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U.S. Stocks Drop on Economic Growth Concerns

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US FINANCIAL MARKET

U.S. Stocks Drop on Economic Growth Concerns

  • The S&P 500 and the Dow Jones Industrial Average slid on Friday, hit by worries over the impact of the coronavirus epidemic on global growth, while strong earnings from Amazon.com checked losses on the Nasdaq.
  • Shares of the online retailer surged 9.2% after the company trumped Wall Street’s estimates for holiday-quarter results, putting it back in the $1 trillion market capitalization club.
  • The World Health Organization on Thursday declared the coronavirus—which has now sickened more than 9,500 people and killed more than 200—a public-health emergency of international concern.
  • Disruptions in supply chains and travel curbs are expected to weigh on China’s economy, prompting economists to temper their growth expectations for the world’s second-largest economy.
  • Caterpillar, often considered a bellwether for the economy, said Friday that it expects demand for its machinery to fall this year, citing global economic uncertainty that crimped sales in the latest quarter.
  • Oil majors Exxon Mobil and Chevron dropped about 3% after disappointing results.
  • Visa fell 2.7% as it fell short of analysts’ estimate for first-quarter revenue and warned revenue would be crimped by incentives it provides to banking clients in 2020.
  • Fresh data released Friday showed that U.S. consumers continued to spend in December, continuing a year-long trend.

Amazon Revenue Jumps on Holiday Sales as Profit Rises

  • Amazon.com on Thursday posted holiday quarter results well above expectations as the expansion of its one-day shipping program came under budget and membership in its Prime loyalty club notched a 50% rise in two years.
  • Amazon’s fourth-quarter revenue rose 21% to $87.4 billion from a year earlier.
  • Revenue from subscription fees grew 32% to $5.2 billion as more shoppers signed up for Prime than in any period prior.
  • Amazon said it has more than 150 million Prime members world-wide.
  • Amazon Web Services posted better results than feared, growing revenue 34% to $9.95 billion, similar to its third-quarter increase.
  • The company’s shipping costs rose to $12.88 billion, a 43% increase from a year earlier.
  • Profit rose 8% to $3.3 billion, beating its quarterly profit estimate of between $1.2 billion and $2.9 billion.
  • Amazon said it expects first-quarter sales of between $69 billion and $73 billion.
  • Amazon also forecast operating income of up to $4.2 billion in the current quarter, down from $4.4 billion the year prior.

Visa Sees Muted Revenue Growth in 2020, Shares Fall 3%

  • Visa fell short of analysts’ estimate for first-quarter revenue and said revenue this year would be crimped by incentives it provides to banking clients.
  • The company’s net revenue rose 10% to $6.05 billion in the first quarter, but missed analysts’ estimates of $6.08 billion.
  • Total payments volume rose about 8% to $2.36 trillion in the quarter.
  • Meanwhile, volume from cross-border transactions, which typically carry larger fees, rose 9%.
  • The company’s net income rose 10% to $3.27 billion.
  • Visa expects client incentives as a percentage of revenue to be in the high-end of its forecast range of 22.5% to 23.5% in 2020.

EA’s tepid forecast overshadows quarterly beat, shares slip

  • Electronic Arts forecast fourth-quarter adjusted revenue below analysts’ estimates, weighed down by the delayed launch of its basketball title “NBA Live”, while its “Apex Legends” battles “Fortnite” and “PUBG” to attract young gamers.
  • On an adjusted basis, the company’s revenue jumped 22.9% to $1.98 billion, beating analysts’ expectation of $1.97 billion.
  • Revenue from live services, the largest chunk of its sales, rose 41% to $677 million.
  • Net income for the third quarter rose to $346 million from $262 million a year earlier.
  • EA raised its full-year adjusted revenue forecast to $5.15 billion from $5.13 billion, but was below expectations of $5.21 billion.
  • EA expects current-quarter adjusted revenue to be about $1.15 billion, below analysts’ expectations of $1.20 billion.

Honeywell says 737 MAX production halt to hurt 2020 sales

  • Boeing-supplier Honeywell International on Friday forecast 2020 sales below market expectations, citing a hit from the production freeze of 737 MAX planes on its aerospace unit.
  • Sales fell 2.4% to $9.5 billion from the same period last year as it accounted for the spinoffs of its homes and global-distribution businesses in 2018. Analysts were looking for $9.61 billion.
  • The company’s organic sales, which excludes currency fluctuations and the effect of deals, rose 2%.
  • The aerospace business generated $3.66 billion in sales, compared with $3.43 billion in the prior year.
  • The industrial conglomerate posted net income of $1.56 billion, compared with $1.72 billion in the comparable quarter last year.
  • The company forecast 2020 sales of $36.7 billion to $37.8 billion, below analysts’ estimate of $38.11 billion.
  • The company said it expects 2020 earnings per share of $8.6 to $9, the midpoint of which was 1 cent above the estimate of $8.79.

Caterpillar Drives Down Expectations for 2020

  • Caterpillar on Friday forecast worse-than-expected earnings for this year after reporting lower sales across all three primary segments in the last quarter, offering further evidence of strains in the U.S. industrial economy.
  • Caterpillar said total revenue declined 8.4% for the quarter to $13.14 billion as net income rose 4.8% to $1.1 billion.
  • The company said machinery sales fell 14% in North America, 16% in Latin America and 6% in its Europe, Africa and Middle East region for the fourth quarter from a year earlier.
  • The company expects as much as an annual 9% decline in retail sales this year, resulting in a reduction of up to $1.5 billion in dealer inventories.
  • The world’s biggest construction and mining equipment maker said it expects 2020 profit of $8.50 to $10 per share, lower than $11.06 per share last year and below the average analyst estimate of $10.63 per share.

Exxon quarterly profit falls 5.2% on weak refining, chemical margins

  • Exxon Mobil on Friday reported a 5.2% drop in fourth-quarter profit on weakness in its refining and chemicals business and flat year-on-year oil and gas output, with asset sales helping to stem the decline.
  • The largest U.S. oil producer’s oil and gas output rose less than 1% to 4.02 million barrels per day in the quarter, the sixth quarter in a row of year-over year gains.
  • But quarterly profits on U.S. production were down 74% as the company spent heavily to boost output and suffered from lower natural gas prices.
  • Net income fell to $5.69 billion in the quarter, from $6 billion a year earlier.
  • The results would have looked worse if not for a one-time $3.7 billion gain from the sale of assets in Norway.

Chevron swings to large loss on $10 billion in charges, shares sink

  • Chevron swung to a large fourth-quarter loss on weaker oil and gas prices and $10.4 billion in charges as it stepped up efforts to cull unprofitable assets, and shares of the No. 2 U.S. oil producer tumbled 3% in early trading.
  • Chevron’s net oil equivalent production was flat at 3.08 million barrels per day in the quarter as gains in its U.S. shale were offset by lower output elsewhere.
  • Average prices for Chevron’s oil fell 16% from a year earlier, and natural gas prices fell by nearly half.
  • Chevron’s quarterly loss including charges was $6.61 billion, compared with a profit of $3.73 billion a year earlier.
  • Charges for shale and other write downs pushed operating profit in its U.S. oil and gas operations to a $7.4 billion loss, compared with a $964 million profit a year ago. Outside the U.S., production profits fell to $731 million from $2.3 billion a year ago.

Levi’s shuts half its China stores on coronavirus outbreak, expects financial hit

  • Levi Strauss has shut about half of its stores in China due to the outbreak of a new coronavirus and will take a near-term financial hit as a result of the epidemic, Chief Financial Officer Harmit Singh said on Thursday.
  • Fourth quarter net revenue fell 1.4% to $1.57 billion, missing analysts’ estimates of $1.58 billion.
  • Adjusted net income fell 9% to $108 million in the quarter, beating expectations.
  • The company forecast adjusted 2020 profit of $1.18 per share to $1.22 per share above Wall Street estimates of $1.17. 

 

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US ECONOMY & POLITICS

U.S. Consumer Spending Gains Eased in December; Annual Increase for 2019 Smallest Since 2016

  • Consumer spending eased at the end of last year, part of a trend of steady but slower spending gains that lead to the smallest annual increase since 2016.
  • Personal-consumption expenditures (PCE), or household spending, rose a seasonally adjusted 0.3% in December from November.
  • Personal income also advanced 0.2% last month.
  • Economists expected a 0.3% rise in both spending and personal income.
  • The price index for personal consumption expenditures, the Federal Reserve’s preferred inflation gauge, rose 1.6% in December from the same month in 2018, compared to a revised 1.4% year-over-year rise in November.
  • The core personal consumption expenditures index—which excludes often-volatile prices for food and energy—was up 1.6% in December from a year earlier.

GOP Senators Appear Likely to Reject Witnesses in Impeachment Trial

  • Senate Republicans appear likely to end President Trump’s impeachment trial without considering new witnesses or documents on Friday, moving closer to acquitting him of both impeachment articles.
  • The Senate will vote Friday on whether to introduce additional evidence in the trial after the House Democratic impeachment managers and the president’s defense team each present arguments on the question for two hours.
  • Sen. Lamar Alexander (R., Tenn.), considered one of the key swing votes on the measure, said Thursday night that he would vote no, bolstering Republican chances of blocking Democratic efforts to extend the trial.
  • Without new evidence or witnesses, the Senate could complete the trial later Friday, though Democrats have indicated they may force additional votes that some lawmakers are cautioning could extend the process into early Saturday.

Sanders Gains Ground on Biden Among Democratic Voters

  • Sen. Bernie Sanders has gained ground in the Democratic presidential race and is now tied with former Vice President Joe Biden among the party’s primary voters nationally, a new Wall Street Journal/NBC News poll has found.
  • Mr. Sanders was the first choice of 27% of Democratic primary voters, essentially tied with Mr. Biden, who had 26%.
  • Mr. Biden led in all previous Journal/NBC News polls of the 2020 primary race.
  • Sen. Elizabeth Warren slipped to a distant third place, with 15% support.
  • The survey also finds that Michael Bloomberg, the former New York mayor, has jumped into fourth place nationally on the strength of an ad barrage costing $280 million so far, according to the political-ad tracker Kantar/CMAG.
  • Some 60% of Democratic primary voters have seen a Bloomberg ad, the new poll found, far more than have seen ads by any other candidate.
  • Mr. Bloomberg had 9% support nationally in the survey. Former Mayor Pete Buttigieg drew 7%, while Sen. Amy Klobuchar had 5% and Andrew Yang, 4%.

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EUROPE & WORLD

U.K. and Russia Report Their First Coronavirus Cases

  • The U.K. and Russia each reported their first cases of the dangerous coronavirus, and other countries moved to limit air traffic with China as the number of people infected there approached 10,000.
  • The moves came hours after the World Health Organization and the U.S. elevated their coronavirus alerts, as the death toll from the pneumonia-causing virus rose to 213 late Thursday, up from 170 a day earlier, and the number of illnesses surpassed 9,500.
  • The number of people sickened by the new coronavirus in China now exceeds the global total infected with severe acute respiratory syndrome, or SARS, which killed nearly 800 people after emerging from southern China in late 2002 and into 2003.

Eurozone Growth Hits 6-Year Low as Key Automobile Industry Struggles

  • The eurozone’s economy slowed sharply in 2019 as factories faltered amid weak overseas demand and its key automobile industry struggled to get to grips with a cooling market and the costs of developing a new generation of electric cars.
  • Eurozone GDP rose at an annualized rate of just 0.4% in the three months through December, its weakest expansion since the first quarter of 2013.
  • The European Union’s statistics agency said Friday the eurozone’s gross domestic product grew 1.2% last year, its weakest expansion since 2013, when the currency area was emerging from its twin government debt and banking crises.
  • Germany’s economy grew by just 0.6% in 2019.

LG Display looks to a more positive 2020 on OLED demand, shares rise

  • Apple supplier LG Display posted a smaller-than-expected quarterly loss on Friday and offered an optimistic outlook for the year on higher demand for its organic light-emitting diode (OLED) panels, sending its shares up 4%.
  • The forecast comes after a rough year for the South Korean company that saw a prolonged decline in liquid crystal display (LCD) panel prices, a management shake-up, and costs from restructuring and strategy changes.
  • The company posted a loss of 422 billion won ($361.6 million) in the quarter, compared with an operating profit of 279 billion won a year earlier. Analysts expected a 578 billion won loss.

Airbus Bribery Charges Unveiled After $4 Billion Settlement

  • Airbus, the world’s largest plane maker, made illicit payments to intermediaries to win contracts around the globe, according to allegations disclosed by a French judge as part of a €3.6 billion ($4 billion) settlement with U.S., U.K. and French prosecutors.
  • French prosecutors said Friday the fine had been cut in half because of Airbus’ cooperation. France will take the lion’s share of the settlement, €2.08 billion. U.S. authorities will take €984 million and the U.K. will take €527 million.
  • The settlement covers allegations between 2004 and 2016 and included contracts in Turkey, the United Arab Emirates, Brazil, Taiwan and Nepal, French prosecutors said.

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TODAY in HISTORY

  • Robert E. Lee was appointed commander-in-chief of the Confederate forces. (1865)
  • The first McDonald’s opened in Russia. (1990)

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