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DAILY MARKET REPORTS

  • U.S. stocks were little changed Wednesday, wobbling as analysts looked ahead to an update on global trade policy and Friday’s jobs report.
  • The OECD cut global forecasts for growth yet again on Wednesday, after a previous downgrade in November, citing continued trade disputes and increasing uncertainty over the state of Brexit scheduled for the end of this month.
  • Figures Wednesday showed the U.S. posted its widest monthly trade gap since 2008 in December and a record annual deficit in goods as sturdy economic growth underpinned higher spending by American consumers and businesses.
  • The U.S. private sector added 183,000 jobs in February, although the gains were smaller than expected as job creation slowed from a strong performance in January, the latest ADP report showed Wednesday.
  • General Electric shares tumbled 4.08%, extending losses from a day earlier, after it warned of a negative net cash flow from its industrial businesses this year.
  • Dollar Tree advanced 3.30%, the most on the consumer discretionary sector, after the discount store operator reported better-than-expected quarterly same-store sales.

US FINANCIAL MARKET

OECD Cuts Global Outlook Again and Warns Worse May Be Ahead

  • The OECD cut forecasts again for the global economy in 2019 and 2020, following on from previous downgrades in November, as it warned that trade disputes and uncertainty over Brexit would hit world commerce and businesses.
  • The Organization for Economic Co-Operation & Development forecast in its interim outlook report that the world economy would grow 3.3% in 2019 and 3.4% in 2020.
  • Those forecasts represented cuts of 0.2 percentage points for 2019 and 0.1 percentage points for 2020, compared to the OECD’s last set of forecasts in November.
  • For Germany, Europe’s largest economy, the OECD more than halved its 2019 GDP growth forecast to 0.7% from 1.6% previously. It predicted a light recovery to 1.1% growth in 2020.

Dollar Tree to Close or Rebrand Nearly 600 Family Dollar Stores

  • Dollar Tree reported better-than-expected quarterly same-store sales, as it drew more customers to its namesake stores and had the best growth in sales at its struggling Family Dollar business in the fiscal year.
  • Net sales fell to $6.21 billion from $6.36 billion, but beat analysts’ estimate of $6.19 billion.
  • Same-store sales rose 3.2% at the Dollar Tree brand, while sales at stores open at least a year under the Family Dollar banner increased 1.4%, the highest increase since 2017 but still a drag on Dollar Tree’s overall sales.
  • Analysts had expected same-store sales at Family Dollar and the namesake brand to rise by 0.08% and 2.94%, respectively.
  • The company reported a net loss of $2.31 billion, compared to a profit of $1.04 billion a year earlier, as the retailer recorded a $2.73 billion goodwill impairment charge related to Family Dollar business.
  • Dollar Tree, which has been under pressure from activist investor Starboard Value to sell its underperforming Family Dollar business, announced on Wednesday it would close about 390 Family Dollar stores.

Abercrombie predicts strong 2019 sales, shares surge

  • Abercrombie & Fitch predicted annual sales above Wall Street forecasts on Wednesday, as new store designs and a broader selection of apparel resonate better with shoppers.
  • Fourth-quarter revenue fell 3% to $1.16 billion, but exceeded forecasts of $1.13 billion, led by a 1% rise in sales at Hollister.
  • Sales at Abercrombie & Fitch stores open for at least a year rose 3%, about twice the 1.47% increase analysts had expected.
  • Net income increased to $98.4 million in the fourth quarter, compared to $75.5 million in the same period a year ago, well above estimates on a per share basis.
  • Net sales in 2019 should range between $3.66 billion and $3.73 billion, the company said, comfortably above Wall Street expectations of $3.61 billion.

GE’s CEO warns of negative industrial cash flow in 2019, shares drop

  • General Electric’s chief executive surprised investors on Tuesday by forecasting a net cash outflow from its industrial businesses this year mainly due to its ailing power-plant unit, a gloomy outlook that sent shares and bonds tumbling.
  • “Industrial free cash flow will be (in) negative territory,” compared with a positive $4.5 billion last year, CEO Larry Culp said in a webcast interview with JPMorgan analyst Stephen Tusa, a longtime GE bear.
  • “I don’t want to sugarcoat” the problems in GE’s power business, Culp said, adding the unit likely will lose more cash in 2019 than the $2.7 billion in free cash flow it lost in 2018.
  • The power unit is spending at least $480 million to fix thousands of turbine blades that are at risk after blades broke in 2015 and 2018, causing serious damage to power turbines and coinciding with a drop in GE’s market share.

Qualcomm Cites National Security Risk in Bid to Settle FTC Case

  • Qualcomm is contending that U.S. national security could be undermined by a Federal Trade Commission case challenging the patent-royalty fees it charges for smartphones—and it is getting an assist from some federal officials.
  • Representatives of at least two departments, defense and energy, have had face-to-face meetings with FTC commissioners in recent weeks to encourage a settlement of the lawsuit, according to people familiar with the matter.
  • The officials are supporting Qualcomm’s contention that financial losses from a court defeat in the FTC’s case would cripple the chip maker’s ability to compete with China’s Huawei in the battle to develop future 5G networks and equipment.

Sony Made $250 Million Bet on Michael Jackson Before Documentary

  • Sony Music Entertainment last year entered a deal worth $250 million for the rights to distribute Michael Jackson’s recordings over seven years, according to a person familiar with the matter.
  • That investment looks riskier following a new documentary accusing the late pop star of sexually abusing young boys.
  • “Leaving Neverland,” which aired in two parts Sunday and Monday evening on HBO, details the accounts of two men who say Mr. Jackson abused them as children years ago while urging them to keep their relationships secret and courting their families.
  • In response to the documentary, the singer’s estate has launched a counteroffensive against HBO, filing suit against the AT&T unit for $100 million in damages.
  • HBO said Sunday’s installment of “Leaving Neverland” aired to 1.3 million viewers and by Tuesday afternoon had drawn an additional 600,000 viewers on various HBO platforms, the third-largest premiere of any HBO documentary in the past decade.

Silicon Valley Hit with New Digital Tax in France

  • The French government on Wednesday introduced a new levy aimed at big tech giants, adding to momentum behind more than a dozen similar measures globally that could collectively cost Silicon Valley companies billions of dollars.
  • The measure, likely the first of many proposed digital-services taxes in Europe, will apply a 3% tax on French-source revenue that companies like Alphabet or Amazon reap from specific services like targeted advertising or digital marketplaces.
  • The new French tax will intensify pressure on the U.S. in a new round of multilateral talks, shepherded by the Organization for Economic Cooperation and Development, about how to overhaul the corporate taxation system for the digital age.

Oil Falls After Industry Report Shows Jump in Crude Stockpiles

  • Oil declined after an industry report showed a massive increase in U.S. crude stockpiles, raising oversupply concerns.
  • U.S. inventories swelled by 7.29 million barrels last week, the American Petroleum Institute was said to report.
  • If confirmed by government data due Wednesday, it would be the biggest increase in six weeks.
  • Saudi Arabia’s energy minister, Khalid Al-Falih, said last week that American inventories are “brimming” and it’s leaning toward extending production curbs beyond June.

U.S., China Face Off Over Digital-Market Regulation

  • World Trade Organization members launched talks Wednesday on how to govern global digital commerce, for the first time tackling 21st century trade issues that have sparked intense rivalry among the U.S., Europe and China.
  • At stake in the talks is a global framework to regulate digital trade in goods and services, a market that is currently subject to a patchwork of different rules.
  • Such a system would potentially remove obstacles such as cross-border sales barriers that disrupt access in online trade, enabling small companies to access global markets and helping giants like Amazon and Alibaba tap a bigger market.

House to hold hearing on Sprint, T-mobile proposed merger

  • U.S. House lawmakers plan to hold a March 12 hearing to review a proposed $26 billion merger of T-Mobile and Sprint with the telecommunications companies’ chief executives, according to a congressional statement on Wednesday.

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US ECONOMY & POLITICS

U.S. Private Sector Adds 183,000 Jobs in February

  • The U.S. private sector added 183,000 jobs in February, according to a report released Wednesday, although the gains were smaller than expected as job creation slowed from a strong performance in January.
  • Economists were expecting the addition of 185,000 jobs last month.
  • The ADP National Employment Report revised the number of private-sector jobs added in January to 300,000 from 213,000.
  • Most of the jobs added in February—139,000—were in the service sector, while the rest were in the goods-producing sector.

U.S. Posts Record Annual Trade Deficit

  • The U.S. posted its widest monthly trade gap since 2008 in December and a record annual deficit in goods as sturdy economic growth underpinned higher spending by American consumers and businesses.
  • The international trade deficit in goods and services widened 19% in December from the prior month to a seasonally adjusted $59.8 billion, economists had expected a $57.3 billion gap.
  • Economists say the shortfall was fueled, ironically, by another Trump administration policy: tax cuts and spending increases that juiced demand from U.S. consumers and businesses at a time when growth in the rest of the world was slowing.
  • Concern that the U.S. economy could overheat prompted the Federal Reserve to raise interest rates four times in 2018, contributing to a strong dollar in the second half of the year that made foreign goods relatively cheap for Americans
  • As a result, U.S. imports grew 7.5%, while exports increased just 6.3%.
  • U.S. goods exports to China fell 7.4% in 2018 to $120.3 billion, while imports from China grew 6.7% to $539.5 billion as Americans increased their purchases of electronics, furniture, toys and other products.
  • Exports to the rest of the world fell 1.9% to $205.1bn, while imports rose by 2.1% to $264.9bn.

FDA Chief Scott Gottlieb to Leave Agency

  • Scott Gottlieb, who as head of the Food and Drug Administration sought to crack down on cigarette makers and speed the approval of generic medicines, is resigning from his post, the agency said.
  • The departure puts into question the fate of some of the initiatives that the commissioner championed, often through active use of social media, such as a proposed ban on menthol cigarettes.
  • Dr. Gottlieb’s FDA sped up the approval of generic drugs in an effort to slow the growing cost of prescription drugs.
  • The FDA chief also took major steps to combat the opioid crisis.

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EUROPE & WORLD

China’s February exports seen falling most in two years, imports down again: Reuters Poll

  • China’s exports likely contracted in February after a surprise bounce in January, while imports fell for a third straight month, a Reuters poll showed, heightening anxiety over whether Washington and Beijing can resolve deep differences over trade.
  • China’s exports in February are expected to have fallen 4.8% from a year earlier, according to the median estimate of 32 economists in a Reuters poll, following a 9.1% rise in January.
  • Imports in February are expected to have fallen 1.4% from a year earlier, compared with the previous month’s 1.5% decline.

Nio stock sinks, as investors spooked by earnings miss, delivery slowdown

  • Nio shares tanked in the extended session Tuesday after the Shanghai-based electric-car maker reported a wider-than-expected quarterly loss, highlighted a delivery slowdown this year and raised more concerns about China’s economy.
  • Revenue reached 3.4 billion renminbi ($499.7 million) in the quarter, compared with 1.5 billion renminbi in the third quarter, and ahead of expected sales of $493 million.
  • Fourth-quarter deliveries of Nio’s ES8, an SUV launched last year in the China, reached 7,980 vehicles, but deliveries in January and February were 1,805 and 811 vehicles reflecting “a greater-than-anticipated slowdown in monthly deliveries,” Nio said.
  • Nio said it lost 3.5 billion renminbi ($511.5 million) in the fourth quarter, significantly below consensus.

Logitech’s new guidance gives shares a boost

  • Logitech International raised its long-term profit targets and said it expects sales to increase at a mid- to high-single-digit pace in constant currencies in the year to March 2020, sending its stock to the highest level since November.
  • Logitech, which enjoyed an upbeat performance over the past 12 months, forecast operating income of $340 million to $345 million in its current financial year that ends on March 31.
  • It expects annual sales to increase by 9-11% in the 2019 financial year when currency swings were removed.
  • It increased its long-term outlook, saying products for cloud computing, egaming and peripherals used by the creative industries could achieve constant-currency growth in the high-single-digit range.
  • The Swiss-U.S. company said it expects operating income in the range of $375 million to $385 million for the fiscal year 2020.

Uber Partner Picks Up $1.5 Billion From SoftBank

  • Southeast Asian ride-hailing company Grab has raised $1.46 billion in fresh funding from Japan’s SoftBank, which it will use to fuel its expansion beyond transportation services.
  • That brings the total from Grab’s latest fundraising round, over the past year, to more than $4.5 billion, the company said.
  • It values Grab at around $14 billion, up from $11 billion last year, and makes Grab one of the region’s most valuable startups.

Hyundai may suspend production at one of its Chinese plants as slowdown bites

  • Hyundai is considering plans to suspend production at its oldest plant in China, the South Korean carmaker said on Wednesday, as it reels from tumbling sales and massive overcapacity in its biggest market.
  • The move by Hyundai, which together with affiliate Kia was the No.3 automaker in China until 2016, highlights the reversal of fortunes of China’s auto industry.
  • The company, which has three manufacturing plants in the city, said that it has yet to decide when a suspension would start.
  • However, the Korea Economic Daily newspaper reported that suspension could start as early as next month.

North Korean Launch Site Is Being Built Back Up Again

  • North Korea is restoring a missile launch site it previously claimed to be dismantling as an overture to the U.S., according to newly released commercial satellite photos and people briefed on South Korean intelligence.
  • The move has sparked concerns that North Korea may be wavering on some of the gestures it made to demonstrate its willingness to denuclearize the Korean Peninsula.
  • The disclosure of the restoration work comes in the wake of last week’s U.S.-North Korean summit meeting in Hanoi, which failed to make headway on nuclear and sanctions issues.

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TODAY in HISTORY

  • The Alamo fell to Mexican forces. (1836)
  • Walter Cronkite, “the most trusted man in America,” retired from the CBS and was replaced by Dan Rather. (1981)

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