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Wall Street Rises for Third Session on Private Jobs Data, Virus Treatment Talks

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US FINANCIAL MARKET

Wall Street Rises for Third Session on Private Jobs Data, Virus Treatment Talks

  • U.S. stocks surged for a third straight day on Wednesday and the Nasdaq hit a new record high, helped by strong monthly domestic private jobs data and reports of progress in developing a treatment to fight the fast-spreading coronavirus.
  • Private-sector payrolls increased by 291,000 in January, the ADP National Employment Report showed, far above expectations of 156,000 job additions.
  • Earlier in the day, stock index futures got a boost after a report that a Zhejiang University team had found some drugs that could inhibit the coronavirus in vitro cell experiments.
  • Separately, researchers in the UK told Sky News that they have made a “significant breakthrough” in finding a vaccine.
  • The World Health Organization played down the reports, saying “there are no known effective therapeutics against this 2019-nCoV (virus)”.
  • Investors will be watching for further clarity on the Iowa presidential caucus results today.
  • After a technical mishap, the results were delayed but the first wave of figures that make up about 70% of the results show Pete Buttigieg and Bernie Sanders in the lead.

Disney Reports More Than 28 Million Subscribers to New Streaming Service

  • Walt Disney emerged as a formidable contender in a rapidly escalating battle among online-video platforms, as the number of subscribers to its new streaming service more than doubled in its first three months.
  • Revenue across the company rose 36% from a year earlier to $20.86 billion, slightly exceeding consensus of $20.76 billion.
  • Studio Entertainment revenues came in at $3.76 billion during the quarter, up from $1.8 billion during the year ago period.
  • Revenue for Disney’s Parks, Experience and Products segment grew 8% year over year to $7.4 billion during the quarter, while operating income increased 9% to $2.3 billion.
  • Revenue for Disney’s Direct-to-Consumer segment more than quadrupled to $3.98 billion from $918 million a year ago, while the segments operating loss deepened to $693 million from $184 million a year ago – below expectations.
  • Disney+ had 28.6 million subscribers through Monday, Chief Executive Robert Iger said Tuesday, up from 10 million in November, analysts had expected the company to report 20 million subscribers.
  • About 20% of subscribers who signed up for Disney+ did so through a free trial with Verizon, Iger said.
  • Subscribers at Hulu climbed to 30.7 million as of Monday, the company said. ESPN+ customers reached 7.6 million this week.
  • Disney reported net income of $2.11 billion in the first quarter which fell from a year earlier.
  • The company estimates that if Shanghai Disneyland remains closed for two months, the financial impact could be about $135 million, she said.
  • A closure in Hong Kong of the same duration could cost Disney about $40 million, Ms. McCarthy said.
  • Disney did not update guidance on subscriber numbers, previously forecast at 60-90 million subscribers by 2024.

Spotify Adds Subscribers, Swings to Loss as It Invests in Podcasts

  • Spotify Technology forecast current quarter revenue largely below analyst estimates, as the streaming service spends more on promotions to keep and lure listeners in its battle against Apple Music and Amazon.
  • Revenue rose to 1.86 billion euros ($2.05 billion) from $1.50 billion euros a year earlier.
  • Analysts were expecting 1.89 billion euros.
  • At the end of the fourth quarter, Spotify had 271 million monthly active users, topping the company’s expectations.
  • Paid subscribers, which make up nearly 90% of its revenue, tallied 124 million. Analysts on average expected 122 million.
  • Average revenue per user for the paid-subscription business fell 5%, or 6% excluding foreign-exchange-rate effects, to €4.65 ($5.14), mostly due to an extended free trial period in the quarter.
  • Spotify swung to a loss of €209 million for the period compared to a profit of €442 million in the prior-year quarter.
  • The company forecast total premium subscribers in the range of 126 million to 131 million for the first quarter compared with the estimate of 128 million.
  • Spotify expects total revenue in the range of 1.71 billion to 1.91 billion euros for the first quarter.
  • Analysts expected 1.90 billion.

General Motors’ Fourth-Quarter Results Hit by Factory Strike

  • General Motors on Wednesday forecast flat profits for 2020 and reported a better-than-expected fourth quarter result as it kicked off a new effort to win over investors stampeding into shares of electric car rival Tesla.
  • Revenue in the quarter fell nearly 20% to $30.8 billion.
  • Net income reversed to a $194 million loss in the fourth quarter, from a $2 billion profit a year earlier.
  • GM’s fourth quarter profits took a $3.6 billion hit from a 40-day United Auto Workers strike that shut down the automaker’s profitable U.S. operations.
  • GM expects U.S. car and light truck sales to fall by about 500,000 vehicles from last year’s 17.1 million.
  • GM said it expects earnings per share for 2020 in a range from $5.75 to $6.25. Analysts are expecting GM to earn $6.23.

Ford’s Operating Income Falls by Two-Thirds

  • Shares of Ford fell nearly 8% on Wednesday, a day after the automaker forecast a lower profit for 2020, surprising analysts who also criticized the company’s management for holding back details on the earnings shortfall.
  • Revenue fell 5%, to $39.7 billion.
  • Ford said operating income for the October-to-December period was $485 million, down from $1.5 billion a year earlier.
  • Ford booked a net loss of $1.67 billion for the quarter which it attributed to higher contributions to its pension plans overseas.
  • Ford forecast 2020 adjusted earnings before interest and taxes (EBIT) between $5.6 billion and $6.6 billion, largely below at the midpoint, compared with $6.4 billion in 2019.

Chipotle’s earnings beat estimates on higher prices, digital boost

  • Chipotle Mexican Grill raised menu prices and consumers bit, helping the fast-casual burrito chain beat analysts’ estimates for quarterly sales and profit on Tuesday.
  • Revenue rose 17.5% to $1.44 billion, slightly higher than the estimate of $1.40 billion.
  • Sales from restaurants open for at least 13 months rose 13.4%, beating analysts’ estimate of 9.52%.
  • For the fourth quarter, digital sales rose 78.3% and accounted for 19.6% of total sales.
  • The average check size was up 5.4% in the fourth quarter and the number of transactions increased 8%, the company said.
  • Net income rose to $72.4 million, or $2.55 per share, from $32.02 million, or $1.15 per share, a year earlier.
  • The company expects to deliver mid-single digit percentage growth in comparable restaurant sales this year.

Snap Misses Quarterly Revenue Estimates, Shares Sink

  • Snap missed Wall Street estimates for fourth quarter revenue on Tuesday as it faced tough competition from digital advertising giants Google and Facebook, sending its shares down 10%.
  • Revenue, rose 44% to $560.88 million but missed the average analyst estimate of $563.03 million.
  • Snap said daily active users (DAU) on Snapchat rose 4% to 218 million from the prior quarter, above estimates of 215.04 million.
  • Average revenue per user jumped 23% to $2.58 during the quarter from a year earlier.
  • Snap’s net loss widened to $240.7 million, from $191.67 million a year earlier.
  • The company expects first-quarter revenue in the range of $450 million to $470 million. Analysts were expecting $461.6 million.

Match Quarterly Revenue Misses Estimates as Tinder Subscriber Growth Slows

  • Match Group missed Wall Street’s quarterly revenue estimates on Tuesday, as sequential subscriber growth on its popular dating app, Tinder, fell to its lowest in at least a year, sending shares down 10% after the bell.
  • Total revenue rose 19.6% to $547.2 million in the quarter, missing analysts’ average estimate of $552.9 million.
  • Tinder added about 200,000 average subscribers in the fourth quarter, taking its total average subscriber count to nearly 5.9 million, below expectations.
  • Match Group’s net earnings rose to $132.2 million for the fourth quarter, from $115.5 million a year earlier.
  • The online dating service provider forecast first-quarter revenue of $545 to $555 million, below estimates of $562.2 million.

Gilead 2020 outlook short of Wall Street estimates, shares dip 2%

  • Gilead Sciences on Tuesday forecast 2020 results below Wall Street estimates, including revenue largely flat from 2019, and the drugmaker’s shares fell more than 2%.
  • Gilead’s fourth-quarter revenue rose to $5.9 billion from $5.8 billion, in line with analyst estimates.
  • Sales of HIV drugs rose 11% to $4.6 billion.
  • Sales of Gilead’s hepatitis C drugs fell to $630 million from $738 million a year earlier, as medicines from Gilead and others have cured many patients infected with the liver-damaging virus and drugmakers compete on price.
  • Sales of the Kite unit’s cancer cell therapy Yescarta rose 50% to $122 million, but fell short of analyst estimates of $134 million.
  • Net income fell to $1.65 billion from $1.87 billion a year ago after adjustments.
  • For 2020, the company forecast adjusted earnings of $6.05 to $6.45 per share on sales of $21.8 billion to $22.2 billion.

Coty Shares Rise While Revenue Slips

  • Shares of Coty rose after the beauty-products company reported better-than-expected results for its second quarter.
  • Net revenue at Coty fell more than 6% to $2.35 billion, slightly topping analysts’ consensus of $2.34 billion.
  • Coty reported a loss of $21.1 million, compared with a loss of $960.6 million a year earlier.
  • The company also affirmed its 2020 outlook of adjusted operating income growth of 5% to 10% year-over-year, and adjusted earnings growth in the mid-single digits.

NYSE Owner Intercontinental Exchange Makes Takeover Offer for eBay

  • The owner of the New York Stock Exchange has made a takeover offer for eBay that could value the sprawling online marketplace at more than $30 billion, according to people familiar with the matter.
  • Intercontinental Exchange, known as ICE, has approached eBay in the past and did so again recently, the people said.
  • The companies aren’t currently in formal talks, and there is no guarantee eBay would agree to a deal.
  • ICE issued a statement late Tuesday confirming its interest in a deal after The Wall Street Journal reported on it earlier in the day and the company’s shares sank.

Justice Department Ramps Up Google Probe, With Heavy Focus on Ad Tools

  • The Justice Department has reached out to more than a dozen companies in its antitrust probe of Google, including publishers, advertising technology firms and advertising agencies, as the company’s online ad tools become a major focus.
  • In recent months, the department has been posing increasingly detailed questions—to Google’s rivals and executives inside the company itself—about how Google’s third-party advertising business interacts with publishers and advertisers, the people say.
  • That digital business was built largely on the company’s 2008 acquisition of the ad-technology firm DoubleClick.
  • Many of the questions center around two moves that Google has made in recent years that publishers and rivals say have helped consolidate its power.
  • The first was Google’s integration of its ad server, the leading tool for websites to put ad space up for sale, with its ad exchange, the industry’s largest digital ad marketplace.
  • The second move was Google’s decision to require advertisers to use its own tools to buy ad space on YouTube.

 

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US ECONOMY & POLITICS

U.S. Trade Deficit Narrowed in 2019 for First Time in Six Years

  • The U.S. trade deficit narrowed in 2019 for the first time in six years, as exports ticked down and Americans imported less from overseas amid trade tariffs and slower growth at home and abroad.
  • The deficit in goods and services shrank 1.7% last year to $616.8 billion, the first decline since 2013, according to Commerce Department data released Wednesday.
  • The deficit in goods shrank 2.4% last year to $886.0 billion.

U.S. Private Sector Added 291,000 Jobs in January

  • The nonfarm private sector in the U.S. added 291,000 jobs in January, topping economists’ expectations according to the ADP National Employment Report.
  • Economists were anticipating the nonfarm private sector to add 150,000 jobs in January.
  • The January jobs report from the Labor Department will be released Friday.
  • Economists are expecting 158,000 new jobs and for the unemployment rate —which was at 3.5% for December—to stay the same.

Buttigieg, Sanders Take Lead as Iowa Results Remain in Flux

  • After a day of confusion and recriminations over a technical mishap that snarled the vote count, the first wave of delayed results from Iowa’s presidential caucuses showed Pete Buttigieg and Sen. Bernie Sanders at the top of the Democratic pack.
  • With 71% of precincts reporting, Mr. Buttigieg had the largest share of delegates to the state party convention, while Mr. Sanders had the second most. But Mr. Sanders led in the raw vote so far, followed by Mr. Buttigieg.
  • Ms. Warren and Mr. Biden were third and fourth, respectively, in both counts.
  • Though the state’s population is small and not very diverse, Iowa’s caucuses have had a reasonably good record in recent history of picking the eventual winner of the Democratic nomination: Al Gore in 2000, John Kerry in 2004, Barack Obama in 2008 and Hillary Clinton in 2016.

Trump Touts Economy, Ignores Impeachment in State of the Union Speech

  • With his anticipated acquittal in his impeachment trial a day away, President Trump used his annual State of the Union address Tuesday to paint an optimistic picture of the country’s future and tout the strong economy nine months before Election Day.
  • During the speech, Republicans repeatedly jumped to their feet and cheered, and Democrats sat stone-faced, standing rarely.
  • A few Democrats walked out of the State of the Union speech early.
  • At the end of the address, Mrs. Pelosi tore her copy of the president’s speech in half.
  • In the speech, Mr. Trump focused on election themes, such as his plans for health care, the impact of economic growth on the middle class and the wall along the southern border.

Senate Expected to Vote to Acquit Trump on Impeachment

  • The Senate is expected to acquit President Trump on charges of abuse of power and obstruction of Congress on Wednesday, bringing to a close the third impeachment trial in U.S. history and one that began with virtually no chance of conviction.
  • The vote in the Republican-controlled chamber concludes a turbulent inquiry upended late last month by new revelations from former national security adviser John Bolton about the president’s pressure campaign on Ukraine.
  • The vote is expected to fall well short of the two-thirds threshold needed to remove the president from office.
  • Republicans are watching to see if Sens. Joe Manchin of West Virginia, Doug Jones of Alabama and Kyrsten Sinema of Arizona, all Democrats who represent states that Mr. Trump carried in 2016, join them in voting to acquit Mr. Trump.

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EUROPE & WORLD

Siemens hit by industrial slowdown and energy problems

  • German engineering company Siemens, hit by a global slowdown in power and gas and among industrial customers, said on Wednesday it missed forecasts for first-quarter sales and profit in what its chief executive called a “slow start to the year”.
  • Revenue rose slightly to 20.32 billion euros, undershooting estimates for 20.63 billion euros.
  • During the first quarter, Siemens’s industrial operating profit fell 30% to 1.43 billion euros ($1.58 billion), missing analyst forecasts for 1.88 billion euros in a consensus gathered by the company.
  • Still, the company confirmed its guidance of full year earnings per share in the range of 6.30 to 7.00 euros after posting 1.33 euros during the first quarter.

ABB braces for hit from coronavirus outbreak in China

  • Swiss engineering company ABB is going to take a hit from the coronavirus outbreak in China, where it generated around 15% of its sales last year, Chief Executive Peter Voser said on Wednesday.
  • Sales dropped 2% on a comparable basis to $7.07 billion, missing forecasts of $7.14 billion.
  • Orders rose a comparable 1% to $6.9 billion.
  • Fourth-quarter net profit rose 3% to $325 million, beating estimates of $230 million despite a slowdown in industrial demand.
  • ABB’s factories in China — where it has 20,000 workers — have been shut down in line with government guidance, but ABB has not evacuated staff, Voser said.
  • It has restricted travel to China and Hong Kong to essential business, and employees are subject to a 14-day quarantine before returning to work.

Infineon yet to feel coronavirus impact as demand outlook lifts shares

  • Germany’s Infineon Technologies said on Wednesday that the coronavirus outbreak had not yet had an impact on its operations as it reassured investors that demand was steadying after a cyclical downturn, boosting its shares.
  • The company said its first-quarter revenue fell 7% on a sequential basis while the segment margin was boosted to 15.5% by one-off items.
  • For the fiscal second quarter, Infineon forecast quarter-on-quarter revenue growth of 5%, plus or minus 2 percentage points, and a segment result margin of around 14%
  • Infineon confirmed its guidance for the fiscal year, saying it expects revenue to grow by 5% while segment margin – the key measure of profitability targeted by management – would come in at 16%.
  • Infineon also said it expected its $10 billion takeover of Cypress Semiconductor to close around the end of the current quarter.

Vodafone to remove Huawei from core of European network

  • Vodafone will remove Huawei technology from the core of its European networks following Britain’s decision to restrict the Chinese company’s role in 5G and new EU guidelines on the firm’s equipment, Chief Executive Nick Read said.
  • Britain last month allowed Huawei a limited role in new mobile networks – defying U.S. pressure for an outright ban on security grounds – but excluded it from the core and imposed a 35% cap in the less-sensitive radio network.
  • Read said Vodafone would only have to make minor adjustments to comply with the rules in Britain, where it has not deployed Huawei in its core.

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TODAY in HISTORY

  • FDR proposed increasing the number of Supreme Court justices—”packing” the court. (1937)

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