DAILY MARKET REPORTS
- U.S. stocks slid Thursday after the European Central Bank unveiled plans to deploy additional stimulus, raising fresh worries about the health of the global economy.
- The three main indexes were set for its fourth day of losses, after a rally in the S&P 500, which was powered by optimism over trade negotiations and a dovish stance by the Federal Reserve, has lost its steam.
- The ECB said Thursday that it would leave interest rates unchanged at least through the end of the year, months longer than investors had previously expected.
- It also added that it would launch a fresh batch of ultracheap long-term bank loans, a measure meant to try to encourage growth and spending at a time when the global economy has shown signs of faltering.
- European stocks lost ground following the announcement, with the Stoxx down 0.8% after trading higher earlier in the session.
- In another sign of pessimism, the euro lost 0.7% against the dollar and yields on Italian and German government debt declined.
- Among stocks, Kroger tumbled 13.1% after the supermarket chain projected annual earnings below Wall Street forecasts.
US FINANCIAL MARKET
Kroger Shares Fall as Grocery Chain Stumbles
- Kroger projected annual profit below Wall Street estimates, as the grocer spends billions of dollars on modernizing its stores and delivery to compete better with Walmart and Amazon.
- Sales during the quarter fell 10% to $28.1 billion, below expectations of $28.4 billion.
- Kroger’s digital sales rose 58%, and the company said it is offering delivery or online pickup at 91% of its stores.
- Fourth-quarter net income plunged to $259 million from $854 million a year earlier.
- The grocer plans to invest between $3 and $3.2 billion this year, excluding acquisitions, compared with $3 billion last year.
- The costs resulted in its full-year earnings forecast of between $2.15 and $2.25 per share falling short of expectations of $2.26.
Barnes & Noble Lowers Earnings Forecast After Weak Postholiday Sales
- Barnes & Noble expects to record a smaller profit this year than it had previously expected as postholiday sales have been weaker than expected and it looks to invest more in the business.
- Net sales were roughly unchanged at $1.23 billion. Barnes & Noble said comparable-store sales rose 1.1%.
- The company reported earnings of $66.9 million for the third quarter, compared with a net loss of $63.5 million for the comparable quarter a year prior.
- The bookseller said it expects full year adjusted EBITDA to be between $140 million and $155 million, well below the $175 million to $200 million number it expected when it reported its second-quarter results in November.
American Eagle forecasts profit below estimates; shares slide
- American Eagle Outfitters forecast current-quarter profit below analysts’ estimates on Wednesday as the apparel maker spends more on advertising and new Aerie store openings.
- Pittsburgh-based American Eagle’s same-store sales rose 6% in the fourth quarter, in line with analysts’ estimates.
- However, its total net revenue rose just 1% to $1.24 billion, missing analysts’ estimates of $1.26 billion.
- Net income fell to $76.2 million compared to $94.0 million a year ago due to a 200 bps increase in the company’s SG&A expenses.
- American Eagle forecast first-quarter adjusted earnings of 19 cents to 21 cents per share, below analysts’ expectations of 24 cents.
Huawei Sues the U.S., Says Congress Acted as ‘Judge, Jury and Executioner’
- Huawei filed a lawsuit challenging a law signed by President Trump in August that restricts federal agencies from doing business with the Chinese company, the latest in a series of countermoves by the telecommunications giant.
- The lawsuit challenges the constitutionality of parts of the National Defense Authorization Act, an annual measure that authorized billions of dollars in military spending and put new limits on federal dollars going to Huawei and ZTE.
- The law also barred federal agencies from buying equipment that uses gear from the Chinese companies.
- In its suit, Huawei also argues that the law violates its right to due process and is a violation of the separation of powers between Congress and other branches of government.
Tesla Faces Backlash in China After Price Cuts
- Tesla faces criticisms from Chinese customers complaining that they ended up paying thousands of dollars more for their new cars because they bought before the company’s recently enacted price cuts.
- Some Tesla owners in China this week took to social media to attack the auto maker’s Feb. 28 pledge to lower global prices and its decision to shut most of its physical stores.
- Tesla hiked its Chinese prices in July after Beijing raised its tariff on U.S. vehicles to 40% from 15% amid the trade dispute with Washington; then it reversed course and implemented a string of price reductions to arrest a drop in sales.
- Before the reductions began in November, a basic Model S sedan cost the equivalent of $126,800 in China, whereas now it is available for $109,000, according to the Tesla website. It isn’t clear if that price reflects the latest cut.
Amazon to Shut All U.S. Pop-Up Stores as It Rethinks Physical Retail Strategy
- Amazon is shutting down all 87 of its U.S. pop-up stores, ending the retailer’s yearslong experiment with these small shops as the company tinkers with an evolving bricks-and-mortar strategy.
- The closings are expected by the end of next month, some employees at Amazon pop-up stores said.
- These shops typically occupy a few hundred square feet of space and showcase devices like voice-assistant speakers, tablets and Kindle e-readers.
Air Lease says Boeing signaling ‘full speed ahead’ for midsized jet
- Boeing is indicating “full speed ahead” for a new midsized airplane in what would be the first all-new jet program for the world’s biggest planemaker in more than a decade, Air Lease’s chief executive, John Plueger, said on Wednesday.
- Boeing reiterated on Wednesday that it will make a decision in 2020 on whether to launch the plane, which aims to address the middle of the jet market between traditional narrowbody jets with one aisle and long-distance widebody planes.
- In an emailed statement, Boeing said it is still working through the business case for the new jet, adding: “If we decide to offer the airplane and the market responds positively, we will proceed with a launch decision sometime in 2020.”
Philadelphia Is First U.S. City to Ban Cashless Stores
- Philadelphia is the first major U.S. city to ban cashless stores, placing it at the forefront of a debate that pits retail innovation against lawmakers trying to protect all citizens’ access to the marketplace.
- Starting in July, Philadelphia’s new law will require most retail stores to accept cash. A New York City councilman is pushing similar legislation there, and New Jersey’s legislature recently passed a bill banning cashless stores statewide.
- Businesses that have gone cashless point to greater efficiency for employees, who don’t have to make change or count cash at closing time, and improved safety because workers don’t have to carry large bank deposits.
- But backers of measures forcing stores to accept cash say they worry about people who don’t have credit or debit cards. Supporters also say some consumers prefer to pay with currency for privacy reasons.
US ECONOMY & POLITICS
U.S. Jobless Claims Declined Last Week
- Initial jobless claims, an indication of layoffs, declined by 3,000 to a seasonally adjusted 223,000 in the week ended March 2.
- Economists had forecast 221,000 new applications for jobless benefits last week.
- Claims for the week ending Feb. 23 were revised up to 226,000 from an initially reported 225,000.
- Thursday’s report also showed the number of continuing unemployment benefit claims—those drawn by workers for more than a week-declined by 50,000 to 1,755,000 in the week ended Feb. 23. Continuing claims are reported with a one-week lag.
U.S. Productivity Rose 1.9% in the Fourth Quarter
- U.S. worker productivity growth ticked up at the end of last year, just beating the sluggish trend that has marked much of the current economic expansion.
- The productivity of nonfarm workers, measured as the output of goods and services for each hour on the job, increased at a 1.9% seasonally adjusted annual rate in the fourth quarter, the Labor Department said Thursday.
- A gauge of compensation costs known as unit labor costs rose at a 2% annual rate in the last three months of 2018. This measure increased 1.6% in the third quarter after declining in the second.
- Economists expected a 1.6% increase in productivity and a 1.7% rise in unit labor costs in the fourth quarter.
Cohen Told Lawyer to Seek Trump Pardon
- Michael Cohen, a former lawyer for President Trump, directed his attorney last spring to inquire about the possibility of a presidential pardon, weeks after federal agents raided his properties, apparently contradicting his testimony last week.
- Lanny Davis, a lawyer for Mr. Cohen, said Wednesday that in the months after the FBI raid, Mr. Cohen was open to a pardon from the president.
- In testimony before the House Oversight Committee last week, Mr. Cohen said: “I have never asked for, nor would I accept, a pardon from Mr. Trump.”
Window for Bipartisan Compromise in Washington Narrows
- Intensifying partisan pressure in Congress is further clouding prospects for any major legislative compromises with the White House in the few months before the 2020 election cycle consumes Capitol Hill.
- President Trump, Senate Republicans, and Democrats now in control of the House began the year with a short list of shared policy goals, including investing in infrastructure and lowering the cost of prescription drugs.
- But House Democrats’ ratcheting up of investigations into Trump, along with a possible rules change by Senate Republicans to speed up confirmation of nominees, is fueling a more partisan climate that is expected to make legislating more challenging.
- Mr. Trump indicated Tuesday that House Judiciary Committee Chairman Jerrold Nadler’s request for records from more than 80 people and organizations related to Mr. Trump’s business dealings didn’t leave him inclined toward bipartisan compromise.
Iranian Hackers Have Hit Hundreds of Companies in Past Two Years
- Cyberattacks linked to Iranian hackers have targeted thousands of people at more than 200 companies over the past two years, Microsoft said, part of a wave of intrusions that researchers say has hit businesses and government entities around the globe.
- It caused damages estimated at hundreds of millions of dollars in lost productivity and affected oil-and-gas companies, heavy-machinery manufacturers and international conglomerates in more than a half-dozen countries according to researchers at Microsoft, which deployed incident-response teams to some of the affected companies.
- Microsoft traced the attacks to a group it calls Holmium, one of several linked by other researchers over the past year to hackers in Iran, a country that many security researchers say aspires to join Russia and China as one of the world’s premier cyber powers.
Paul Manafort Set to Be Sentenced
- Paul Manafort is scheduled to be sentenced Thursday on tax and bank-fraud charges that could see the former Trump campaign chairman spend much of the rest of his life in prison.
- Mr. Manafort was convicted in August of not paying taxes on more than $16 million in income from political consulting work in Ukraine in the early 2010s, and of lying to multiple banks to obtain loans once that money dried up by 2015.
- Sentencing guidelines, which Judge Ellis isn’t required to follow, call for him to spend upward of 19 years in prison, and prosecutors said they agreed with those guidelines.
EUROPE & WORLD
ECB Reverses Course with New Stimulus Measures
- The European Central Bank made a major policy reversal Thursday, unveiling plans for fresh measures to stimulate the eurozone’s faltering economy less than three months after phasing out a €2.6 trillion ($2.9 trillion) bond-buying program, making it the first rich-country central bank to ease policy in response to the global slowdown.
- The ECB said it would hold interest rates at their current levels at least through the end of this year—months longer than previously signaled—and announced plans for a fresh batch of cheap long-term loans for banks.
- The first loans will be launched in September, each with a maturity of two years.
- The ECB also slashed is forecast for gross domestic product growth this year to 1.1% from 1.7% in December.
- It lowered its inflation projection to 1.2% from 1.6%, further below the ECB’s target of just under 2%.
- Despite the new stimulus, ECB President Mario Draghi said that the risks to the economy remain prevalent, though the likelihood of a recession is “very low.”
- The euro fell against the dollar 0.4% on the day, with one euro buying $1.126.
- The Italian 10-year bond rallied, with yields falling to 2.586% from 2.647%, and German 10-year bund yields fell to 0.09% from 0.12%, a sign of the continued extraordinarily loose lending conditions in the eurozone.
Trudeau Says He Regrets Loss of Trust with Former Attorney General
- Canadian Prime Minister Justin Trudeau tried to turn the page on a political crisis that has consumed his government, saying he has regrets about how trust between his office and the former attorney general deteriorated and is prepared to heed lessons from this episode.
- Trudeau continued to defend against allegations that his senior aides tried to politically interfere in the criminal prosecution involving SNC-Lavalin, an engineering and construction company based in the politically important province of Quebec.
- Mr. Trudeau said he and his aides were preoccupied that a successful conviction of SNC-Lavalin, on bribery-and-fraud charges filed in 2015, could lead to significant job losses.
Movement at North Korea ICBM plant viewed as missile-related, South says
- New activity has been detected at a North Korean intercontinental ballistic missiles plant, South Korean media said on Thursday, as U.S. President Donald Trump said he would be very disappointed if Pyongyang rebuilt a rocket site.
- Movement of cargo vehicles was spotted recently around a factory at Sanumdong in Pyongyang, which produced North Korea’s first ICBMs capable of reaching the United States, South Korea’s JoongAng Ilbo and Donga Ilbo newspapers reported, citing lawmakers briefed by the National Intelligence Service.
TODAY in HISTORY
- Alexander Graham Bell received a patent for the telephone. (1876)
- Adolf Hitler broke the Treaty of Versailles and the Locarno Pact when he ordered troops to march into the Rhineland. (1936)
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