DAILY MARKET REPORTS
- Wall Street’s main indexes on Tuesday pulled away from all-time highs set in the previous session, following a slump in the shares of Google-parent Alphabet after weak quarterly results.
- Impeding the recent run up in stocks, Alphabet shares fell 7.6%, on track for their worst decline since January 2012, after the company posted its slowest revenue growth in three years.
- Apple dropped 2% ahead of results later in the day, which will wrap up earnings for the high-growth FAANG stocks.
- In a big day for healthcare earnings, Pfizer rose 1.4% and Merck climbed 0.7% after both the drugmakers reported better-than-expected quarterly earnings.
- General Electric jumped 4.4% after the industrial conglomerate’s first-quarter profit rose and it lost less cash than expected.
- Mastercard rose 2.8% after the card company beat Wall Street’s estimates for quarterly profit.
- Investors will also pay close attention to the next two rounds of U.S.-China trade negotiations.
- U.S. Treasury Secretary Steven Mnuchin said he hopes to make “substantial progress” with Chinese negotiators.
- Also on the radar was the Fed which kicks off a two-day meeting on Tuesday, at the end of which a decision on interest rates will be announced.
US FINANCIAL MARKET
Wall Street queries Google ad changes after rare revenue miss
- Wall Street punished Google on Tuesday for managers’ refusal to give details of changes made to its ad platform in first-quarter results, following a rare miss of expectations for revenue due to a cleanup of YouTube content.
- Alphabet, which gets most of its revenue from ads, said its quarterly revenue rose 17% to $36.3 billion, but that was still about $1 billion short of Wall Street’s average estimate.
- The company’s margin, a constant concern for analysts and investors, fell to 18%, compared with 25% last year.
- The crimped margin can in part be blamed on last month’s $1.7 billion fine from European regulators for abusing the dominance of its search engine and limiting competition. Excluding the fine, the company’s margin came in at 23%.
- Net income declined to $6.7 billion, compared to $9.4 billion in the same period a year ago when results were supercharged by the conglomerate marking up its stakes in private technology companies.
Mastercard’s Revenue and Profit Continue to Grow
- Mastercard revenue rose in the latest quarter as the global payments company got a boost from its geographical expansion and a growing number of credit-card transactions from online shopping.
- The company reported net revenue jumped 9% to $3.9 billion, within range of the consensus forecast of $3.86 billion.
- Mastercard said its gross dollar volume—or the value of card transactions—increased 12% to $1.5 trillion.
- Profit rose to $1.9 billion, from $1.5 billion a year earlier and ahead of expectations on a per share basis.
GE Swings to Quarterly Profit as It Shrinks
- General Electric swung to a first-quarter profit as the conglomerate reported stronger cash production than expected while leaving its full-year expectations unchanged.
- Total revenue fell 2% to $27.29 billion, as a sharp decline in the Power division, which makes turbines for power plants, offset gains in Aviation and other units, but results were above analysts’ average estimate of $27.05 billion.
- In the latest quarter, power orders fell 14% and profit fell 71% to $80 million on revenue of $5.7 billion, down about 22% from a year earlier, GE said.
- The Aviation unit, which make jet engines used by Boeing and Airbus, reported $1.66 billion in quarterly profit as revenue rose 12% to nearly $8 billion, making it GE’s biggest and most profitable unit.
- GE’s core industrial businesses burned through $1.2 billion of cash in the quarter; the company warned earlier this year that cash flow would drop as much as negative $2 billion this year from its core industrial operations.
- In the first quarter, GE reported a profit of $3.55 billion, compared with a year ago loss of $1.18 billion.
McDonald’s Drives Up Sales with Promotions
- McDonald’s said renovated restaurants and new promotions helped boost U.S. sales in the first quarter, though those investments have weighed on profit.
- Overall, first-quarter revenue fell 4% from the year-earlier period to $4.96 billion, due to its move to franchise a majority of its restaurants, but results were ahead of the estimated $4.94 billion in revenue.
- McDonald’s reported global same-store sales growth of 5.4% in its first-quarter, beating analyst expectations of 3.4% growth by that metric. Closely watched U.S. comparable-store sales came in at 4.5%, outpacing projections for its biggest market.
- Net income fell to $1.33 billion in the first quarter, from $1.38 billion a year earlier.
Cable operator Charter edges past quarterly revenue estimates
- Cable operator Charter Communications edged past analysts’ estimates for first-quarter revenue on Tuesday, as the company attracted more customers for its internet services, offsetting a drop in video subscribers.
- Total revenue rose to $11.21 billion from $10.66 billion, slightly beating estimates of $11.2 billion.
- The company added 398,000 internet customers in the reported quarter, above a consensus estimate of 344,000.
- Net income totaled $253 million in the first quarter, compared to $168 million during the same period last year.
Pfizer Raises Earnings Projections on Biopharma Sales Increase
- Pfizer on Tuesday beat Wall Street estimates for quarterly profit and slightly raised its earnings forecast for the year, as the largest U.S. drugmaker reined in costs and recorded higher sales of cancer drug Ibrance and pneumonia vaccine Prevnar.
- Overall sales rose 2% to $13.12 billion from a year earlier, or 5% with foreign exchange effects excluded.
- Analysts expected revenue of $12.99 billion.
- Ibrance brought in sales of $1.13 billion during the quarter, up 21.4% from a year earlier, just ahead of analysts’ estimates of $1.12 billion. Prevnar raked in $1.49 billion, beating the average estimate of $1.39 billion.
- Pfizer reported quarterly earnings of $3.88 billion, up from $3.56 billion a year earlier.
- Pfizer pushed its 2019 adjusted earnings per share forecast marginally higher to between $2.83 and $2.93, from a prior estimate of $2.82 to $2.92, and reiterated its full-year revenue target of $52 billion to $54 billion.
Merck’s first-quarter profit beats on Keytruda boost
- Merck reported a higher-than-expected first-quarter profit on Tuesday and raised its earnings and sales forecasts for the year, thanks to surging sales of its blockbuster cancer immunotherapy Keytruda.
- Sales rose to $10.81 billion, beating analysts’ average estimate of $10.48 billion.
- Keytruda has driven much of Merck’s recent growth as it maintains its lead as an initial treatment for advanced lung cancer, the most lucrative oncology market. Sales of the drug rose 55% to $2.27 billion.
- Merck said net income rose to $2.92 billion, in the first quarter from $736 million a year earlier.
- Merck said it now expects full-year adjusted earnings per share of $4.67 – $4.79, up from its prior forecast of $4.57 to $4.72.
Eli Lilly misses estimates for top-selling diabetes drug Trulicity, shares slip
- Eli Lilly reported lower-than-expected sales for its top-selling diabetes drug Trulicity on Tuesday and said it expects further hits from price declines in the United States, sending its shares down.
- Revenue rose to $5.09 billion, but missed estimates of $5.13 billion.
- Trulicity brought in $879.7 million in the first quarter, missing the average analyst estimate of $952 million, partly hurt by lower realized prices and changes in estimates to rebates and discounts in the United States.
- Sales of psoriasis treatment Taltz, considered one of Lilly’s growth drivers, came in at $252.5 million, also missing estimates.
- Net income more than tripled to $4.24 billion, due to a $3.7 billion gain from its spin-off of animal health unit Elanco.
- Lilly now expects 2019 revenue to be between $22.0 billion and $22.5 billion, lower than the earlier $25.1 to $25.6 billion and below the expected $22.17 billion, but raised its adjusted earnings forecast to a range of $5.60 to $5.70, beating estimates of $5.63.
Western Digital Shares Tank After Company Misses Earnings Badly
- Shares of Western Digital were falling hard Monday in after-hours trading after the company missed earnings expectations.
- Revenue was $3.67 billion, down steeply from last year’s $5 billion in revenue, missing analyst’s estimates of $3.68 billion.
- Continued price declines for Flash Memory brought gross margin down to 15.8% from 38.4% a year ago.
- Western Digital posted a loss of $581 million, compared to a profit of $61 million a year ago, but management continues to expect an improvement in market fundamentals in 2H19.
GM first-quarter profit beats estimate, lifted by pickups, Lyft
- General Motors on Tuesday reported a higher-than-expected quarterly profit, driven mostly by highly lucrative pickup truck sales in the U.S. market and in part by revaluations of shares it holds in ride-hailing company Lyft and Peugeot.
- The company’s revenue for the quarter fell to $34.9 billion from $36.1 billion a year earlier.
- Net income more than doubled, to $2.16 billion, from a year earlier when GM recorded restructuring charges in South Korea.
- The earnings came despite a 7% decline in U.S. new-vehicle sales in the first quarter, in which smaller rival Fiat Chrysler Automobiles NV’s pickup trucks outsold GM’s.
- Buyers paid an average of around $48,000 for GM’s large pickup trucks— the Chevrolet Silverado and GMC Sierra—up about 20% during the quarter following a redesign of those models.
ConocoPhillips profit beat estimates on higher output
- U.S. oil producer ConocoPhillips beat quarterly profit estimates on Tuesday, benefiting from a rise in output from its U.S. assets.
- Total production, excluding Libya, rose by 94,000 barrels of oil equivalent per day (boepd) to 1.32 million boepd in the quarter.
- The company said the total realized price per barrel was $50.59 in the quarter, compared with $50.49 per barrel a year earlier, as higher LNG and bitumen prices were largely offset by lower crude, natural gas liquids and natural gas prices.
- Adjusted net earnings came in at $1.15 billion in the quarter, compared with $1.14 billion a year earlier.
BP’s profit fall cushioned by higher output, trading
- BP’s first quarter profits fell by nearly a third but beat forecasts as lower oil and gas prices and weaker refining margins were partly offset by higher production and stronger trading.
- Cashflow from operations, which had risen to their highest level in four years in the previous quarter, fell by over 20% to $5.3 billion.
- BP’s first-quarter underlying replacement cost profit, the company’s definition of net income, came to $2.4 billion, exceeding forecasts of $2.3 billion but was down from $2.6 billion a year earlier and from $3.5 billion in the fourth quarter of 2018.
GE’s Baker Hughes profits from foreign focus
- Oilfield services company Baker Hughes on Tuesday reported a quarterly profit that topped analysts’ average estimate as demand for the company’s services from its international customers rose.
- Total revenue rose to $5.62 billion from $5.40 billion.
- Revenue from the company’s oilfield services business, which constitutes roughly half of its total sales, rose 12% to $2.99 billion in the first quarter, beating estimates of $2.87 billion.
- Baker Hughes said adjusted net income rose to $76 million in the quarter, from $38 million a year earlier.
Arconic to Keep Building-Products Unit as It Charts Path Toward Breakup
- Arconic plans to retain its building and construction products business after considering a sale of the unit in a strategic review following the deadly June 2017 Grenfell Tower apartment fire in London.
- Overall sales rose 1.9% to $3.54 billion. Analysts expected revenue of $3.53 billion.
- Arconic’s profit fell 14% to $187 million, but was marginally ahead of estimates after adjustments.
- Arconic raised its full-year outlook on earnings excluding special items of $1.75 to $1.90 a share, up from $1.55 to $1.65 a share, and said it is working toward cutting roughly $230 million in costs in the year, up from its previous target of $200 million.
KKR Profit Climbs, Assets Rise
- KKR reported a sharply higher first-quarter profit, as it benefited from sales in its private-markets business.
- Assets under management at KKR climbed to $199.5 billion, compared with $176.36 billion a year earlier and $194.72 billion in the prior quarter.
- The private-equity firm reported first-quarter profit of $709.3 million, compared with a $178.4 million profit for the comparable quarter a year earlier.
Blue Apron Delivers Better Margins as Business Shrinks
- Blue Apron Holdings continued to lose customers for its meal kits.
- Total sales were $141.9 million, down from $196.7 million a year earlier.
- Revenue per customer during the quarter was $258, up from $250 in the previous year’s period.
- Orders fell 29% in the quarter to 2.5 million. Blue Apron’s customer count declined again to 550,000, down from a peak of just over 1 million in March 2017.
- Overall, Blue Apron said its first-quarter loss narrowed to $5.3 million, compared with a year-earlier loss of $31.7 million.
Berkshire To Make $10 Billion Investment in Occidental To Finance Anadarko Bid
- Berkshire Hathaway has agreed to make a $10 billion equity investment in Occidental Petroleum, a bid to help the oil company complete its proposed acquisition of Anadarko Petroleum.
- In return for the investment, Berkshire will receive 100,000 shares of preferred stock, according to a statement from Occidental.
- The preferred stock will generate dividends at 8% a year.
- Berkshire will receive a warrant to buy up to 80 million shares of Occidental common stock at a price of $62.50 a share.
- Berkshire will only follow through on the investment if Occidental is able to complete its proposed acquisition of Anadarko.
Gardner Denver to Merge with Ingersoll-Rand Division
- Gardner Denver agreed to merge with the industrial division of Ingersoll-Rand, a tie-up that would create the world’s second-largest manufacturer of industrial pumps and compressors.
- In the deal, Ingersoll plans to spin off its industrial segment, and then combine it with Gardner Denver.
- Ingersoll will retain its heating, ventilation and air-and temperature-controlled transport business for buildings, homes and transportation.
- The combined firm would generate about $6.6 billion in revenue this year on a pro forma basis.
WeWork Files for Initial Public Offering
- Shared-office-space giant WeWork has added its name to the slew of highly valued startups heading to the public markets, a surprise move that will test the company’s rich valuation and heavy spending.
- WeWork filed confidentially for an initial public offering in December, not long before it was valued at $47 billion by SoftBank.
- The nine-year-old New York-based company reported a loss last year of $1.9 billion on revenue of $1.8 billion.
Online Pet Products Retailer Chewy Files for IPO
- Chewy the online seller of branded and private-label pet food and grooming supplies, has filed documents to pursue an initial public offering.
- Chewy, which launched in 2011 and is majority owned by retailer PetSmart, had $3.53 billion in sales in its latest fiscal year.
- The company has yet to reach profitability. Its net loss narrowed to $267.9 million in the year ended Feb. 3 from $338.1 million in the year-earlier period. Sales rose 68%.
US ECONOMY & POLITICS
Home-Price Growth Slows to Lowest Level Since 2012
- The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 4% in the year ending in February, down from 4.2% the prior month.
- The Case-Shiller 10-city index gained 2.6% over the year ending in February, down sharply from a 3.1% annual change in January. The 20-city index gained 3%, also a significant slowdown from an annual gain of 3.5% in January.
- Economists expected the 20-city index to gain 2.8%.
U.S. Employment Costs Climbed in First Quarter
- The employment–cost index, a measure of wages and benefits for civilian workers, rose a seasonally adjusted 0.7% from January through March from the previous three-month period, the Labor Department said Tuesday.
- The gain was smaller than the 0.8% rise expected by economists in a Wall Street Journal survey and matched the 0.7% increase in the fourth quarter.
- From a year earlier, total compensation increased 2.8% in the first quarter, down from a 2.9% in the fourth quarter.
U.S. Consumer Confidence Rose In April
- The Conference Board on Tuesday said its index of U.S. consumer confidence increased to 129.2 in April from 124.2 in March.
- Economists had expected a 126 reading in April.
- The report could suggest consumers are feeling upbeat going into the second quarter of the year.
Democrats Push for Expansive Infrastructure Package
- Congressional Democratic leaders laid down a marker ahead of a meeting with President Trump to discuss a bipartisan compromise on infrastructure, calling for a package that also would address climate change and include new revenue.
- House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer are scheduled to meet with the president Tuesday morning to discuss the idea of a bill that would fix the nation’s roads and bridges.
- While Mrs. Pelosi and Mr. Schumer said the bill must pay for itself, calling in the letter for “new and real revenue,” they don’t outline how to do that.
- Some Democrats have suggested raising the national gas tax. Others want to roll back some of the tax cuts passed in 2017 by Republicans.
Maryland Takes Step Toward Capping Drug Prices
- Maryland is poised to become the first state to create a panel to review expensive prescription drugs and cap what public agencies will pay for them.
- The legislation, which cleared the state legislature in the waning moments of its session earlier this month, would be the first of its kind to allow prices for certain drugs to potentially be capped.
- The effort already has encouraged other states to take action, and lawmakers in Nevada, Maine and Massachusetts are considering legislation to create similar boards.
EUROPE & WORLD
Airbus Set to Pass Boeing in Jetliner Production, Amid 737 MAX Grounding
- Airbus posted strong adjusted earnings growth Tuesday but played down the prospect of immediate market-share gains from rival Boeing’s 737 MAX woes that have put the European giant on pace to regain the title of world’s biggest plane maker.
- Airbus delivered 162 airliners in the first quarter compared with 121 in the year-prior period, driving a 24% increase in sales to €12.55 billion.
- The company around midyear plans to start building 60 of the A320 airliners a month, up from around 52 last year.
- It previously said output would rise to 63 of the airliners a month in 2021.
- However, net profit fell 86% to €40 million, linked to several program charges and a €190 million earnings hit from the German government’s suspension of defense export licenses to Saudi Arabia over the Middle East country’s military activity in Yemen.
- Airbus confirmed plans to deliver at least 880 commercial jets this year.
Samsung Electronics bets on better second-half after first-quarter profit slumps
- South Korea’s Samsung Electronics flagged improved second-half results on expectations of a pickup in memory chip and smartphone sales, after posting its weakest profit in more than two years in the first quarter.
- The world’s top maker of semiconductors, however, warned of more short-term pain in the second quarter, with memory chip prices likely to decline further before a rebound in demand as data centers re-stock later in the year.
- Revenue fell 13.5% to 52.4 trillion won, also in line with its earlier estimates.
- Hit by falls in chip prices and slowing demand for display panels, Samsung posted operating profit of 6.2 trillion won ($5.4 billion) in the quarter ended March, smallest since late 2016 but in line with the company’s guidance.
- Samsung’s core semiconductor business booked a 64% fall in operating profit to 4.1 trillion won, while the display business logged 560 billion won in losses and its mobile business posted a 40% drop in operating profit to 2.3 trillion won.
Glencore cuts 2019 copper production target
- Miner and trader Glencore lowered its target for 2019 copper output following severe flooding in Australia as well as safety outages that led to a 7% year-on-year drop in production in the first quarter.
- First quarter copper production fell to 320,700 tonnes, missing estimates by 11%, while cobalt output jumped 56%.
- Glencore said it expects copper production for the year to be 1,460,000 tonnes, plus or minus 30,000 tonnes. It had earlier forecast approximately 1,540,000 tonnes.
- In addition it narrowed its cobalt outlook, saying full year output should be 57,000 tonnes plus or minus 4,000 tonnes, versus plus or minus 5,000 tonnes previously.
Vodafone found security flaws in Huawei equipment in 2011, 2012
- Telecoms group Vodafone found security flaws in equipment supplied by China’s Huawei to its Italian business in 2011 and 2012, the two companies said on Tuesday.
- While Vodafone says the issues were resolved, the revelation may further damage the reputation of a major symbol of China’s global technology prowess.
- Europe’s biggest phone company identified hidden backdoors in the software that could have given Huawei unauthorized access to the carrier’s fixed-line network in Italy, a system that provides internet service to millions of homes and businesses, according to Vodafone’s security briefing documents from 2009 and 2011.
China’s Manufacturing Activity Falters
- The official manufacturing purchasing managers index slid to 50.1 in April from the six-month high of 50.5 in March, data from the National Bureau of Statistics showed Tuesday.
- The overall new orders subindex of the official gauge edged down to 51.4 from 51.6, and production fell to 52.1 from 52.7.
- The new export subindex—an indicator of external demand for Chinese goods—rose to 49.2 from 47.1.
- The private Caixin China manufacturing purchasing managers index dropped to 50.2 in April from 50.8 in March, Caixin Media and research firm Markit said Tuesday.
Venezuela’s Juan Guaidó Says He Has Support From Members of Military
- Opposition leader Juan Guaidó, flanked by a small group of heavily armed troops outside a military base on Tuesday, called for Venezuelans to hit the streets to overthrow President Nicolás Maduro.
- The Maduro administration said it was moving to put down what it called a coup attempt, setting up a potential armed struggle for control of the government with Mr. Guaidó, who is viewed by the U.S. and more than 50 other nations as Venezuela’s sole legitimate leader.
- Many Venezuelans see Mr. Guaidó’s call as an opportunity to remove a regime reviled for food shortages, blackouts and a collapsing economy. Videos posted on Twitter showed hundreds of people beginning to move toward the air base.
TODAY in HISTORY
- France sold Louisiana and adjoining lands to the United States as part of the Louisiana Purchase. (1803)
- S. commercial television made its official debut at the New York World’s Fair. The signal was transmitted from the Empire State Building. (1939)
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