiry.
  • Their role will be to make the Democrats’ case for Mr. Trump’s removal from office in the Senate impeachment trial, which could start as early as this week.
  • The president will also designate a team to defend him. White House counsel Pat Cipollone is expected to lead the team. Mr. Trump’s personal lawyer Jay Sekulow is also expected to join.

Trump Administration Plans to Shift Additional $7.2 Billion for Border Wall

  • The Trump administration is planning to shift an additional $7.2 billion out of military coffers for border-wall construction, according to two people familiar with the plans.
  • The Pentagon funds would come from two primary pots of money: $3.7 billion from one for military construction and $3.5 billion from another for counternarcotics efforts.
  • The new money would permit the government to construct as many as 885 miles of its preferred style of border fencing, though a significant portion of that would likely replace existing border barriers.

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EUROPE & WORLD

China posts strong December exports as world awaits Sino-U.S. trade deal signing

  • China’s exports rose for the first time in five months in December and by more than expected, signaling a modest recovery in demand as Beijing and Washington agreed to defuse their prolonged trade war.
  • After a rough year, China’s exports ended 2019 on an upbeat note, rising 7.6% in December from a year earlier, customs data showed on Tuesday.
  • Imports also beat expectations, jumping 16.3% from a year earlier, though boosted in part by higher commodity prices.
  • China posted a trade surplus of $46.79 billion in December, compared with the poll’s forecast for a $48 billion surplus and up from November’s surplus of $37.93 billion.
  • For all of 2019, its total exports proved remarkably resilient to trade tensions, rising 0.5%, though that was well off a near 10% gain in 2018, reflecting weaker U.S. sales.
  • Imports fell 2.8% last year as China’s economic growth cooled to near 30-year lows, after rising 15.8% in 2018.

European Powers Put Iran on Notice Over Nuclear Deal

  • Britain, France and Germany took a first step toward reimposing international sanctions on Iran, seeking to pressure Tehran into returning to compliance with the 2015 pact that has limited the country’s nuclear activities.
  • Tuesday’s move by the European powers, which say they remain committed to the 2015 nuclear deal and are seeking to save it, is their first significant response to Tehran’s gradual escalation of its nuclear program in recent months.
  • Britain, France and Germany, which are party to the 2015 agreement, triggered a dispute-settlement mechanism written into the agreement.
  • That mechanism could result in the United Nations Security Council reimposing international sanctions on Iran’s economy, banks and some top officials within two months.

Iran Makes Arrests Over Downed Ukrainian Plane

  • Iranian authorities said they arrested a number of individuals in connection with the shooting down of a Ukrainian airliner last week that killed 176 people, as public outrage and calls for accountability grow.
  • The judiciary didn’t say how many people were arrested or identify those detained, but said it was in the early stages of the process to prosecute them.
  • He said Iran would also investigate whether “U.S. warmongering” was to blame.

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TODAY in HISTORY

  • The United States ratified treaty with England ending the Revolutionary War. (1784)
  • President Roosevelt and Prime Minister Churchill meet at the Casablanca Conference. (1943)
  • The Simpsons premiered on television. (1990)

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