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S&P 500, Nasdaq Notch New Records on Optimism Coronavirus May Plateau Soon

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US FINANCIAL MARKET

S&P 500, Nasdaq Notch New Records on Optimism Coronavirus May Plateau Soon

  • The S&P 500 and the Nasdaq indexes hit record highs on Tuesday as a top Chinese health adviser sparked expectations that the coronavirus outbreak may be peaking, while T-Mobile shares jumped after a federal judge approved its purchase of Sprint.
  • T-Mobile climbed 11.2% to the top of the benchmark S&P 500, while Sprint shares surged 73.8%.
  • After more than 1,000 deaths and weeks of uncertainty that roiled global financial markets, China’s foremost medical adviser on the epidemic said infections may be over by April, with the number of new cases already declining in some places.
  • While concerns about the widespread transmission of the virus to other countries including the U.S. and U.K. remain, the number of confirmed infections inside China rose by 400 to 42,700 Tuesday, the smallest one-day increase in cases since Jan. 24.
  • However, the hit to the world’s second-largest economy was still unclear as factories struggled to resume production after an extended holiday.
  • Federal Reserve Chair Jerome Powell was fairly upbeat about the outlook for the U.S. economy in his prepared remarks to Congress on Tuesday, but cited a potential threat from the coronavirus outbreak.
  • The fourth-quarter earnings season has been largely upbeat, with about 71% of the 324 S&P 500 companies that have reported beating profit estimates.
  • Hasbro rose 2% on better-than-expected profit, but Under Armour tumbled 16.2% after it forecast a surprise drop in 2020 revenue.

Under Armour shares drop after surprise profit decline warning for 2020

  • Under Armour forecast a surprise drop in 2020 profit, blaming ongoing weakness in its North American business and the coronavirus outbreak in China, sending its shares tumbling as much as 16%.
  • For the fourth quarter, net revenue rose 3.7% to $1.44 billion, but missed estimates of $1.47 billion.
  • The company reported a net loss of $15.3 million compared with a gain of $4.2 million during the previous year’s fourth quarter.
  • In 2020, total revenue is expected to be down at a low single-digit percent compared with last year’s results, reflecting North America to decline at a mid- to high-single-digit rate while it expects international sales to grow in the low double-digits.
  • The company announced another restructuring program for 2020 that will result in up to $425 million in charges, including potentially abandoning plans to open a flagship store in New York City.
  • The company said the coronavirus outbreak in China, which has killed more than a thousand people and forced several retailers to close and revise their forecasts, would have a $50 million to $60 million hit on first-quarter sales.

Lightsabers and princesses star in toymaker Hasbro’s holiday quarter

  • Stormtroopers, lightsabers and Elsa dolls powered Hasbro’s holiday-quarter profit as toy demand was spurred by the release of new Star Wars and Frozen movies, sending the company’s shares 7% higher.
  • Net revenue rose 2.8% to $1.43 billion, marginally missing estimates of $1.44 billion.
  • Revenue from Hasbro’s partner brands unit, which includes sales of toys based on the Star Wars and Frozen movies, rose nearly 50% to $408.5 million in the fourth quarter.
  • Net income rose to $267.3 million in the quarter, bumped up by $102.5 million in foreign currency gains.

T-Mobile, Sprint Deal Wins Approval, Reshaping Industry

  • A judge’s approval of T-Mobile’s takeover of Sprint will usher in a new balance of power in the U.S. wireless market and test whether three giants will compete as aggressively for cellphone users as four unequal players once did.
  • U.S. District Judge Victor Marrero concluded the deal, worth $26 billion when it was struck two years ago, wasn’t likely to substantially lessen competition, and rejected the main arguments by a group of states seeking to block the deal as anticompetitive.
  • The judge said the cellphone business was more dynamic than other markets, adding that current features and standards “may be considered outmoded and unmarketable in the not-too-distant future, much like brick phones of not too long ago, and the flip phones that replaced them.”
  • Sprint shares jumped nearly 75%, recouping roughly $14 billion of market value.

Amazon Seeks to Question Trump Over Pentagon Contract

  • Amazon.com asked a judge to allow it to depose President Trump in the company’s legal battle to overturn a Pentagon decision awarding a huge cloud-computing contract to rival Microsoft.
  • The Amazon motion, made public Monday, says that Mr. Trump’s bias against Amazon founder and CEO Jeff Bezos “is a matter of public record.
  • The Defense Department said it “remains confident in the JEDI award. Our team’s duty and sole focus must remain on equipping our warfighters for an increasingly complex and challenging battlefield environment.”
  • The contract is valued at as much as $10 billion over the next decade.

FAA says approaching 737 MAX test flight, awaits Boeing proposals

  • The U.S. Federal Aviation Administration is narrowing the issues needed before it can conduct a certification test flight on the grounded Boeing 737 MAX, but will not commit to a timetable for lifting a flight ban, its top official said.
  • “We are following a very diligent process and it is important that we stay focused on the process and not on the timeline,” FAA Administrator Steve Dickson told reporters.
  • The certification flight to be carried out by FAA pilots “is not scheduled yet because we still have a few issues to resolve, but we continue to narrow the issues. We are waiting for proposals from Boeing on a few items,” he added.
  • Dickson said he expected close technical alignment between global regulators over the criteria for reversing the grounding, when the time for that decision comes, but noted there could be differences in how the jet is put back to service worldwide.

Pratt & Whitney says Korean Air orders its engines for up to 50 A321neos

  • Korean Air Lines has ordered Pratt & Whitney engines to power up to 50 Airbus A321neo jets for delivery from 2021, the enginemaker said on Tuesday.
  • Pratt, owned by United Technologies, said it was also in talks with Korean Air’s engineering division about joining the enginemaker’s maintenance, repair and overhaul network for the engines.

JPMorgan in talks to merge blockchain unit Quorum with startup ConsenSys – sources

  • JPMorgan Chase is in talks to merge its marquee blockchain unit Quorum with Brooklyn-based startup ConsenSys, according to people familiar with the plans.
  • The deal is likely to be formally announced within the next six months, but financial terms are still unclear, the people said.
  • JPMorgan built the Quorum blockchain internally using the ethereum network, the software that underpins ether, one of the most well known cryptocurrencies.
  • It is being used by JPMorgan to run the Interbank Information Network, a payments network that involves more than 300 banks.
  • JPMorgan also said it would use Quorum to issue a digital currency called JPMorgan Coin that it designed to make instantaneous payments using blockchain.

 

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US ECONOMY & POLITICS

Fed’s Powell says economy ‘resilient,’ but warns on coronavirus, productivity

  • Federal Reserve Chair Jerome Powell was fairly upbeat about the outlook for the U.S. economy in the first of his twice-a-year updates to Congress on Tuesday, but he cited a potential threat from the coronavirus in China and concerns about the economy’s long-term health.
  • His remarks echoed the formal report the Fed submitted to Congress on Friday, which repeated the central bank’s view that its current target range for short-term borrowing costs, between 1.50% and 1.75%, is “appropriate” to keep the expansion on track.
  • That report, in turn, largely tracked the policy statement from the Fed’s policy meeting last month.
  • With risks like trade policy uncertainty receding and global growth stabilizing, Powell signaled he sees no reason to adjust U.S. interest rates unless new developments cause a “material reassessment” to the current outlook.

U.S. job openings drop to two-year low in December

  • U.S. job openings dropped to a two-year low in December, while hiring increased marginally, suggesting a recent acceleration in job growth was unlikely to be sustained.
  • Job openings, a measure of labor demand, decreased 364,000 to 6.4 million, the lowest reading since December 2017, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS, on Tuesday.
  • The second straight monthly decline in job openings followed a 574,000 plunge in November, which was the biggest drop since August 2015.
  • The job openings rate declined to 4.0% in December from 4.3% in November.
  • Hiring rose to 5.9 million in December from 5.8 million in November.
  • The hiring rate edged up to 3.9% in December from 3.8% in the prior month.

U.S. Evacuee from Wuhan Tests Positive for Coronavirus, After a Misstep

  • A passenger on a U.S.-chartered flight out of Wuhan became the first to test positive for the coronavirus among those evacuated from the center of the outbreak, while in China the highest-level officials yet were removed for the handling of a crisis that has killed more than 1,000 people.
  • In San Diego, a female passenger who arrived on an evacuation flight to a military base there tested positive after developing a cough and being taken to a hospital—but not before initially being given a negative result and being allowed to return to the quarantine compound alongside other evacuees.
  • The botched result calls into question the reliability of tests that have been used in diagnosing cases around the world, and the handling of the hundreds of Americans and their family members who have been ferried back to the U.S.

U.S. companies cut back on installing robots in 2019

  • U.S. companies installed fewer robots in 2019 than they did the year before, the first cut back since 2015, as a downturn in manufacturing fueled by trade wars and weaker demand dampened appetite for the machines.
  • Shipments fell to 23,758, a more than 16% drop, according to data seen by Reuters that was set for release on Tuesday by the Association for Advancing Automation, an industry group based in Ann Arbor, Michigan.
  • Robot shipments also fell in Mexico last year, declining 25% to 3,263, while shipments in Canada roughly held steady at just over 3,000 units.
  • Orders for new robots in North America, a separate measure that gives a sense of how many machines will be installed in future months, increased last year by 1.6% to 29,988 unit.

Bernie Sanders Leads in Polls as New Hampshire Primary Voters Cast Ballots

  • New Hampshire voters will cast their ballots in the nation’s first Democratic presidential primary on Tuesday as polls show Sen. Bernie Sanders is looking to take the upper hand in the crowded contest for the party’s nomination.
  • Mr. Sanders also got a boost Monday with the release of a Quinnipiac University poll showing him atop the field nationally, leading former Vice President Joe Biden by 8 percentage points.
  • Sen. Amy Klobuchar of Minnesota, who had a strong debate performance last week, leapfrogged Ms. Warren and Mr. Biden into the third position in two late polls of New Hampshire voters released on Sunday.

Trump’s $4.8 trillion budget gets chilly reception from Congress

  • President Donald Trump’s $4.8 trillion budget plan for the coming fiscal year drew a prompt rejection on Monday from congressional Democrats, who said it betrayed his promise to protect popular health and safety-net programs.
  • Democrats said Trump’s proposal upended his promise in last week’s State of the Union speech to “always protect” the popular Social Security pension plan and the Medicare health plan for seniors.
  • Trump’s budget would reduce Medicare spending by lowering drug costs and tightening eligibility requirements for Social Security’s disability program.
  • It also would enact new work requirements for people who get food stamps or use the Medicaid health plan for the poor.

Trump Wants to Double Spending on AI, Quantum Computing

  • The White House on Monday proposed roughly doubling nondefense research-and-development spending on artificial intelligence and quantum information sciences, citing fierce global competition, while cutting overall funding for R&D.
  • Under the proposal, the government’s overall R&D spending would decline to $142.2 billion from an estimated $156 billion in fiscal 2020, according to a White House budget document.
  • Within the next two years, annual spending on AI would rise to more than $2 billion and funding for quantum computing would increase to $860 million, according to the White House plan.
  • The proposed increases in AI spending include more than $850 million at the National Science Foundation, $125 million at the Department of Energy’s Office of Science and $100 million at the Agriculture Department, among other agencies.

Trump budget proposes $150 million for creation of uranium reserve

  • President Donald Trump’s 2021 budget proposed $150 million for the creation of a U.S. uranium reserve as the administration seeks to help struggling producers of the fuel for nuclear power reactors.
  • The money, if approved by Congress, would begin the process of purchasing uranium, Energy Secretary Dan Brouillette told reporters in a teleconference on the Energy Department’s budget.
  • Brouillette also said the budget represents a push by Trump to challenge the global expansion of nuclear power development by Chinese and Russian companies.
  • Since 2013, nearly 10 U.S. nuclear power plants have been closed and eight more are scheduled to shut in coming years.

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EUROPE & WORLD

Daimler’s Profit Slump Pushes It to Slash Dividend

  • An unexpectedly sharp fall in profit prompted Daimler to cut its shareholder dividend by a third as the luxury car maker battles slumping demand, the escalating cost of a fundamental shift to electric vehicles and charges related to emissions-cheating probes.
  • Mercedes-Benz is readying a major push into electric and hybrid cars, with the proportion of electrified vehicles in its fleet set to jump to 9% from 2% in 2020 with production of an electric A-Class, electric van and electric SUV.
  • Daimler said that it swung to a loss of €11 million ($12 million) in the three months to December, warning it would sell fewer cars this year.
  • The results were well below analysts’ estimates and contributed to a 67% decline in full-year net profit to €2.4 billion.
  • Mercedes-Benz Cars reported a 53% decline in earnings before interest and taxes to €3.4 billion in 2019, while Daimler Trucks earnings slid 11% to €2.5 billion, and Mercedes-Benz Vans reported an EBIT loss of €3 billion.

Merkel’s conservatives set to stop short of Huawei 5G ban in Germany

  • Lawmakers from Chancellor Angela Merkel’s conservative party are set on Tuesday to back a strategy paper that stops short of banning China’s Huawei from taking part in the rollout of Germany’s 5G network.
  • The move would rebuff U.S. President Donald Trump’s calls on Washington’s allies to bar the Chinese telecoms giant from next-generation networks after Britain stopped short of an outright ban and the European Union backed a rules-based approach.
  • Leading Christian Democrat lawmakers signed off on the four-page paper on Monday evening after weeks of wrangling with hardliners who sympathize with U.S. warnings that Huawei’s gear is not safe and it is beholden to Beijing. Huawei denies this.

China’s first-quarter smartphone sales may halve due to coronavirus: analysts

  • China’s smartphone sales may plunge by as much as 50% in the first quarter, as many retail shops have closed for an extended period and production has yet to fully resume due to the fast spread of a new coronavirus, according to research reports.
  • Canalys expects China’s smartphone shipments to halve in the first quarter from a year ago, while IDC, another research firm that tracks the tech sector, forecasts a 30% drop.
  • Xiaomi, Huawei, and Oppo, three of China’s top Android brands, are all expected to announce flagship devices in the first half.

Airbus unveils ‘blended wing body’ plane design after secret flight tests

  • Airbus on Tuesday unveiled a curvaceous aircraft design that blends wing and body, designed to slash carbon emissions by some 20%.
  • The European planemaker has been carrying out flight tests of a 3.2-metre-wide (10.5 feet) technology demonstrator, code-named Maveric, at a secret location in central France since last year. It lifted the veil on the design at the Singapore Airshow.
  • The concept of a “blended wing body” design has been around since the 1940s and led to the U.S. B-2 bomber, as well as the X-48 research project between Boeing and NASA a decade ago.

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TODAY in HISTORY

  • Ayatollah Khomeini’s followers seized control of the Iran government. (1979)
  • South African resistance leader, Nelson Mandela, was released from prison after more than 27 years. (1990)

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