DAILY MARKET REPORTS
- U.S. stocks rebounded Wednesday, lifted by technology stocks ahead of the Federal Reserve’s latest interest-rate decision.
- Investors have rewarded companies after their earnings reports more frequently than normal this reporting season following the worst quarter for stocks since 2011. Even shares of companies that miss expectations are performing better than normal.
- Apple shares climbed 4.9% even though the iPhone maker posted its first holiday-quarter decline in revenue and profit in more than a decade and warned the slowdown in its core iPhone business and weakness in China has spilled into this year.
- Aerospace giant Boeing added 6.7% after topping quarterly profit targets and giving an upbeat outlook for 2019.
- Chip maker AMD surged 15% after projecting stronger-than-expected revenue for the year.
- And McDonald’s rose 2.8% after reporting fourth-quarter revenue that was in line with analyst targets.
- Still, AT&T was among the companies whose shares fell following its latest results. Shares dipped 5.2%. EBay also fell and was recently down 1.8% after giving softer-than-expected sales targets for 2019.
- Microsoft, Facebook and Tesla are among the big names posting numbers after the market closes, and investors were also weighing trade talks with slow growth from China buffeting large technology companies recently.
US FINANCIAL MARKET
Apple’s Revenue and Profit Drop: ‘The iPhone Has Matured’
- Apple posted a quarterly decline in both revenue and profit—the first time in more than a decade for the December quarter— underlining the tech giant’s challenge to reignite slowing iPhone sales and depend more on services for growth.
- The combination of weak iPhone sales and a downturn in China reduced revenue 4.5% to $84.31 billion in the quarter.
- Sales of the iPhone, which accounts for two-thirds of Apple’s total revenue, fell about 15% to $61.1 billion.
- The iPhone woes were particularly pronounced in China where Apple’s total sales fell 27% to $13.17 billion.
- Growth of Apple’s services business slowed during the period.
- The segment increased sales 19% to $10.88 billion, a deceleration from six quarters of more than 20% growth.
- Profit fell slightly to $19.97 billion from $20.07 billion a year earlier, but earnings per share increased to their highest level ever due to Apple’s extensive buyback program that reduced outstanding shares by almost 400,000.
Boeing’s Sales Climb on Air Travel Demand
- Boeing said it expects sales to rise as much as 10% this year as the aerospace giant ramps up production to meet global demand for air travel.
- Quarterly revenue rose 14.4% to $28.34 billion, above analysts’ average expectation of $26.87 billion.
- Boeing’s 2018 revenue surpassed the $100 billion mark for the first time in its 102-year history.
- Boeing said it expects to deliver between 895 and 905 commercial aircraft in 2019, up from 806 aircraft it delivered last year, which – although just below target – kept it ahead of rival Airbus SE for a seventh year.
- Fourth-quarter profit rose 3% to $3.4 billion from $3.3 billion a year earlier, but beat estimates on a per share basis by 19%.
- The company forecast operating cash flow between $17 billion and $17.5 billion in 2019, compared with cash flow of $15.32 billion in 2018, and above analysts’ average estimate of $16.73 billion
- Boeing raised its full-year core earnings per share forecast to $19.90-$20.10 from $14.90-$15.10, and revenue to a range of $109.5 billion to $111.5 billion, from $98 billion to $100 billion, fueled by strong volume across its businesses.
AT&T Sheds Pay-TV Customers but Wireless Profits Surge
- AT&T’s pay-television business lost more than 650,000 customers in the fourth quarter, as cord-cutting continued to take its toll, but the media business—now called WarnerMedia—and surging profits in its wireless business helped the bottom line.
- Consolidated revenue jumped 15% to $48 billion. The WarnerMedia business wasn’t part of the earlier year’s results.
- The company reported a net loss of 403,000 DirecTV satellite subscribers as well a decline in its online streaming service DirecTV Now, which shed 267,000 customers including free trial accounts.
- In its wireless business, AT&T ended the quarter with 134,000 more postpaid phone subscriptions, valuable customers who tend to stick around longer. This number was significantly lower than Verizon’s 650,000 net adds over the same period.
- Overall, fourth-quarter profit was $4.86 billion, compared with $19.04 billion a year earlier. The year-ago results were skewed by a $20 billion paper gain triggered by the federal tax overhaul.
AMD Guides for Slower Growth, But That’s OK for Wall Street
- Chip maker Advanced Micro Devices’ expects slower revenue growth this year as it grapples with weaker graphics sales and works through excess inventory left over from the blockchain and crypto-currency sales boom.
- Revenue rose 6% to $1.42 billion, missing analysts and AMD’s guidance.
- Gross margin improved to 37.8% from 33.7% a year earlier. However, the metric in the third quarter was about 40%.
- Overall, AMD reported a fourth-quarter profit of $38 million, compared with a year-earlier loss of $19 million which missed consensus estimates on a per share basis.
- However, the company’s forecast of revenue rising by a high-single-digit percentage was better than expected, coupled with expectations of the company’s Ryzen chipset market share to double in 2019 and shares in the company rose nearly 10% in after-hours trading.
McDonald’s Pushes Up Prices in the U.S., But Overall Sales Drop
- McDonald’s pushed up prices in the U.S. in the fourth quarter, but overall sales still drifted lower, highlighting the challenge the fast-food chain faces.
- The company said sales in the fourth quarter dropped 3% from the year earlier to $5.16 billion, in line with analyst expectations.
- Global same-store sales rose 4.4% in the quarter, higher than the 4% gain analysts expected.
- In the U.S., McDonald’s said a 2.3% same-store sales gain was driven in part by higher prices.
- The company reported a profit of $1.42 billion, compared with $699 million a year earlier.
- McDonald’s also said it expects long-term average sales growth across the company of 3% to 5% and earnings-per share in the high single digits.
Anthem speeds up pharmacy benefits launch, sees 2019 profit above estimates
- Anthem surprised Wall Street by moving ahead the launch of its in-house pharmacy benefits management business, as the company seeks to firm up its position against leading health insurers that have signed billion-dollar deals to cut costs.
- Total revenue increased 3.8% to $23.3 billion compared to $22.5 billion in the same period a year ago.
- Net income declined 66% to 424 million in the quarter compared to $1.2 billion a year ago – helped by a tax benefit from U.S. corporate tax reform.
- Anthem forecast 2019 adjusted earnings per share of over $19, ahead of Wall Street estimates of $17.61.
EBay to Pay Its First-Ever Dividend
- EBay said it would pay a 14-cent dividend in March, its first ever, as the company faces pressure from hedge-fund investors to improve shareholder returns.
- It also added $4 billion to its buyback program. Its authorization was $3.2 billion on Dec. 31.
- Total sales rose 6% to $2.88 billion from $2.71 billion a year earlier.
- Analysts had expected $2.86 billion of revenue for the quarter.
- The company said that its number of active buyers grew by 4% across its platforms during the fourth quarter.
- For the fourth quarter, the online marketplace posted a profit of $760 million, compared with a loss of $2.6 billion a year ago.
General Dynamics beats profit estimates on strong IT demand
- U.S. aerospace and defense company General Dynamics beat analysts’ estimates for quarterly profit, boosted by strong demand for the IT services it provides to the U.S. Department of Defense.
- Total revenue rose 25.4% to $10.38 billion, beating estimates of $10.36 billion.
- Revenue at the company’s IT unit jumped 93.3% to $2.38 billion in the fourth-quarter.
- General Dynamics bought IT services-heavy CSRA for $9.7 billion last year.
- Net income rose to $909 million, from $636 million a year earlier.
- In its 2019 forecast, revenue of $38.5 billion missed estimates of $39.2 billion, and EPS of $11.60-$11.70 missed estimates of $12.00, sending shares down more than 5% in early trading.
Amgen 2019 forecast falls short of expectations, shares dip
- Amgen reported fourth-quarter profit that easily surpassed expectations as sales rose and tax expense fell, but competition for its older medicines is growing and the drugmaker forecast 2019 earnings below Wall Street estimates.
- Revenue for the quarter rose 7% to $6.23 billion, beating the average analyst estimate of $5.84 billion.
- Net income jumped to $1.9 billion in the fourth quarter compared to a $4.3 billion loss in the same period of 2017 due to a charge related to U.S. Corporate Tax Reform.
- For the full-year, Amgen projected adjusted earnings of $13.10 to $14.30 per share on revenue of $21.8 billion to $22.9 billion, below forecasts of $14.61 per share on revenue of $22.9 billion.
Royal Caribbean sees quarterly profit above estimates, shares rise
- Royal Caribbean Cruises forecast current-quarter earnings above estimates, benefiting from higher demand for its Caribbean cruises and passengers spending more money on activities while on board.
- Total revenue rose 16.4% to $2.33 billion, edging past analysts’ average estimate of $2.31 billion
- Net income rose to $315.7 million in the fourth quarter, from $288 million a year earlier.
- Royal Caribbean said it expected 2019 net yields, a closely watched metric that cruise companies use to measure revenue per available berth net of significant variable costs, to increase 6.5% to 8.5%, on a constant currency basis.
Hess production tops estimates on Bakken, Gulf of Mexico strength
- U.S. oil and gas producer Hess’s fourth-quarter production beat estimates, driven by higher output in the Bakken shale region and off the U.S. Gulf of Mexico.
- Total production for the quarter was 289,000 barrels of oil equivalents per day (boe/d), down from 300,000 boe/d a year earlier but higher than the 271,908 boe/d analysts were expecting.
- Average realized selling price, excluding hedging, rose to $58.11 per barrel, from $57.32 per barrel a year-ago.
- Net loss narrowed to $4 million, in the fourth quarter, from $2.68 billion a year earlier.
Align Slips on Softer View as Bulls Call 2019 an Investment Year
- Align Technology shares recovered significant after-market losses in pre-market trading after 2019 EPS guidance missed expectations amid gross margin pressures from a new manufacturing facility and higher-than-expected spending.
- Revenue of $534 million jumped 27% of the same period a year ago, and came in well ahead of expectations of $512 million.
- Full year Invisalign shipments jumped 32% year over year to 1.23 million units.
- Net income rocketed by more than 800% to 97.4 million compared to 10.3 million in the same period a year ago, and came in ahead of consensus on a per share basis. Last year’s quarter had a charge related to 2017’s Corporate Tax Reform.
- The company guided first quarter EPS in the range of $0.78 to $0.84, significantly below the average estimate of $1.17 which sent shares down as much as 13% in after-hours trading.
Thermo Fisher Fourth Quarter Adjusted EPS Beats Highest Estimate
- Total revenue grew 8% in the fourth quarter to $6.51 billion compared to $6.05 billion in the same period a year ago, and ahead of the average estimate of $6.23 billion.
- Net income increased 70% to $898 million from $528 million in the same period a year ago, and exceeded estimates on a per share basis.
U.S. Suit Against Qualcomm Over Patent Tactics Reaches Endgame
- Closing arguments took place Tuesday in the federal government’s suit against Qualcomm over patent licensing, the final stage in a trial that could upend a business model vital to the chip maker’s success in the smartphone era.
- U.S. District Judge Lucy Koh was expected to question both sides in the suit, which challenges Qualcomm’s “no license, no chips” policy, that has required smartphone makers to pay patent-royalty fees to purchase its chips.
- In addition to the weighty stakes for Qualcomm, Judge Koh’s eventual ruling could have considerable implications for the FTC’s ability to pursue companies it believes wield their intellectual property in anticompetitive ways.
US ECONOMY & POLITICS
U.S. Private Sector Adds 213,000 Jobs in January
- The U.S. private sector added 213,000 jobs in January, according to the ADP National Employment Report released Wednesday, beating expectations but falling short of last month’s growth.
- Economists polled by The Wall Street Journal were expecting the addition of 183,000 jobs.
- Of the jobs added in January, 145,000 were in the service sector, while the rest were in the goods-producing sector.
- The professional and business services sector had the largest job growth in January at 46,000, according to the report.
U.S. Pending Home Sales Declined in December for Third Month
- Contract signings to purchase previously owned U.S. homes unexpectedly fell for the third straight month in December, yet another sign the housing market is struggling amid elevated property prices and borrowing costs.
- The index of pending home sales fell 2.2%, after a 0.9% decline the previous month, according to data released Wednesday from the National Association of Realtors in Washington. That compared with the median projection of analysts for an increase.
- The gauge was down 9.5% from a year earlier, the worst drop since early 2014.
U.S. mortgage applications fall as borrowing costs edge up
- U.S. mortgage applications to buy a home and to refinance one fell for a second straight week, as borrowing costs edged higher in step with higher bond yields, the Mortgage Bankers Association said on Wednesday.
- The Washington-based group’s seasonally adjusted index on mortgage activity fell 3.0% to 388.7 in the week ended Jan. 25.
- Two weeks ago, it reached an 11-month high at 411.8, raising hopes of a revival in the housing market that has slowed due to rising mortgage rates.
As China Trade Talks Begin, Trump Faces Pressure to Make a Deal
- As the U.S. and China resume high-level trade talks Wednesday, President Trump sees himself with the upper hand given China’s lagging economic growth, but there is pressure for Mr. Trump and his administration to cut a deal too. Chinese tariffs imposed to counter U.S. levies are unpopular with leading business groups and have hit regions and constituencies that Mr. Trump counts among his staunchest supporters, including soybean farmers in the Great Plains, auto workers in the Midwest and oil-industry workers in the Dakotas and Texas.
- The talks are set to begin Wednesday morning and conclude Thursday afternoon. In a sign of their importance, Mr. Trump is scheduled to meet with the head of the Chinese delegation, Vice Premier Liu He, this week.
Federal Reserve Likely to Hold Rates Steady
- The Federal Reserve is set to hold interest rates steady Wednesday and reaffirm it is likely to leave them unchanged for a while.
- Fed officials have signaled this position individually in recent public comments but could make it official by tweaking the policy statement the central bank issues Wednesday, after its two-day policy meeting.
- Since the start of the year, Fed officials have used a new watchword—patient—to signal they are likely to refrain from raising rates until they get a better understanding of whether slowing global growth and volatile financial markets have altered the U.S. economic outlook.
Government Updates Timing for Data Releases Delayed by Shutdown
- The U.S. Census Bureau published an updated calendar Wednesday for economic-data reports that were halted during the partial government shutdown, with some of the releases canceled.
- Among the reports rescheduled: The report on new-home sales in November, originally scheduled for release on Dec. 27, will be published on Thursday.
- The report on international trade in goods and services in November, originally scheduled for Jan. 8, will be released on Feb. 6.
- The report on construction spending in November, originally scheduled for Jan. 3, will be published on Feb. 1.
EUROPE & WORLD
Alibaba sales grow at weakest pace in three years as slowing China bites
- E-commerce giant Alibaba’s quarterly revenue grew at its weakest pace since 2016, as the impact of a slowing Chinese economy and a crippling Sino-U.S. trade war kept buyers away during its top-sale season.
- Alibaba posted third-quarter revenue of 117.28 billion yuan ($17.47 billion), compared with 83 billion yuan a year earlier.
- That compares with an estimate for revenue of 118.9 billion yuan.
- Revenue from its cloud business rose 84% to 6.6 billion yuan, while sales from its digital entertainment and media business rose 20% to 6.5 billion yuan.
- Net income rose 33% to 30.96 billion yuan, however, beating estimates and sending Alibaba’s stock up in pre-market trade.
Small panels drive big fourth-quarter profit jump at LG Display
- South Korea’s LG Display said fourth-quarter operating profit leapt more than six-fold from a year earlier, on the back of strong demand for its small panels including for smart watches.
- Revenue fell 2.5% to 6.9 trillion won.
- One bright spot in the fourth quarter was sales of small panels with higher prices, which helped drive operating profit growth in the fourth quarter despite weaker large-size panel prices, the company said.
- The Apple supplier’s operating profit for October-December came in at 279 billion won ($249.7 million) from 44 billion won in the same period a year ago, and above the 132 billion won forecast of 10 analysts.
Canadian National Rail tops profit estimates as crude shipments rise
- Canadian National Railway topped analysts’ estimates for quarterly profit on Tuesday, as the railroad company transported higher volumes of petroleum crude and Canadian grain.
- Revenue rose nearly 16% to C$3.81 billion from C$3.29 billion.
- Carloads, the amount of freight loaded into cars, rose about 5% in the final quarter of 2018, while rail freight revenue per carload increased about 11%, Canada’s largest railroad operator said in a statement.
- CN’s net income fell about 56% to C$1.14 billion ($858.8 million) as the company recorded an income tax gain of C$1.76 billion in the same period last year.
Europe’s fourth-quarter company earnings growth expectations slashed yet again
- European companies listed on the STOXX 600 index are expected to report 3.6% year-on-year earnings growth in the fourth quarter, sharply lower than the 4.8% forecast last week.
- The new estimate confirms a sharp downward trend and amounts to about a third of the earnings growth levels forecast in November. On January 15, the forecast still stood at 6%.
- The revision comes after 26 STOXX 600 companies reported results so far this earnings season with 50% exceeding analyst estimates. This is in line with a typical quarter, Refinitiv analysts said in a note.
Mexican Economic Growth Slowed in Fourth Quarter
- Mexico’s economic growth lost momentum in the fourth quarter of 2018 as a decline in industrial output partially offset gains in services and agricultural production.
- Gross domestic product, a measure of output in goods and services, expanded 0.3%, seasonally adjusted, from the third quarter, bringing growth for the full year to 2%, the National Statistics Institute said Wednesday.
- Industrial output fell 1.1% from the third quarter, while services increased 0.8%, and agricultural production was 1.9% higher.
- The increase from the previous quarter translates into an annualized rate of 1.2%, down from 3.4% annualized growth in the third quarter. Full-year growth at 2% also marked a slight slowdown from 2017, when the economy expanded 2.1%.
Vale to Dismantle 10 Dams in Wake of Brazil Mining Disaster
- Brazil’s Vale SA said it would dismantle 10 dams that are similar to the one that collapsed on Friday, killing at least 84 people, after police arrested five people in connection with the disaster earlier Tuesday.
- The world’s largest iron-ore producer said it would halt 10% of annual production as it speeds up efforts to get rid of mining-waste dams like the one that burst on Friday at its Corrego do Feijão complex.
- Brazilian police arrested five people in connection with the disaster, which took place in the rural town of Brumadinho, including three Vale employees, as investigators moved quickly to determine the cause.
- Chief Executive Officer Fabio Schvartsman said it could take as long as three years to dismantle the dams and would would halt 40 million metric tons of production, out of annual production of 400 million tons.
TODAY in HISTORY
- North Vietnamese forces launched attacks against the South Vietnamese, beginning the Tet offensive. (1968)
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