DAILY MARKET REPORTS
- U.S. stocks inched higher Thursday as President Trump prepared to meet top Chinese officials in Washington to resolve the continuing trade dispute, a major investor concern amid doubts around growth in the world’s leading economies.
- Liu He, China’s vice premier, will visit the White House on Thursday afternoon.
- The S&P index is near its highest since Oct. 10 and less than 2% away from hitting an all-time high.
- However, worries about a global slowdown sapped some enthusiasm.
- Earlier, data showed German industrial orders in February fell at their sharpest rate in more than two years.
- A big decliner was Tesla, which tumbled 9% after the electric carmaker’s deliveries fell 31% in the first quarter on challenges in shipping to Europe and China.
US FINANCIAL MARKET
Constellation Brands Gets a Boost from Beer Sales
- Constellation Brands said sales rose in the latest quarter as beer sales helped offset weakness in its lower-priced wine brands.
- Net sales for the company rose 2% from a year earlier to $1.8 billion. Analysts expected $1.73 billion.
- Beer sales rose 9.3% to $1.09 billion, but net sales declined 7.6% to $707.1 million in the wine and spirits segment.
- Profit rose to $1.24 billion, up from $910.5 million a year earlier.
- For fiscal 2020, the company guided adjusted earnings per share of $8.50 to $8.80 and expects net sales of beer to grow 7% to 9% for fiscal 2020, while wine and spirits net sales are forecast to decline 25 to 30%.
Tesla’s First-Quarter Deliveries Plummet
- Tesla said new-vehicle deliveries in the first quarter fell 31% from the previous three months as the electric-car maker struggled to ship its Model 3 compact car to customers in Europe and China for the first time.
- The auto maker said it delivered about 63,000 vehicles, worse than analysts’ already-lowered expectations of 73,500, a figure reflecting total deliveries of Model 3, Model S and Model X vehicles.
- Tesla attributed the slowdown to challenges associated with taking the Model 3 overseas for the first time, noting it had only delivered half of the entire quarter’s vehicles 10 days before the period ended.
- The company cautioned that lower-than-expected sales volumes along with several price cuts would negatively affect first-quarter income. It said it planned to end the quarter with “sufficient cash on hand.”
- Last quarter was Tesla’s first sales period following the phaseout of U.S. tax credits went into effect, dropping to $3,750 from $7,500 for buyers. The credits end at the beginning of next year.
Tesla’s junk bond slammed on car deliveries miss; CDS cost surges
- The price for Tesla’s $1.8 billion junk bond fell by the most in seven months and the cost to insure its debt against default surged on Thursday after a bigger-than-expected drop in first-quarter deliveries.
- The electric vehicle maker’s 5.3% senior unsecured note due in August 2025 fell 2.26 cents to a bid price of 85.1 cents on the dollar, with its yield rising nearly half a percentage point to 8.37% in active European trading.
- The cost for a five-year credit default swap, a form of insurance against default, rose to an upfront cost of more than 17%, the cost to insure a Tesla bond against default was roughly 22 cents on the dollar of insured face value.
Ethiopian Probe Initial Findings Blames 737 MAX Flight-Control System
- Air accident investigators found the cockpit crew of a crashed 737 MAX followed approved emergency procedures, ratcheting up pressure on Boeing to fix a flight-control system at the heart of several probes into two deadly crashes of the airliner.
- Ethiopian authorities, in a press conference Thursday disclosing findings from their preliminary crash probe, stopped short of drawing any firm conclusions about the causes of the crash.
- They recommended Boeing review the system, and said regulators should then test it before lifting a global grounding of the MAX fleet.
- The Indonesian probe also raised questions about maintenance of a sensor feeding the system, and about whether pilots followed Boeing guidance on how to respond to a fault. In the Ethiopian flight, no such issues were found—at least so far.
‘Avengers: Endgame’ Pulverizes Ticket-Presale Records
- The next installment in Disney’s Marvel Studios universe of superheroes doesn’t come out until the end of the month, but it is already setting records in ticket presales, indicating a blockbuster opening for the movie.
- “Avengers: Endgame” had the biggest single-day ticket sales Tuesday on ticket-buying service Fandango.
- Fandango didn’t disclose how many tickets were sold, but the performance of the previous record-holder offers some indication of how big “Endgame” could be:
- The previous Fandango record for sales in one day was set by Disney’s “Star Wars: The Force Awakens,” which collected $248 million in its opening weekend in the U.S. and Canada in December 2015.
- AMC Entertainment, the nation’s largest theater chain, said the traffic on its website and mobile app was 10 times higher than normal and caused servers to shut down.
WeWork Acquires Managed by Q, Seeking to Expand Beyond Office Leases
- The shared office-leasing giant said Wednesday it agreed to acquire Managed by Q, which runs a platform that office tenants can use to hire service providers such as cleaning crews, receptionists or IT support staff.
- Financial terms weren’t disclosed. The companies said WeWork is using cash and stock to buy Managed by Q, which was valued at $249 million in a financing round in January, according to PitchBook.
- Managed by Q works mainly with medium and larger-size companies, an area of the market where WeWork wants to expand after building a customer base focused on smaller companies and large corporate customers.
Sears, After Years of Closures, Is Opening Stores Again
- Sears plans to open three stores in May in an attempt to reclaim shoppers after closing hundreds of locations in recent years.
- The new stores, called Sears Home & Life, will be a fraction of the size of a typical Sears department store and sell only so-called hardline goods—appliances, tools, mattresses and lawn and garden equipment.
- Located in Anchorage, Alaska, Lafayette, La., and Overland Park, Kan., the stores will size from 10,000 to 15,000 square feet.
- By contrast, a typical Sears store, which also sells apparel, home furnishings, electronics and a range of other items, averages about 150,000 square feet.
Carl Icahn Sold Lyft Stake to George Soros Prior to Initial Public Offering
- Carl Icahn sold his roughly 2.7% stake in Lyft to fellow billionaire George Soros ahead of the ride-hailing company’s initial public offering last week, according to people familiar with the matter.
- Jonathan Christodoro, a former Icahn Capital LP managing director who sat on Lyft’s board until last month, facilitated the sale of Mr. Icahn’s stake, worth roughly $550 million at the IPO price, some of the people said.
- The exact timing and motivation for Mr. Icahn’s move couldn’t be determined, though he had held the stake for roughly four years—a relatively long period for him.
- The activist investor, who rarely invests in private companies, had been unhappy with Lyft’s plan to use supervoting shares to give its two founders near-majority voting rights, some of the people said.
Verizon, South Korea Launch Smartphone 5G
- The 5G era for smartphones began on Wednesday, providing the world’s first glimpses at what the much-hyped network technology can offer consumers and how much the speed upgrade will cost.
- Verizon launched 5G wireless service in parts of Chicago and Minneapolis on Wednesday, a week ahead of its planned start date, while carriers in South Korea deployed their service in the Seoul metropolitan area the same day.
- South Korea’s 5G launch, which covers about half the population, promises to facilitate experiences that would exhaust the networks of today: eight-way video calls and streaming live sports at a screen resolution triple that of an IMAX movie.
- The industry is betting 5G service, with speeds up to 100 times faster than current networks, will replicate the breakthroughs enjoyed from 4G—which reshaped the way people order takeout and hail taxis and helped spawn services such as Uber.
Target raises minimum wage to $13 an hour in tight labor market
- Target will raise its U.S. minimum wage to $13 an hour in June, from $12 currently, increasing its payroll costs and putting new pressure on rival Walmart Inc to attract retail workers in a tight labor market.
- In 2017, Target, said it was committed to raising its minimum wage to $15 an hour by 2020.
- The wage increase will affect “tens of thousands” of employees, a Target spokeswoman said.
- Minneapolis-based Target employs over 300,000 workers and runs 1,845 stores in the United States.
JPMorgan’s Dimon says bad mortgage rules hindering growth of U.S. economy
- JPMorgan Chase Chief Executive Jamie Dimon said on Thursday bad mortgage rules were hindering the growth of the U.S. economy and called for swift reforms.
- In his annual letter to the shareholders, Dimon said the involvement of many regulators coupled with increased political intervention was making it difficult to achieve much-needed reforms in mortgage lending.
- Dimon said JPMorgan was intensely reviewing its role in originating, servicing and holding mortgages.
US ECONOMY & POLITICS
Jobless Claims Dropped to Lowest Level Since 1969 Last Week
- Initial jobless claims, a proxy for layoffs across the U.S., decreased by 10,000 to a seasonally adjusted 202,000 in the week ended March 30, the lowest level for initial claims since Dec. 6, 1969, when the U.S. workforce and population were much smaller.
- Economists expected 218,000 new claims last week. Claims for the previous week were revised to 212,000 from 211,000.
- Thursday’s report showed the number of claims workers made for longer than a week decreased by 38,000 to 1,717,000.
U.S.-China Trade Talks in ‘End Game’ but No Final Deal Yet, Chamber Leader Says
- The U.S. and China are moving toward “the end game” in trade talks but are unlikely to complete a deal this week, said Myron Brilliant, the U.S. Chamber of Commerce’s executive vice president.
- President Trump expects to name the date of a summit with Chinese President Xi Jinping this afternoon, according to an administration official. The prospect of such a summit indicates that the two sides are close to a deal.
- Even so, Mr. Brilliant said he had been told by officials that U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier and trade envoy Liu He continue to talk through a variety of issues and aren’t likely to finish negotiations this week.
U.S. sets 2025 target for China to fulfill trade pledges: Bloomberg
- The trade deal that the United States and China are crafting would give Beijing until 2025 to meet commitments on commodity purchases and allow U.S. companies to wholly own enterprises in China, Bloomberg reported.
- Under the proposed agreement, China would commit by 2025 to buy more U.S. commodities, including soybeans and energy products, and allow 100% foreign ownership for U.S. companies operating in China as a binding pledge that can trigger retaliation from the U.S. if left unfulfilled.
Senate GOP Invokes ‘Nuclear Option’ to Change Rules by Simple Majority
- Senate Republicans invoked the so-called nuclear option to use a simple majority to change the chamber’s rules for confirming many appointees to the executive and judicial branches.
- Under the new, permanent procedures, the Senate will allow for two hours of debate after cloture votes on nominees to noncabinet executive positions and district courts, down from 30 hours.
- The new rules deepen the procedural arms race that has eroded the power of the chamber’s minority party in recent years.
- Both Republicans and Democrats accused the opposing party of abusing procedural tactics and dangerously departing from the Senate’s storied status as the world’s greatest deliberative body.
- Conflict over the Senate’s process for confirming appointees has only escalated since Senate Majority Leader Harry Reid used the nuclear option to eliminate the 60-vote threshold for confirming the vast majority of executive and judicial nominees in 2013.
Top Democrat Proposes Annual Tax on Unrealized Capital Gains
- The top Democrat on the Senate’s tax-writing committee proposed taxing unrealized gains in investment assets every year at the same rates as other income, offering an idea that would transform how the U.S. taxes the wealthiest people.
- Under Mr. Wyden’s concept, capital gains would be taxed annually based on how much assets have gained in value.
- Now, by contrast, gains are taxed only when assets are sold and at a top rate of 23.8% instead of 37% for ordinary income.
- Among households making more than $10 million in adjusted gross income in 2016, capital gains accounted for 46.4% of income, compared with 0.7% of income for households making less than $100,000 annually, according to the Tax Policy Center.
Beto O’Rourke Raises $9.4 Million in First 18 Days of Presidential Campaign
- Former Texas Rep. Beto O’Rourke said he brought in $9.4 million in the first 18 days of his Democratic presidential run, putting his fundraising total among the top tier of 2020 candidates who have announced numbers so far.
- The Sanders campaign announced Tuesday it had raised $18.2 million in six weeks.
- Among others, California Sen. Kamala Harris raised $12 million; South Bend, Ind., Mayor Pete Buttigieg raised $7 million; and tech entrepreneur Andrew Yang collected about $1.7 million; according to their campaigns.
EUROPE & WORLD
German Manufacturing Slump Piques Fears Over Europe’s Flagship Economy
- German manufacturers saw orders drop sharply in February, increasing the likelihood that Europe’s flagship economy could contract in the first half of 2019 in a setback for a weakened continent.
- Total orders for the sector dropped 4.2% from January, missing forecasts by a large margin.
- Compared with February 2018, order volumes were down a steep 8.4%.
- The steep slowdown in Germany is bad news for the rest of Europe.
- With Italy already in recession and the French economy hit by protests against President Emmanuel Macron’s reform agenda, the eurozone economy will find it hard to expand in the coming months.
Samsung Electronics quarter one earnings under pressure as chip prices fall
- The odds are stacked against Samsung ahead of the release of its first-quarter earnings guidance on Friday, with memory chip prices falling and its pricey premium smartphones struggling to be profitable.
- Samsung Electronics was forecast to post a 6.9 trillion won ($6.1 billion) operating profit for the January-March period, more than 50% below the 15.6 trillion won recorded in the same period a year ago.
- Chipmakers in particular have been hit hard by a glut in the global semiconductor industry triggered by weakening smartphone sales and falling investment from data center companies.
- Although Samsung’s DRAM chip business remains its earnings engine-room with strong margins, its NAND flash memory chips are forecast to post losses as prices slump, analysts say.
- NAND flash chip prices dropped 20% in the first quarter, their steepest fall since early 2018, and continued to slide albeit at a slower pace in the second quarter, according to DRAMeXchange, a division of tech research firm TrendForce.
Theresa May Meets Opposition Leader in Risky New Brexit Strategy
- British Prime Minister Theresa May and the leader of the opposition Labour Party set off on a path fraught with political risk as they met Wednesday to start trying to hash out a compromise Brexit deal.
- With a summit of European Union leaders just a week away, pressure is on the British government to find a Brexit agreement that can gain Parliament’s approval and avoid the U.K. leaving the bloc without a deal April 12.
- The two sides described talks on Wednesday as constructive and said negotiating teams would follow up later in the day and on Thursday with intensive technical discussions.
- The prime minister’s strategic shift marks an end to a monthslong effort to push the House of Commons to back the deal, and signals her potential willingness to keep the U.K. close to the EU after Brexit to get her agreement over the line.
Tencent Closes Asia’s Biggest Dollar-Bond Sale in a Year
- Tencent has sold $6 billion of bonds in Asia’s biggest sale of dollar debt in over a year.
- The Chinese company, which is a major videogame publisher and owns the popular messaging service WeChat, priced bonds that mature in five, seven, 10 and 30 years, according to a filing Thursday morning in Hong Kong.
- The biggest offering was $3 billion of 10-year bonds, paying a coupon of 3.975%, and sold at slightly under face value.
- The 30-year bonds were also sold at slightly under par, with a coupon of 4.525%.
TODAY in HISTORY
- President William Henry Harrison died from pneumonia, one month after his inauguration. (1841)
- Martin Luther King, Jr., was assassinated. (1968)
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