DAILY MARKET REPORTS
- The S&P 500 was little changed on Tuesday, as mixed earnings reports and concerns about the upcoming U.S.-China trade talks gave little impetus for markets to recover from a slide a day earlier.
- The Trump administration late Monday unveiled a sweeping set of criminal charges against China’s Huawei Technologies.
- Federal prosecutors accused Huawei of violating U.S. sanctions on Iran and of stealing trade secrets from a U.S. business partner.
- Shares of Harley-Davidson fell 7%, putting the motorcycle maker among the S&P 500’s biggest decliners, after it missed analysts’ revenue and earnings projections.
- The company blamed a range of issues for the weak performance, including higher costs due to tariffs the Trump administration implemented on steel and aluminum.
- Industrial adhesive maker 3M, meanwhile, lowered its profit outlook for the year, pointing to weaker demand in China after reporting better-than-expected revenue and profit for the fourth quarter.
- Among the gainers, Corning rose 9.3% after the glassware maker said it returned to a profit in the fourth quarter.
- Shares of Xerox also rose, gaining 8.8% after the printer and copier company beat analysts’ earnings expectations and offered an upbeat outlook for the year.
US FINANCIAL MARKET
Lockheed Martin forecasts 2019 profit below estimates, shares off
- Lockheed Martin, the Pentagon’s top weapons supplier, forecast 2019 profit below estimates and reported that quarterly margins slipped at the unit that makes the radar-evading F-35 fighter jet and C-130 transport plane.
- Net sales fell 4.8% to $14.41 billion, but topped expectations of $13.7 billion.
- During the fourth quarter, Lockheed’s order backlog grew 19% to $130.5 billion from $109 billion.
- Net income rose to $1.2 billion compared to a loss of $642 million a year earlier due to a charge related to U.S tax reform.
- Lockheed expects full-year profit to range between $19.15 and $19.45 per share, below the average analyst estimate of $19.55.
3M Lowers Profit Outlook for 2019
- 3M beat on both top and bottom compared to expected results, but lowered its profit outlook for this year, becoming the latest company to flag slowing sales in China.
- Sales fell 0.6% to $7.95 billion in its fourth quarter; however, this was better than the expected $7.87 billion in revenue.
- 3M said its fourth-quarter profit was $1.35 billion, compared with $523 million in the same period a year before.
- 3M said it expects potentially lower revenue growth and earnings of $10.45 to $10.90 a share this year, compared with its prior goal of $10.60 to $11.05 a share.
Verizon’s Profit Stung by Oath Restructuring
- Verizon’s core wireless business continues to add customers in the crowded U.S. market, but the company’s quarterly profit was hit by charges related to a restructuring in its struggling media business.
- Quarterly revenue rose 1% to $34.3 billion, with gains in wireless offset by declines in Verizon’s landline and media units.
- Its landline business added 54,000 net new home broadband connections during the final quarter of 2018 and lost a net 46,000 Fios video customers, it also added a net 653,000 new postpaid phone connections during the final quarter of 2018.
- Net income was $1.94 billion, down from $18.67 billion a year earlier, when it received a one-time $16.8 billion reduction of its deferred tax liabilities.
- Verizon’s fourth-quarter results included $4.9 billion pretax in charges, mostly from an accounting charge to write down the value of its Oath media business, which was created by the acquisitions of AOL and Yahoo.
Harley-Davidson’s Retail Motorcycle Sales Fall Again
- Harley-Davidson said sales of its motorcycles fell again last year amid weak demand for the company’s products in the U.S.
- For the fourth quarter, sales dropped about 9% to $956 million. Analysts expected $1.05 billion in sales in the fourth quarter.
- Overall, the company said motorcycle and related-product sales rose 1.1% last year to $4.96 billion, the first increase since 2014.
- Harley reported a profit of $495 million and broke even on a per-share basis, which was well below analyst expectations.
- The manufacturer said bike shipments fell 6.1% to 229,000 in 2018 from around 242,000 the previous year. It expects to ship 217,000 to 222,000 motorcycles this year.
Pfizer Results Hurt by Pricing Challenges
- Pfizer swung to a loss in the fourth quarter as the pharmaceutical company faced pricing challenges in the U.S. and tougher generic competition.
- Overall sales increased 2% from a year ago to $13.98 billion, above the $13.89 billion analysts had estimated.
- In its essential health unit, which contains its global pharmaceutical business, sales fell by 7%, led primarily by industry-wide pricing challenges and increasing competition with generics, the company said.
- Sales from its innovative health unit, which makes up more than half the business and includes its consumer-health brands such as Advil, Chapstick and Centrum vitamins, rose 8% in the quarter.
- Pfizer reported a loss of $394 million, compared with a profit of $12.27 billion a year earlier. Analysts were expecting Pfizer to report a profit.
Smartphone screen maker Corning beats revenue, profit estimates
- Apple supplier Corning bucked the trend for shaky phone and chipmaker results on Tuesday, beating expectations for both revenue and profit in the fourth quarter, helped by demand from telecom companies looking to upgrade their networks to 5G.
- Net sales rose to $3.04 billion from $2.64 billion. Analysts on average had expected revenue of $3.01 billion.
- Net sales from Corning’s optical communications division surged 26% to $1.17 billion, as the company secured more contracts from companies upgrading their networks.
- Corning’s net sales from its specialty materials unit, which makes Gorilla Glass used in smartphones, tablets and notebook PCs, rose just 2% to $399 million after several quarters of rapid growth.
- Corning reported net income of $292 million, compared with a loss of $1.41 billion a year earlier.
Xerox profit, forecast beat estimates; shares jump
- Xerox beat analysts’ expectations for profit in the fourth quarter and forecast full-year profit above estimates, suggesting moves to refocus under new management were paying off and sending its shares up 6%.
- Xerox’s fourth-quarter revenue was $2.53 billion, compared to consensus forecasts of $2.56 billion.
- Net income was $137 million, compared to a loss of $190 million a year earlier.
- The company said it expected to report 2019 profit of between $3.70 and $3.80 per share on an adjusted basis, well above analysts’ average expectation of $3.53.
Whirlpool Posts Drop in Fourth-Quarter Sales
- Whirlpool reported a decline in fourth-quarter sales despite price increases in key businesses like U.S. kitchen appliances.
- Revenue fell to $5.66 billion from $5.7 billion a year earlier, as weaker sales in Whirlpool’s Europe, Middle East and Africa region weighed on the company. Analysts had expected revenue of $5.76 billion.
- Whirlpool swung to a fourth-quarter profit of $170 million from a loss of $268 million a year earlier, largely due to charges related to the U.S. tax overhaul.
- Whirlpool this year expects to make a profit between $12.75 and $13.75 a share, or $14 and $15 a share on an adjusted basis, much lower than the profit of $15.05 a share, or $15.93 a share on an adjusted basis expected by analysts.
Nucor profit jumps on higher steel tariff, better demand
- U.S. steelmaker Nucor reported a better-than-expected profit in fourth quarter on Tuesday, helped by robust economic growth and President Donald Trump’s hefty tariff on steel imports boosting shipments as well as prices.
- Revenue rose to $6.29 billion from $5.09 billion as the average selling price of the country’s largest steel producer rose 21% from the same quarter a year ago, while steel mill shipments increased 2%.
- Net income rose to $646.8 million in the fourth quarter, from $383.9 million a year earlier, despite a benefit of $175.2 million from the Tax Cuts and Jobs act in the fourth quarter of 2017.
Biogen beats estimates on Spinraza, Tecfidera strength
- Biogen beat analysts’ estimates for fourth-quarter profit and revenue on Tuesday, driven by demand for its muscle disease treatment Spinraza and top-selling multiple sclerosis drug Tecfidera.
- Total revenue rose 6.6% to $3.53 billion, exceeding estimates of $3.40 billion.
- Spinraza, the first approved treatment for spinal muscular atrophy, brought in $470 million in the quarter, but fell short of analysts’ estimate of $487.9 million.
- Sales of Tecfidera rose 3.2% to $1.11 billion, narrowly beating analysts’ estimates of $1.10 billion.
- Net income was $946.8 million for the quarter, compared with a net loss of $297.4 million a year earlier, which included a charge of $1.2 billion related to the U.S. tax overhaul.
Homebuilder Pulte reports biggest decline in orders since 2013
- The United States’ third largest homebuilder PulteGroup posted its largest decline in orders in five years on Tuesday, joining larger rival D.R. Horton in saying buyers were being priced out of the U.S. housing market.
- Total revenue rose 7.3% to $2.99 billion from $2.79 billion in the reported quarter.
- Pulte said orders fell 11.2% compared to the same period a year ago, to 4,267 homes. The average analyst estimate was 4,584.
- The company’s results showed net income tripled to $237.6 million in the quarter, but were skewed by the impact of tax charges a year ago.
Botox maker Allergan’s 2019 revenue forecast misses estimates
- Allergan forecast 2019 revenue below analysts’ estimates, as the company faces impending competition for its second-most important medicine, the eye drug Restasis.
- Net revenue fell to $4.1 billion from $4.33 billion. Sales of Restasis fell 17.7% to $341.6 million in the fourth quarter.
- Allergan took an asset impairment charge of $5.4 billion in the quarter, which led to a loss of $4.3 billion compared to a profit of $3.1 billion in the same period a year earlier.
- The company forecast full-year 2019 revenue of $15 billion-$15.3 billion, compared with analysts’ estimates of $15.40 billion.
Harris beats estimates for both profit and revenue
- Revenue increases in all three of Harris’s segments led to an overall revenue number of $1.66 billion, up 8.5% from a year earlier and ahead expectations of $1.635 billion.
- Harris’s backlog increased 27% to $1.766 billion.
- Net income nearly doubled to $225 million, compared to $131 million in the same period a year ago and marginally beat expectations on a per share basis.
Eagle Materials misses on both top and bottom
- Total revenue declined to $333.3 million in the fiscal third quarter, down from $359.4 million a year earlier and below estimated of $354 million.
- Management cited unusual weather patterns, and lower energy prices which crimped demand across all segments
- Net income fell to $57.7 million from $101.4 million in the same period a year ago, primarily due to higher operating maintenance costs and weather effects. On a per share basis this was about 6% below estimates.
PG&E Files for Bankruptcy Following California Wildfires
- PG&E filed for bankruptcy protection on Tuesday as it struggles with billions of dollars in potential liabilities from its role in sparking California wildfires, triggering one of the most complex corporate reorganization cases in years.
- The company said earlier this month that it faces about 750 complaints on behalf of at least 5,600 fire victims who allege damages caused by PG&E equipment, and estimated that its fire-related liabilities could ultimately exceed $30 billion.
- PG&E received some relief last week when state fire investigators said its equipment wasn’t responsible for the 2017 Tubbs Fire, which burned nearly 37,000 acres and killed 22 people.
- PG&E’s shares jumped on the news but were still down, through Monday, more than 80% since October.
Apple Bug Enables Eavesdropping on FaceTime Users
- Apple scrambled to fix a bug in its FaceTime video-chat system that lets callers eavesdrop on users of iPhones, iPads, and Macs, an embarrassing setback for a company that has touted its commitment to privacy.
- The glitch, which was flagged on social media Monday, allows one FaceTime user calling another to listen in while the recipient’s Apple device is still ringing—even if the person never accepts the call.
- Late Monday, Apple disabled the Group FaceTime feature that was linked to the security bug. A spokeswoman said the company was aware of the issue, and expected to release a software fix this week.
Boeing nears $3.5 billion 737 MAX jet deal with Japan’s ANA – sources
- Boeing is close to a deal worth $3.5 billion at list prices to sell 30 Boeing 737 MAX jetliners to ANA Holdings, two people familiar with the matter said.
- The deal is the first sale in Japan for the newest version of Boeing’s best-selling 737 family and marks a reversal for Europe’s Airbus, five years after the same airline became the first Japanese carrier to pick the competing A320neo.
- Boeing declined to comment. ANA could not immediately be reached for comment. A deal announcement could come as early as Tuesday, subject to the airline’s final approval, the sources said, speaking on condition of anonymity.
US ECONOMY & POLITICS
U.S. Consumer Confidence Declines in January
- A measure of U.S. consumer confidence fell for the third month in a row in January, signaling that political discord in Washington and economic uncertainty are weighing on U.S. households.
- The Conference Board on Tuesday said its index of U.S. consumer confidence fell to 120.2 in January from 126.6 in December.
- Economists surveyed by The Wall Street Journal had expected a 124.0 reading for January.
- U.S. households’ economic expectations for the future “declined sharply as financial market volatility and the government shutdown appear to have impacted consumers,” said Lynn Franco, senior director of economic indicators.
U.S. Authorities Unveil Sweeping Set of Charges Against China’s Huawei
- The Trump administration unveiled a sweeping set of criminal charges against China’s Huawei in its latest salvo against the telecom giant, with authorities unsealing a pair of indictments just days before U.S.-China trade talks are set to resume.
- In the cases unsealed Monday, federal prosecutors accused Huawei of violating U.S. sanctions on Iran and of stealing trade secrets from a U.S. business partner, portraying the company as a serial violator of U.S. laws and global business practices.
- Huawei offered bonuses to employees who were successful in stealing confidential information, U.S. prosecutors alleged, adding that the alleged conspiracy against T-Mobile wasn’t limited to rogue employees but a companywide endeavor.
- After Huawei learned of the investigation in 2017, the company tried to move witnesses that knew about the Iran business to China, beyond the reach of U.S. law enforcement, and tried to destroy related evidence, the indictment alleged.
Home-Price Growth Continues to Slow
- Home-price growth continued to ease off the accelerator in November, bolstering economists’ predictions that price growth could slow to be more in line with increases in incomes and inflation this year.
- The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 5.2% in the year ending in November, down from a 5.3% increase reported in October.
- Las Vegas had the fastest home price growth in the country for the sixth straight month at 12%, followed by Phoenix, where prices grew 8.1%.
U.S.-China Trade Talks Won’t Be Affected by Huawei Charges, Says Treasury Secretary Steven Mnuchin
- Treasury Secretary Steven Mnuchin said Tuesday a sweeping set of criminal charges against China’s Huawei unsealed Monday will not complicate U.S.-China trade talks set to resume in Washington this week.
- In an interview with Fox Business Network, Mr. Mnuchin said that process is being run by the Justice Department and is not part of the trade negotiations.
- Mr. Mnuchin also suggested the administration would be willing to lift U.S. tariffs on China once the two sides reach a trade deal.
Big Divides Remain as U.S.-China Trade Talks Resume
- Cabinet-level delegations from the U.S. and China will resume trade negotiations here Wednesday, but early indications are that the two sides remain sharply divided, suggesting a hard slog ahead for a deal to be cut before a March 1 deadline.
- The Chinese delegation, dozens strong and led by Vice Premier Liu He, plans to offer a big increase in purchases of U.S. farm products and energy, along with modest reforms in industrial policies, said people in China who are closely following the talks.
- But Beijing will fight U.S. demands for deep structural changes in the Chinese economy, these people said.
- Those demands have included eliminating subsidies to favored industries, as well as regulatory help and other aid to Chinese companies, especially state-owned enterprises.
Cooling Housing Market Prompts Closer Scrutiny of Some Lenders
- One of the principal gatekeepers to housing-finance markets is stepping up scrutiny of nonbank mortgage lenders, concerned that some may not have the financial heft needed to overcome stressed conditions.
- The increased oversight by the Government National Mortgage Association, or Ginnie Mae, comes as nonbank lenders play an ever-bigger role in making mortgages to Americans and as housing markets are cooling.
- Many of these companies flourished after the financial crisis as banks stepped back from the mortgage market but haven’t yet been tested by an economic downturn.
- For the first time in recent memory, the agency has asked a handful of these lenders to improve certain financial metrics before granting them full ability to continue issuing Ginnie-backed mortgage bonds.
EUROPE & WORLD
U.S. Imposes Sanctions on Venezuela’s Oil Industry
- The U.S. imposed sanctions on Venezuela’s state-owned oil giant in a dramatic move designed to empower the opposition and cripple the government of President Nicolás Maduro by preventing the proceeds of U.S. crude sales returning to Caracas.
- The sanctions on Petróleos de Venezuela, the South American country’s main exporter, are the culmination of a two-year pressure campaign, and are an attempt to funnel income from the country’s biggest revenue generator into the hands of opposition leader Juan Guaidó.
- Mr. Trump’s national security adviser, John Bolton, said Monday’s effort would block $7 billion in assets and deprive Caracas of $11 billion in funds from exports during the next year, if the sanctions are maintained.
- The Trump administration’s latest actions, including last week’s official recognition, will enable a transitional government immediately to access some $500 million, Mr. Guaidó told The Wall Street Journal in an interview Monday.
Britain’s Theresa May Seeks to Renegotiate Brexit Deal
- British Prime Minister Theresa May on Tuesday told her cabinet that she would seek to renegotiate the Brexit deal that her government spent more than a year hashing out with the European Union.
- The Brexit withdrawal agreement, completed in November, lays out the terms of divorce between the U.K. and the EU. But the deal proved unpopular with British lawmakers, who voted it down by a historic margin earlier this month.
- In an effort to quell dissent within her own party, Mrs. May says she wants to go back to Brussels and renegotiate key parts of the deal, in particular the so-called Irish backstop, which many in Mrs. May’s party fear would lock the U.K. in a customs union with the EU.
- There was no immediate reaction from the EU regarding Mrs. May’s plan, but officials have repeatedly said they have no intention of reopening the withdrawal agreement.
Brazil to Pursue Criminal Charges Against Vale After Deadly Disaster
- Brazil’s top prosecutor said she would pursue criminal charges against executives at Vale, the world’s largest iron-ore miner, and the government said it was ordering inspections at dams across the country after a deadly disaster at one the company owned.
- The government also said it would publish an official order on Tuesday to demand state governments immediately inspect 140 or so dams similar to the one that burst in the town of Brumadinho in the southeastern state of Minas Gerais.
- Brazilian police arrested five people Tuesday in connection with the deadly collapse of the dam, including employees of the mining company, as authorities moved to uncover the cause of the disaster.
TODAY in HISTORY
- Edgar Allan Poe’s The Raven was published. (1845)
- Poet Robert Frost died in Boston. (1963)
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