US FINANCIAL MARKET
U.S. Stocks Rise as Coronavirus Worries Abate
- U.S. stocks climbed to new highs Wednesday as investors watched for clues about the path of monetary policy in Federal Reserve Chairman Jerome Powell’s second day of testimony before Congress.
- Mr. Powell previously said the U.S. central bank is monitoring disruption from the coronavirus in China and focusing on effects on the U.S. economy.
- He said it was too early to tell if the outbreak would change the Fed’s view that interest rates are at an appropriate level.
- China on Wednesday reported its lowest number of new coronavirus cases since January, lending weight to a prediction by its top medical adviser for the outbreak to end by April.
- However, it was still unclear to what extent economic growth would take a hit from the virus that has killed more than 1,100 people, shuttered businesses in China and briefly disputed global stock market rally in the past weeks.
- The benchmark S&P 500 has climbed nearly 5% from late January lows, as largely positive fourth-quarter earnings, encouraging U.S. economic data and stimulus from China spurred demand for risk despite concerns about the virus outbreak.
- A mostly upbeat fourth-quarter earnings season is beginning to wind down, with 337 S&P 500 companies having reported.
- Of those, 70.9% have surpassed profit expectations, according to IBES data from Refinitiv.
- Lyft slid 8.5% as the ride-hailing company forecast slower revenue growth for the year.
Lyft’s Net Loss Widens as It Focuses on Profitable Growth
- Lyft on Tuesday forecast slower revenue growth in the new year and the company refused to match larger rival Uber, which recently moved up a key profit target by a year, sticking to its later date of projected profitability.
- Lyft reported revenue of $1.02 billion in the fourth quarter, up 52% and ahead of analysts who expected $984 million in revenue.
- The company said it had 22.9 million active riders through Dec. 31, earning on average $44.40 from each rider.
- For the quarter, the company’s net loss widened to $356 million, bringing its losses for the year to $2.6 billion. That compares with a loss of $911 million in 2018.
- Lyft said it expects 2020 full-year revenue of $4.575 billion to $4.65 billion.
- The company said it expects an adjusted EBITDA loss of between $450 million and $490 million for all of 2020.
CVS Turns Quarterly Profit, Posts Higher Revenue
- CVS Health on Wednesday reported a quarterly profit compared with a year-ago loss, which included a $2.2 billion charge, with the latest quarter benefiting from its Aetna health insurance business.
- CVS said its revenue rose 22.9% to $66.89 billion from the same period the year before. Analysts were targeting $63.93 billion.
- The company’s health-care-benefits business, which includes Aetna, posted revenue of $17.15 billion, up nearly threefold from the prior year.
- Its business that offers pharmacy–benefit services to employers, health plans and employee groups had $37.07 billion in revenue for the quarter, up from $34.9 billion in the prior year.
- Revenue in its retail segment, which fulfills prescription medications and sells a range of merchandise, was $22.58 billion, up from $22.03 billion in the year-ago period.
- Net income came in at $1.75 billion in the fourth quarter, compared with a loss of $419 million a year ago.
- For 2020, CVS expects per-share earnings from continuing operations of $5.47 to $5.60, or $7.04 to $7.17 on an adjusted basis. It sees operating income of $12.8 billion to $13 billion, or $15.5 billion to $15.8 billion on an adjusted basis.
Bed Bath & Beyond Warns on Holiday Sales
- Shares of Bed Bath & Beyond were on pace for their worst day ever on Wednesday, as disappointing sales numbers raised concerns on Wall Street that the retailer’s turnaround would take longer and be much tougher than anticipated.
- The home-goods retailer said same-store sales fell 5.4% for the first two months of its fiscal fourth quarter.
- Bed Bath & Beyond attributed the decline to lower store foot traffic, inventory management problems and higher markdowns.
- Bed Bath & Beyond’s warning of a torrid final quarter comes just a little over a month after it withdrew its forecast for fiscal 2019.
Shopify forecasts full-year revenue above estimates, shares rise
- e-commerce company Shopify on Wednesday posted better-than-expected quarterly earnings, helped by higher holiday sales, and forecast full-year revenue above Wall Street estimates, sending its U.S.-listed shares up about 9%.
- The company’s total revenue jumped 47% to $505.2 million from $343.9 million a year earlier, beating estimates of $482.5 million.
- The company posted net income of $771,000 for the quarter, compared with net loss of $1.5 million a year earlier.
- For full year 2020, it forecast revenue in a range of $2.13 billion to $2.16 billion, above estimateS of $2.11 billion.
Boeing sees airline profits hit, stagnant air cargo market due to virus
- The global air cargo industry is unlikely to grow this year because of the challenges in the China market due to the coronavirus, a senior executive at Boeing said on Wednesday.
- Boeing previously forecast air freight would grow by 1% to 2% this year due in part to the United States and China forging an interim trade deal, said Randy Tinseth, vice-president of marketing at Boeing Commercial Airplanes.
- The coronavirus crisis has dimmed hopes of a rebound for air cargo after its worst year in the decade since the financial crisis, the International Air Transport Association, a group of 280 global airlines, said last week.
- Travel restrictions to and from China and a more than two-thirds drop in capacity offered by Chinese airlines will hit airline revenues, said Ihssane Mounir, the planemaker’s senior vice president of commercial sales & marketing.
US ECONOMY & POLITICS
U.S. Officials Say Huawei Can Covertly Access Telecom Networks
- U.S. officials say Huawei can covertly access mobile-phone networks around the world through “back doors” designed for use by law enforcement, as Washington tries to persuade allies to exclude the Chinese company from their networks.
- Intelligence shows Huawei has had this secret capability for more than a decade, U.S. officials said.
- When telecom-equipment makers sell hardware such as switching gear, base stations and antennas to cellphone carriers—which assemble the networks that enable mobile communication and computing—they are required by law to build in ways for authorities to tap into the networks for lawful purposes.
- These companies also are required to make sure they themselves can’t gain access without the consent of the network operator.
- U.S. officials said Huawei has built equipment that secretly preserves its ability to access networks through these interfaces, without the carriers’ knowledge.
- “We have evidence that Huawei has the capability secretly to access sensitive and personal information in systems it maintains and sells around the world,” national security adviser Robert O’Brien said.
Credit-Card Debt in U.S. Rises to Record $930 Billion
- Credit-card debt rose to a record in the final quarter of 2019 as Americans spent aggressively amid a strong economy and job market, and the proportion of people seriously behind on their payments increased.
- Total credit-card balances increased by $46 billion to $930 billion, well above the previous peak seen before the 2008 financial crisis, according to data released by the Federal Reserve Bank of New York on Tuesday.
- The proportion of credit-card debt in serious delinquency, meaning payments were late by 90 days or more, rose to 5.32% in the fourth quarter, the highest level in almost eight years, from 5.16% in the third quarter.
- Total household debt increased 1.4% to a record $14.15 trillion in the fourth quarter from the third.
Work Stoppages Reach Highest Level in Nearly Two Decades
- U.S. corporations accelerated deductions and deferred income to maximize the benefits of the 2017 tax-rate cut, contributing to a large temporary drop in federal corporate-tax revenue in 2018, according to newly released data.
- Labor unrest reached its highest level in nearly two decades with 25 labor-related work stoppages—including strikes and lockouts—involving 1,000 or more workers in 2019, the Labor Department said Tuesday.
- Labor disputes tend to increase when the job market is tight and workers feel they have more leverage; the unemployment rate fell to a half-century low in 2019.
- The total number of strikes last year was small compared with the hundreds that occurred annually in the 1960s and 70s.
Bernie Sanders Wins New Hampshire Primary
- Sen. Bernie Sanders won the New Hampshire Democratic presidential primary Tuesday night in a narrow victory that ensures the race to challenge President Trump this November will remain heated.
- With more than 85% of precincts reporting, Mr. Sanders, who is from neighboring Vermont, had 25.7% of the vote, followed by Pete Buttigieg with 24.4% and Sen. Amy Klobuchar of Minnesota with 19.7%.
- Elizabeth Warren and Joe Biden, who each have led the field in national polling, lagged with less than 10% of the vote.
- The crowded Democratic field also narrowed as results were coming in, with Colorado Sen. Michael Bennet and entrepreneur Andrew Yang both ending their bids.
- Exit polls released by television networks indicated that nearly half—48%—of New Hampshire voters surveyed made their decision within the past few days, another indication of a dynamic electorate.
EUROPE & WORLD
SoftBank profit wiped out by Vision Fund losses, second fund scaled back
- Quarterly profit at SoftBank was almost wiped out as the Japanese technology giant was hit for a second straight quarter by losses at its $100 billion Vision Fund.
- Group profit was 2.6 billion yen ($24 million) in the October-December quarter versus 438 billion yen a year before.
- The Vision Fund posted an operating loss of 225 billion yen ($2.05 billion) for the quarter compared with a 176 billion yen profit in the same period a year earlier.
- The Vision Fund said it had invested $74.6 billion in 88 companies as at the end of December, when those investments were worth $79.8 billion.
No coalition without Merkel, say German Social Democrats
- Germany’s Social Democrats (SPD) signaled on Wednesday they could quit their coalition with Angela Merkel’s conservatives if she is forced out as chancellor, piling pressure on their partners to avoid a snap election as they pick a new leader.
- After Merkel’s protegee Annegret Kramp-Karrenbauer gave up her ambitions for the top job on Monday, the Christian Democrats (CDU) are embarking on choosing a new leader and chancellor candidate for the next federal election due by Oct. 2021.
- The possibility of having a rival as party leader while she remains chancellor may be unworkable and force Merkel, who will not seek re-election after leading Europe’s biggest economy for around 15 years, to stand down early.
- This could trigger an early election, not least because the SPD have made clear their coalition deal is only with Merkel.
China’s new coronavirus cases drop, world still scared
- China reported on Wednesday its lowest number of new coronavirus cases in two weeks, bolstering a forecast by Beijing’s senior medical adviser for the outbreak in the country to end by April – but fears of further international spread remained.
- The 2,015 new confirmed cases took China’s total to 44,653. That was the lowest daily rise since Jan. 30 and came a day after epidemiologist Zhong Nanshan said the epidemic should peak in China this month before subsiding.
- China’s latest figures also showed that the number of deaths on the mainland rose by 97 to 1,113 by the end of Tuesday.
TODAY in HISTORY
- The Utah Territory granted women the right to vote (revoked in 1887). (1870)
- Pu Yi, the last emperor of the Manchu (Ch’ing) dynasty in China, renounced his throne following the establishment of a republic under Sun Yat-sen. (1912)
- The Senate voted to acquit President Clinton on charges of perjury and obstruction of justice. (1999)
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