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US FINANCIAL MARKET | US ECONOMY & POLITICS
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DAILY MARKET REPORTS

  • U.S. stocks edged down for a third straight session Thursday as investors parsed data that showed U.S. economic growth softened in the final three months of 2018 and an early end to the U.S.-North Korea summit.
  • Gross domestic product—a measure of how much the U.S. produces in goods and services—rose at a 2.6% annual rate in October through December, better than expected.
  • Overnight, President Trump cut short a summit with North Korean leader Kim Jong Un after failing to reach an agreement on curbing North Korea’s nuclear-weapons program.
  • Investors got the strongest sign yet that a U.S.-China trade accord may be near, as U.S. Trade Representative Robert Lighthizer said Wednesday that America was abandoning for now its threat to raise tariffs to 25% on $200 billion of Chinese goods.
  • In Thursday’s action, technology stocks were among those that led U.S. losses, with HP shares tumbling 16%. The company reported earnings late Wednesday that missed sales targets for its latest quarter.
  • Meanwhile, shares of J.C. Penney surged 20% after the struggling department store’s fourth-quarter profit and revenue topped analysts’ expectations. The retailer also said it would close 18 department stores and nine home and furniture stores this year.

US FINANCIAL MARKET

HP misses revenue estimates, shares down

  • HP reported quarterly revenue that fell short of estimates, due to weaker-than-expected sales in both its personal computer and printing businesses, sending shares down 12% after hours.
  • Net revenue rose 1.3% to $14.7 billion, missing estimates of $14.86 billion.
  • Sales in the personal systems business, which accounts for more than 60% of HP’s total revenue, rose 2.3% to $9.66 billion in the first quarter, missing analysts’ average estimate of $9.74 billion.
  • The company lowered its 2019 profit forecast and now expects it in the range of $2 to $2.10 per share compared with the previous forecast of $2.04 to $2.14 per share.
  • HP reiterated its 2019 adjusted profit forecast in the range of $2.12 to $2.22 per share, but analysts were projecting the company to earn $2.20 per share.

J.C. Penney beats same-store sales forecasts, shares surge 20%

  • J.C. Penney said it would close 18 department stores and nine home and furniture stores this year, as the retailer struggles to stabilize its sales.
  • The company said Thursday that net sales fell 10% to $3.67 billion in the quarter.
  • Adjusted sales at J.C. Penney outlets open for at least 12 months fell 4%, better than forecasts of a 4.3% decline.
  • Profit in the latest quarter fell to $75 million, from $242 million a year earlier.

PG&E Records $10.5 Billion Charge Related to Camp Fire

  • PG&E on Thursday said it thinks its equipment will likely “be determined to be an ignition point” in the Camp Fire in Paradise, Calif., that killed 85 people, and recorded a $10.5 billion charge in the fourth quarter from the fire.
  • PG&E reported a loss of $6.87 billion for the fourth quarter, compared with a profit of $114 million for the fourth quarter of 2017.
  • PG&E contributed to starting 18 fires that led to 22 deaths in 2017, and the Wall Street Journal reported this week that the company delayed replacing equipment for five years on a line that is suspected of possibly being responsible for the Camp Fire.

Square forecasts first quarter profit below estimates; shares fall

  • Payments company Square on Wednesday forecast current-quarter profit well below Wall Street estimates, as it cited investments it is making in its business, sending its shares down 6% in after-hours trading.
  • Total revenue surged 51% to $932.5 million.
  • The company said Cash had more than 15 million monthly active customers in December, more than double year over year.
  • The company said its net loss widened to $28.2 million in the quarter, from $15.7 million, a year earlier.
  • For the first quarter, Square expects adjusted earnings per share of 6 cents to 8 cents, below the average estimate of 11 cents.

Box shares tumble 24% as forecast hit by slowing billings growth

  • Cloud content management platform Box’s fourth-quarter revenue and current-quarter forecast missed estimates, as the company was hurt by weaker-than-expected billings growth and sluggish additions, sending its shares down 24%.
  • Revenue rose to $163.7 million from $136.7 million, missing estimates of $164.2 million.
  • Box’s fourth-quarter billings – revenue plus the change in deferred revenue – rose 16% to $237.7 million, below the “mid 20s” growth rate that it had forecast in the third-quarter and well short of analysts’ estimates of $255.5 million.
  • Box’s net loss narrowed to $19.7 million in the quarter, from $32.7 million a year earlier.
  • The company forecast current-quarter revenue in the range of $161 million to $162 million and adjusted loss of 6 cents to 5 cents per share. Analysts were expecting revenue of $169.7 million and a loss of 1 cent per share.
  • For the full-year 2020, it forecast revenue to be in the range of $700 to $704 million, which also fell below analysts’ expectations of $732.7 million.

Apache quarterly profit beats estimates on higher Permian output

  • U.S. oil and gas producer Apache reported a better-than-expected quarterly profit on Wednesday, as the company benefited from a rise in production from its shale assets in the Permian Basin.
  • Revenue rose 11% to $1.77 billion after total production rose 10% to 482,298 boe/d in the quarter.
  • The company said net loss was $381 million for the quarter, compared with a net profit of $456 million a year earlier.

Fitbit sees current-quarter revenue below estimates, shares fall 11%

  • Wearable device maker Fitbit forecast current-quarter revenue below analysts’ estimates on Wednesday, as the company expects its average selling price to drop, sending its shares down 11% in extended trading.
  • Revenue rose marginally to $571.2 million from $570.8 million. Analysts had expected revenue of $569.3 million.
  • Fitbit sold 5.6 million devices in the quarter, beating estimates of 5 million, but average selling price decreased 2% to $100.
  • Fitbit reported a profit of $15.4 million for the quarter, compared with a loss of $45.5 million a year earlier.
  • Fitbit said it expects first-quarter revenue to be between $250 million and $268 million, below estimates of $272.3 million, and adjusted net loss per share in the range of 24 cents to 22 cents, while analysts were projecting a loss of 15 cents.

Keurig Dr. Pepper Says Coffee Brewer Sales Volume Fell

  • Keurig Dr Pepper said sales for beverages like Dr Pepper and Mott’s apple juice grew at the end of the year, but reported a drop in demand for its namesake coffee-brewing devices.
  • Overall, the company said net sales more than doubled in the fourth quarter to $2.81 billion, a gain due to its takeover of Dr Pepper Snapple last year.
  • Net sales for its coffee brewers declined 0.5% to $1.16 billion, and while consumers bought more pods, brewer performance weakened, with volumes falling almost 9%.
  • Profit fell to $266 million from $612 million the year prior, when the company recorded a tax benefit that wasn’t repeated.

Budweiser Brewer Pushes Alternative Drinks as Bud Falls Flat

  • Anheuser-Busch InBev said volumes of its flagship brands continued to decline in the fourth quarter, but that its efforts to woo drinkers with new lower-carbohydrate and lower-alcohol drinks had started to improve its overall performance in the U.S.
  • AB InBev’s revenue dropped 2.4% to $14.25 billion and net profit plunged to $457 million from $3.04 billion, which it attributed to mark-to-market losses tied to hedges and the impact of hyperinflation in Argentina among other factors.
  • On an organic basis, which strips out currency impacts, acquisitions and divestitures, and other one-time items, revenue rose 5.3% and volumes edged up 0.3%.
  • Total volumes declined 2.5% in the quarter to 14.25 million hectoliters, but North American volumes only fell 0.4%, an improvement on the 1.2% decline a year earlier.

L Brands issues weak Victoria’s Secret sales; FY forecast below estimates

  • Fashion retailer L Brands forecast 2019 earnings below estimates and reported lower quarterly sales for its Victoria’s Secret business, sending its shares down 6% in after-hours trading.
  • Net sales for the quarter rose 0.60% to $4.85 billion. Analysts had expected the company to report revenue of $4.88 billion.
  • Sales at Victoria’s Secret fell 5.14% to $2.53 billion while same-store sales declined 3% in the holiday quarter, as customers move to comfortable sports bras and bralettes.
  • Net income fell to $540.1 million in the quarter, from $664.1 million a year earlier.
  • The company expects 2019 earnings per share to be between $2.20 and $2.60, falling short of analysts’ estimates of $2.71.

Puma Takes Premier League Champions Manchester City From Nike

  • Puma will become the official uniform supplier to reigning English Premier League champions Manchester City, taking one of soccer’s most prized assets from industry leader Nike.
  • Terms and length of the Manchester City deal, which begins with the 2019-2020 season, weren’t disclosed, though Puma Chief Executive Bjorn Gulden said the partnership was “the largest deal that we have ever done.”
  • City has been one of the most successful teams in English soccer in recent seasons, and it features some of the game’s best-known players and receives acclaim for playing an attractive, attacking style of soccer.

Celgene slumps as Bristol-Myers shareholder resists merger

  • Activist investor Starboard Value will vote against Bristol-Myers Squibb’s $74 billion acquisition of Celgene, the hedge fund said on Thursday, the latest shareholder to come out against what would be the pharmaceutical world’s biggest ever takeover.
  • In a letter to Bristol-Myers shareholders here, Starboard called the deal “poorly conceived and ill-advised” and said the company’s board should be open to evaluating all alternatives, including a sale of the company.
  • Starboard’s letter comes a day after Wellington Management, which owns nearly 8% of Bristol-Myers, said the buyout was too risky and expensive.

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US ECONOMY & POLITICS

U.S. Economy Grew 2.6% in the Fourth Quarter

  • Gross domestic product, a broad measure of the goods and services produced across the U.S., rose at a 2.6% annual rate in October through December, adjusted for seasonality and inflation, better than the expected 2.2% reading.
  • Comparing total output of 2017 to total output of 2018, GDP grew 2.9% last year, matching a rate last seen in 2015.
  • Consumer spending, which accounts for more than two-thirds of the economy, rose at an inflation-adjusted, annualized rate of 2.8% in the fourth quarter, pulling back from the third quarter when it rose at a 3.5% rate.
  • Nonresidential fixed investment—which reflects spending on software, research and development, equipment and structures—advanced at a 6.2% rate, a pickup from a 2.5% rise in the third quarter.
  • Exports rose at a 1.6% rate in the fourth quarter, after a 4.9% decline in the third. The Commerce Department attributed the upturn to petroleum and capital goods exports.
  • Still, the modest increase in exports was outpaced by the increase in imports, which rose at a 2.7% rate, making foreign trade a slight drag on growth in the fourth quarter.

 

Chicago PMI surges in February as new orders jump

  • The Chicago PMI surged 8 points to a reading of 64.7 in February, MNI Indicators said Thursday.
  • That’s the largest monthly rise since February 2017.
  • Any reading over 50 indicates improving conditions.
  • The new orders component rose 15.2 points.

U.S. Jobless Claims Rose in Mid-February

  • Initial jobless claims, a proxy for layoffs, rose by 8,000 to a seasonally adjusted 225,000 in the week ended Feb. 23.
  • Economists expected 220,000 new claims last week.
  • The four-week moving average of claims, a steadier measure, declined to 229,000.
  • Thursday’s report showed the number of claims workers made for longer than a week increased by 79,000 to 1,805,000 in the week ended Feb. 16.

U.S. Drops Threat of 25% Tariffs on Chinese Goods in Sign That Accord Is Near

  • In the strongest sign yet that an accord is near, U.S. Trade Representative Robert Lighthizer said Wednesday that the U.S. was abandoning for now its threat to raise tariffs to 25% on $200 billion of Chinese goods.
  • His comments came following a House Ways and Means Committee meeting where Mr. Lighthizer said that the U.S. and China have reached a tentative agreement on a mechanism to enforce the trade deal, which has long been a stumbling block in talks.
  • He said a deal with China would allow the U.S. to use tariffs to enforce a deal, only after a series of consultations with Beijing.
  • But if the talks fail to resolve the issues, the U.S. would impose tariffs—essentially what experts call a “snap-back” provision.

Trump, North Korea’s Kim End Nuclear Summit Early Without Agreement

  • President Trump and North Korean leader Kim Jong Un failed to reach an agreement at a second summit aimed at curbing North Korea’s nuclear program, with Washington saying Pyongyang sought sanctions relief without offering enough in return.
  • Mr. Trump said Mr. Kim was prepared to dismantle the North’s Yongbyon nuclear complex, the site of a reactor and plutonium-reprocessing plant, if the U.S. would agree to ease sanctions.
  • But Washington wanted any deal to include other parts of the North’s nuclear program, Mr. Trump said, including undeclared sites for producing highly enriched uranium.
  • “Basically, they wanted the sanctions lifted in their entirety and we couldn’t do that,” Mr. Trump said. “I just felt it wasn’t good enough,” he said of the Yongbyon offer. “We had to have more.”

Michael Cohen Details Allegations of Trump’s Role in Hush-Money Scheme

  • President Trump and his company’s chief financial officer coordinated with Michael Cohen to pay for the silence of a porn star and conceal Mr. Trump’s role in the deal, using sham invoices to cover it up, Mr. Cohen alleged in testimony to the House Oversight Committee.
  • As part of his testimony on Wednesday, Mr. Cohen showed lawmakers an Aug. 1, 2017, check to him signed by President Trump, and another signed by his son Donald Jr. and Allen Weisselberg, the Trump Organization’s CFO.
  • He said they were related to the $130,000 payment he made to conceal an alleged sexual encounter between Mr. Trump and Stephanie Clifford, the porn star known as Stormy Daniels.
  • Mr. Cohen also alleged that Mr. Trump knew in advance of WikiLeaks’ plans to release Democratic emails during the 2016 campaign, but stated that he did not believe there was collusion with the Kremlin.

Trump Inaugural Committee Receives Subpoena from D.C. Attorney General

  • The D.C. attorney general’s office has subpoenaed President Trump’s inaugural committee for documents related to an investigation into whether the fund’s spending was “wasteful, mismanaged” or “improperly provided private benefit.”
  • The subpoena, reviewed by The Wall Street Journal, is the third such request to the committee, which is also the subject of investigations by the Manhattan U.S. attorney’s office and the New Jersey attorney general.
  • D.C. Attorney General Karl Racine’s subpoena appears more narrowly focused than the other two subpoenas the committee has received, signaling an interest by investigators into dealings between the inaugural committee and Mr. Trump’s family business.

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EUROPE & WORLD

China’s Factory Activity at Lowest Level in Three Years

  • Activity in China’s critical manufacturing sector fell to its lowest level in three years in February, weighed on by weak global demand and the long Lunar New Year holiday.
  • China’s official manufacturing purchasing managers index in February dropped to 49.2 from 49.5 in January, data showed.
  • A component measuring new export orders—an indicator of external demand for Chinese goods—decreased to 45.2 from 46.9 in January. February’s reading of the subindex is the lowest since late 2011.
  • A subindex for production fell to 49.5 in February from 50.9 in January, dropping below 50 for the first time since January 2009.
  • The official nonmanufacturing PMI, which covers construction and service sectors, fell to 54.3 in February from January’s 54.7.

JD.com shares jump on upbeat sales performance

  • JD.com, China’s second largest e-commerce firm, reported a 22.4% jump in quarterly sales on Thursday, beating estimates on the back of robust retail sales and sending its U.S.-listed shares up 13.8% in pre-market trade.
  • The results, however, still represent the company’s slowest quarterly revenue growth rate since its 2015 initial public offering, as an economic slowdown hits China’s top ecommerce companies.
  • JD.com posted a net loss of 3.32 yuan per American depository share, compared with a loss of 0.64 yuan a year earlier.
  • Full year revenue for 2018 was 462.02 billion, up 27.5% from 362.3 billion in 2017, beating analyst expectations and China’s wider internet industry, which has seen full-year revenue rise on average 20.3%, according to China’s industry ministry.
  • JD.com forecast March quarter revenue between 118 and 122 billion yuan, versus estimates of 119.48 billion yuan.

BA owner IAG reassures with earnings, orders 18 Boeing jets

  • British Airways owner IAG weathered rising fuel costs and air traffic control disruption to just beat expectations for its 2018 results on Thursday, and said it would order 18 Boeing 777-9 planes.
  • IAG said passenger revenue rose 6.2% across the group in 2018, with passenger unit revenue up 2.4%.
  • IAG reported a 9.5% rise in operating profit before exceptional items for the year to Dec. 31 to 3.23 billion euros ($3.68 billion), ahead of analysts’ consensus forecast for 3.16 billion, but said there would be no growth in 2019.
  • In a separate statement, IAG said it would order 18 Boeing 777-9s and options for 24 more for British Airways to replace 14 747-400s and four 777-200s between 2022 and 2025.

ABB reports forecast-beating fourth-quarter profit as robotics shines

  • Swiss engineering company ABB reported better-than-expected earnings during its fourth quarter on Thursday in its first results since it sold its $11 billion power grids unit and launched its latest revamp to focus on digital industries.
  • ABB’s revenue rose 9% to $7.4 billion, better than forecasts for $7.3 billion when sales of power grids were removed.
  • During the fourth quarter ABB’s robotics division was the star performer, with orders and revenues both rising 11%, as automotive and rail customers bought new machinery and software.
  • ABB, whose remaining product portfolio spans factory robots to industrial drives and electric vehicle chargers, reported net profit of $317 million, beating estimates of $301 million.

Dassault Aviation eyes growth for 2019 as 2018 profits rise

  • France’s Dassault Aviation forecast higher net sales for 2019 and more orders of planes as it posted a rise in annual sales and profits that lifted its shares.
  • The maker of Rafale warplanes and Falcon business jets said its 2018 operating profits had surged 87% from the previous year to 669 million euros ($761 million), while net sales rose 4.3% to 5.08 billion euros.
  • Analysts were on average expecting operating income of 463 million euros on sales of 4.952 billion.

Carmaker Aston Martin’s adjusted pre-tax profit falls

  • Luxury British carmaker Aston Martin posted an adjusted pre-tax profit of 68 million pounds ($90 million) in 2018, a 7% fall on 2017 as it continues to invest in a series of new models and a second factory as part of its turnaround plan.
  • The automaker, which floated on the London Stock Exchange last year, reported 136 million pounds of one-off costs due to its initial public offering, pushing it to a reported pre-tax loss of 68 million pounds.

Political Scandal Worsens for Canada’s Justin Trudeau

  • A political firestorm surrounding Canadian Prime Minister Justin Trudeau became more damaging, as his ex-justice minister accused his top aides of repeatedly pressuring her to drop the prosecution of a global engineering and construction firm.
  • She said that between September and December, she and her staff had roughly 10 phone calls and 10 meetings about the matter involving SNC-Lavalin with Trudeau’s senior aides and other officials, including staff from the finance minister’s office.
  • The former justice minister recounted how senior government officials, mostly from Mr. Trudeau’s office, attempted to persuade her to order prosecutors to cut a plea deal with SNC-Lavalin, which is based in the politically important province of Quebec.
  • A plea deal would have allowed SNC-Lavalin to avoid a decadelong ban on bidding on government contracts in Canada and elsewhere. These make up a significant portion of the company’s revenue.

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TODAY in HISTORY

  • James Watson and Francis Crick described their theory that two DNA strands were coiled in a double helix. (1953)

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