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DAILY MARKET REPORTS

  • U.S. stocks rebounded Friday after slipping the past three sessions, as investors analyzed a batch of new economic data and a breakdown in conversations on denuclearization in North Korea and waited for signs about U.S.-China trade talks.
  • Americans pulled back spending sharply in December, a sign households were cautious on spending in recent months, the Commerce Department said Friday.
  • The Commerce Department also said U.S. personal income fell for the first time in more than three years in January, pointing to a moderate growth in consumer spending.
  • ISM data showed February U.S. manufacturing activity dropped to its lowest since November 2016.

US FINANCIAL MARKET

Dell beats revenue estimates in first report as public company

  • Dell topped estimates for quarterly revenue in the computer maker’s first earnings report since a return to public markets and also forecast annual revenue above estimates, lifted by demand for its servers and network devices.
  • The company posted adjusted total revenue of $24 billion, above estimates of $23.83 billion.
  • For the quarter, Dell’s net loss jumped nearly three-fold to $299 million, as operating expenses surged 13.7% to $6.78 billion.
  • Dell expects full-year 2020 revenue between $93 billion and $96 billion, above analysts’ estimate of $94.11 billion, but its expectations for annual adjusted earnings per share between $6.05 and $6.70 falls below Street estimates of $6.81.

Nordstrom profit beats Wall Street, helped by discount stores

  • Department store operator Nordstrom reported better-than-expected quarterly profit but missed Wall Street’s sales estimates, as customers bought more merchandise at its off-price stores and less at its full-price stores.
  • Total revenue fell to $4.48 billion from $4.7 billion. Analysts were expecting total revenue of $4.61 billion.
  • The retailer said same-store sales rose 0.1% in the fourth quarter, missing the 1.1% increase expected, but Nordstrom’s off-price comparable sales increased 4% in what was a bright spot for the company.
  • Nordstrom’s fourth-quarter net income rose to $248 million, compared with $151 million a year earlier.

Marriott revenue, FY forecast miss estimates on weak demand

  • Marriott missed estimates for quarterly revenue and forecast a lower-than-expected full-year profit, blaming weak demand in North America, its largest market.
  • Revenue rose to $5.29 billion from $5.25 billion. Analysts on average were expecting $5.48 billion.
  • The hotel operator’s worldwide RevPAR growth of 1.3% in the fourth quarter missed expectations of 2.04%, and its full-year worldwide revPAR forecast between 1% and 3%, from a previously announced range of 2% to 3%.
  • Net income rose to $317 million in the fourth quarter, compared with $114 million a year earlier.
  • The company expects full-year 2019 profit in the range of $5.87 to $6.10 per share, well below analysts’ estimates of $6.32.

Workday beats revenue and profit estimates on higher subscription revenue

  • Workday topped Wall Street estimates for quarterly profit and revenue as more companies signed up for the financial and human resources software maker’s cloud-based software, sending its shares up 2%.
  • Total revenue jumped 35.4% to $788.6 million, while analysts were expecting $777.4 million.
  • Subscription services revenue rose 37.5% to $673.5 million, beating estimates of $633 million, while professional revenue grew about 24% to $115.1 million, above the average estimate of $111.9 million.
  • Net loss widened to $104.4 million in the fourth-quarter, from $89.1 million a year earlier.
  • The company also raised its fiscal 2020 subscription revenue outlook and now expects revenue between $3.03 billion and $3.045 billion. Analysts were expecting $3.02 billion.

Gap to Split into Two Public Companies

  • The apparel retailer is separating the fast-growing budget brand from the rest of the business, creating two publicly traded companies.
  • The planned breakup is an acknowledgment of the two chains’ diverging fortunes and how much Gap has lost its once-powerful grip on American consumers.
  • Gap CEO Art Peck will continue to run the parent company, which will include the Gap brand, Banana Republic, Athleta, Intermix and new athletic brand Hill City. It will be renamed and have about $9 billion in annual revenue.
  • Old Navy CEO Sonia Syngal will run the newly separated company, which generates about $8 billion in annual revenue.

Tesla Shifts to Online Sales Model

  • Tesla said it would begin shutting stores and move to selling vehicles only over the internet, an extraordinary step aimed at cutting costs so the company can offer its Model 3 compact at a long-awaited starting price of $35,000.
  • Lowering the price to $35,000—a key part of the Silicon Valley company’s effort to become a mainstream auto maker—is a goal Tesla has discussed for years and repeatedly delayed, but the shift in its sales strategy was a surprise.
  • Tesla said its sales change is essential to meet its price goal. “To achieve these prices while remaining financially sustainable, Tesla is shifting sales world-wide to online only,” it said in a blog post.
  • Tesla said the $35,000 version of the Model 3 has a 220-mile range and can go from zero to 60 in 5.6 seconds.

Tesla Faces Record $920 Million Payment for Convertible Bond

  • Tesla is scheduled to deliver its largest-ever bond payment Friday, a move that will likely use up nearly a quarter of its cash at a time when the company faces increasing scrutiny from regulators and investors.
  • The electric car maker had issued $920 million in convertible, senior notes five years ago, a period when rapid growth and optimism around its Model S electric car drove a furious rally in Tesla shares.
  • Reflecting that, the strike price for the notes, or the level at which the notes would be fulfilled by a conversion into Tesla stock, was $359.87 a share, or 42.5% above the level at that time.
  • Yet because shares closed at $319.88 Thursday, Tesla will have to make good on its obligation using cash which will wipe out a substantial portion of the $3.69 billion in unrestricted cash and equivalents the company reported at the end of 2018.

EBay Plans Strategic Review of Assets

  • EBay will review the company’s operations and assets and add two directors to its board, with a third new member to be added later in 2019, as the company has entered into agreements with activist investors Elliott Management and Starboard Value.
  • The company said Friday it has entered into agreements with affiliates of both activist firms. Elliott’s affiliates have an economic interest of over 4% in the company while Starboard’s affiliates have an economic interest of about 1%, eBay said.
  • The company said that management is going to lead the operating review of the company, which its board will oversee. EBay said it is planning on releasing the results of the review in the fall.

HBO CEO Resigning Amid AT&T Restructuring

  • Two longtime executives of the entertainment empire that AT&T bought for more than $80 billion are stepping down, as the telecommunications giant gets ready to put its stamp on WarnerMedia days after the last antitrust hurdle to the deal was cleared.
  • Richard Plepler, the chairman and chief executive of HBO, said he was resigning in a memo to staff Thursday afternoon.
  • David Levy, president of Turner, the parent of cable channels CNN, TNT, TBS and Cartoon Network, is also stepping down—perhaps as early as Friday, people familiar with the matter said.

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US ECONOMY & POLITICS

Inflation Fell Below Fed Target in 2018

  • Inflation fell short of the Federal Reserve’s 2% target in 2018 for a seventh consecutive year, though a closely watched measure of underlying price pressures gained traction in December.
  • The Fed’s preferred inflation gauge, the personal-consumption-expenditures (PCE) price index, rose 1.75% in December from a year earlier the Commerce Department said Friday.
  • The index was held down mostly by a decline in energy prices, posting a gain of just 0.06% in December from November.
  • The so-called core PCE index, which excludes volatile food and energy components, rose 0.19% in December from November, its largest monthly gain since May.
  • On an annual basis, core PCE prices rose 1.94% in December from a year earlier, the largest such gain since the 2011 commodity boom.

U.S. personal income falls; spending weakest since 2009

  • U.S. personal income fell for the first time in more than three years in January as dividends and interest payments dropped, pointing to moderate growth in consumer spending after it fell by the most since 2009 in December.
  • Personal income slipped 0.1% in January, the first decline since November 2015, after jumping 1.0% in December.
  • Economists had forecast incomes rising 0.3% in January.
  • The jump in December income reflected an $83.4 billion increase in personal dividend income that was primarily due to a one-time special dividend payment by VMware.
  • In addition, farm income was up $29.2 billion, which included subsidy payments from the Department of Agriculture.
  • Households cut back on purchases of motor vehicles and recreational goods in December, leading to a 1.9% plunge in spending on goods, compared to a 1.0% increase in November.
  • Outlays on services edged up 0.1%, held back by a decline in spending on household electricity and gas. Spending on services advanced 0.4% in November.

U.S. Consumer Sentiment Unexpectedly Declined in Late February

  • U.S. consumer sentiment unexpectedly fell from an initial February reading and remained near the prior month’s two-year low, signaling that Americans haven’t quite shaken off the government shutdown and trade war.
  • The University of Michigan’s final February sentiment index was 93.8, below the preliminary reading of 95.5 and missing the 95.9 median forecast in Bloomberg’s survey of economists.
  • The measure of current conditions weakened from the earlier reading to the lowest since November 2016 while expectations were lower than in the initial report.
  • Friday’s report showed 25% of all consumers reported worsening finances, the highest proportion recorded since Donald Trump was elected president, according to the report.

U.S. Factory Gauge Falls to Two-Year Low as Orders Cool

  • A gauge of U.S. factories fell to a two-year low, cooling more than expected with a broad decline that suggests economic growth is moderating, though the drop may reflect some weather-related disruptions.
  • The Institute for Supply Management (ISM) index fell to 54.2 from 56.6 as four of the five main components — orders, employment, production and deliveries — all saw declines.
  • The result missed estimates calling for a drop to 55.8, though remained above the 50 level that indicates expansion.
  • Sixteen of 18 manufacturing industries reported growth, the most in six months, with the nonmetallic mineral products industry reporting the lone contraction.

Biden Leans Toward Another Run, While the Heart of His Party Has Shifted

  • Mr. Biden told a hometown audience at the University of Delaware this week that his family had reached a consensus: “The most important people in my life want me to run.”
  • The former vice president underwent an emotional public deliberation in 2015 in the months after his son, former Delaware Attorney General Beau Biden, died of cancer, and ultimately chose not to challenge Hillary Clinton for the nomination.
  • This time, the 76-yearold former Delaware senator has leaned more heavily into the possibility of running for president.
  • In every recent survey of early-primary-state Democrats, Mr. Biden is ahead or near the top of the polls, though results nearly a year ahead of the first balloting largely reflect his name recognition.

Medicare for All Loses Momentum Among Democrats

  • Democratic support for Medicare for All is slipping from the high levels seen around the November midterm elections as voters worry about its price tag and the toll it would take on both private and employer health coverage.
  • The proposal seeks to provide everyone in the U.S. with access to health coverage under a federal system that would replace Medicaid, Medicare, most private insurance and employer coverage.
  • Net support for single-payer among all registered voters—the difference between the percentage supporting and the percentage that opposed it—fell from about 30% in November 2018 to 12% in February, according to a poll by Morning Consult and Politico.
  • Research pegs the proposal‘s cost at more than $30 trillion over 10 years, although supporters say it ultimately would lower overall U.S. spending on health care.

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EUROPE & WORLD

Canada’s Economy Delivers Worst Quarterly Growth in Two Years

  • The Canadian economy slowed in the fourth quarter in its worst performance in more than two years amid a drop in business investment and softer household spending.
  • Canada’s gross domestic product (GDP), or the broadest measure of goods and services produced in an economy, rose at a 0.4% annualized rate in the fourth quarter of 2018, to 2.063 trillion Canadian dollars ($1.567 trillion), Statistics Canada said Friday.
  • GDP advanced 2.0% in the previous quarter, and market expectations were for a 1.0% advance in the fourth quarter, according to economists at Royal Bank of Canada.
  • For 2018 as a whole, Canada’s economy grew 1.8%, marking a slowdown from the 3.0% expansion in 2017.

Canada seen approving extradition hearing against Huawei executive

  • Canada is likely to announce on Friday that an extradition hearing against a Huawei executive can proceed, legal experts said, worsening already icy relations with Beijing.
  • Ottawa has until midnight on Friday to announce whether it will issue an authority to proceed, which would allow a court in the Pacific province of British Columbia to start a formal extradition hearing.
  • It could be years though before she is ever sent to the United States, since Canada’s slow-moving justice system allows many decisions to be appealed.

Rolls-Royce quits race to power Boeing’s planned mid-market plane

  • Rolls-Royce dropped out of the race to power Boeing’s planned mid-market aircraft on Thursday, saying it did not want to risk more disruption for its airline customers by rushing out a product without extensive testing.
  • Britain’s Rolls-Royce, which makes engines for large civil aircraft and military planes, wants to avoid a repeat of the problems with its Trent 1000 engine that powers Boeing’s Dreamliner 787.
  • The company reported an 8% rise in revenue to 15.1 billion pounds and a doubled operating profit to 616 million pounds.
  • However, changes in Rolls-Royce’s dollar-pound hedge book had a significant impact on its results, and were in part responsible for a reported full-year loss of 2.9 billion pounds.
  • It raised the Trent 1000 charge to 790 million pounds from 554 million pounds at the half year, contributing to a full-year operating loss of 1.16 billion pounds ($1.54 billion), and allocated another 100 million pounds in cash to the problem.

Embattled WPP’s Shares Leap but Ad Gloom Lingers

  • Shares in WPP jumped 8% Friday after the advertising giant reported better-than-expected fourth-quarter results and said its performance should improve toward the end of 2019.
  • WPP said like-for-like net sales—a closely watched indicator that excludes currency swings and acquisitions—fell 0.7% in the fourth quarter, beating analysts’ expectations of a 1.5% decline.
  • For the full year, WPP reported a 0.4% fall in like-for-like net sales and a 42% drop in net profit to £1.06 billion, hit by restructuring costs and a goodwill impairment. It maintained its annual dividend at 60 pence a share.
  • While WPP forecast like-for-like net sales to fall 1.5% to 2% this year, it said headwinds would subside in the second half and forecast margins to hold up better than analysts had thought.

Subaru Recalls Cars for Olfactory Defect: Some Perfumes Cause Malfunctions

  • If you drive a Subaru, you may want to avoid wearing perfume or a sweater treated with fabric softener—they could prevent the engine from starting.
  • Subaru said it plans to recall up to 2.3 million Impreza and Forester vehicles world-wide after discovering that certain chemical compounds released by everyday products such as cosmetics, fabric softener or car polish could cause parts to malfunction.
  • These malfunctions could affect a brake-light switch that is also involved in starting the engine or cause a vehicle-stability warning light to flash unnecessarily, the Japanese auto maker said.
  • If all the affected vehicles were to be recalled it would be the second-largest such action by Subaru, after the recall connected to faulty air bags made by Takata.

Daimler, BMW Team Up on Self-Driving Car Technology

  • Daimler and BMW, two of the world’s biggest manufacturers of high-end vehicles, are expected to unveil plans to expand existing cooperation to include the development of self-driving vehicle technology, a move that underscores how heightened competition is pushing longtime rivals to work more closely together.
  • The companies are expected to announce they will jointly develop self-driving-vehicle technology for highway driving and self-parking applications, key features that are expected to be high in demand by the premium car makers’ well-heeled customers.
  • The news comes less than a week after BMW and Daimler released the details of their plans to merge their car-sharing services, including the investment of €1 billion ($1.14 billion) to create a new shared mobility company called Free Now.

China P2P lender Dianrong closing 60 stores, laying off 2,000 employees: source

  • Dianrong, one of China’s biggest peer-to-peer (P2P) lenders, is shutting down 60 of its 90 offline stores and laying off an estimated 2,000 employees, a source with direct knowledge of the matter told Reuters on Friday.
  • The shrinking of Dianrong comes amid Beijing’s multi-year crackdown on risky practices and excessive leverage in the financial system that has seen a wave of P2P company collapses and triggered protests by angry investors who lost their savings.
  • P2P platforms gather funds from retail investors and loan the money to small corporate and individual borrowers, promising high returns, and the industry had outstanding loans of 1.49 trillion yuan ($217.96 billion) last year, far larger than the combined sector outside China.

Vale Probe Could Lead to Fine of 20% of Revenue From 2018

  • Brazil’s mining authorities have started a probe into Vale SA over a possible coverup regarding safety procedures that could lead to a fine of up to 20% of their 2018 gross revenue.
  • If convicted under Brazil’s anti-corruption law, the maximum penalty could be around 25 billion reais ($6.6 billion) based on estimates of preliminary 2018 data. By contrast, the mining code sets a 3,000 reais limit for fines.
  • Vale’s net revenue was 127 billion reais in the 12 months through September 2018.

Israeli Attorney General Lays Out Planned Charges Against Netanyahu

  • Israeli Attorney General Avichai Mandelblitintends to charge Prime Minister Benjamin Netanyahu with bribery, fraud and breach of trust after two years of corruption probes targeting the premier.
  • The charges are pending a pretrial hearing that is likely to take place after the April election.
  • Mr. Netanyahu has denied the charges and accused Israeli prosecutors of conducting a political witch hunt against him under pressure from his leftist opponents and a biased media.

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TODAY in HISTORY

  • The U.S. Congress authorized the first census. (1790)
  • President John F. Kennedy signed a signed an executive order establishing the Peace Corps. (1961)

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