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WALL ST. PARES LOSSES AFTER TRUMP DECIDES TO DELAY AUTO TARIFFS

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US FINANCIAL MARKET | US ECONOMY & POLITICS
 EUROPE & WORLD | TODAY IN HISTORY

DAILY MARKET REPORTS

  • Stocks erased losses on Wednesday on news that President Donald Trump plans to delay the implementation of auto tariffs.
  • The Dow Jones Industrial Average traded up 19 points after falling as much as 190 points earlier in the session.
  • Sentiment was earlier hurt by a clutch of weak economic data from the United States and China that sparked worries of slowing global growth.
  • U.S. Data Wednesday showed U.S. retail sales fell unexpectedly in April even before the U.S. raised tariffs on $200 billion worth of Chinese imports and Beijing said it would raise levies on $60 billion of U.S. goods in response.
  • U.S. manufacturing output also fell in April, missing expectations.
  • Figures also showed Chinese industrial production, retail sales and fixedasset investment all slowed in April, the latest mixed data point concerning analysts who are uncertain how much stimulus measures will spur activity in the second-largest economy.
  • Figures Wednesday showed Germany’s economy expanded 0.4% in the first quarter, after Europe’s largest economy narrowly avoided a recession late last year.

US FINANCIAL MARKET

Macy’s Same-Store Sales Rise, Affirms Full-Year Outlook

  • Macy’s posted stronger-than-expected growth in a key sales metric in the latest period as the retailer said it benefited from more customers making purchases through digital channels.
  • Overall, Macy’s reported net sales for the first quarter fell less than 1% to $5.5 billion and were roughly in line with estimates.
  • Sales at stores open at least a year grew 0.6% for the period ended May 4, above estimates of a 0.6% decrease.
  • Including licensed departments, same-store sales rose 0.7%.
  • The company posted a profit of $136 million, down from $139 million a year earlier.
  • Macy’s also affirmed its sales and earnings guidance for the current fiscal year, expecting net sales to be roughly flat from the last fiscal year, with comparable sales to be flat to up 1%.
  • Excluding settlement charges, impairment and other costs, the company forecasts adjusted earnings per share of $3.05 to $3.25.

Alibaba beats revenue expectations on cloud boost

  • Chinese e-commerce giant Alibaba beat fourth-quarter revenue forecasts on Wednesday, thanks to growth in its core business and its diversification into cloud computing and other services.
  • Revenue increased 51% from a year earlier to 93.50 billion yuan ($13.6 billion), beating estimates of 91.58 billion yuan.
  • Revenue from the company’s cloud computing business rose 76% in the fourth quarter, it said.
  • It said its net income rose in the quarter to 25.83 billion yuan from 7.56 billion yuan in the same period a year earlier.
  • Alibaba said it expects its revenue will hit over 500 billion yuan for its next fiscal year, ending in March 2020, which would be a 33% increase on the previous year.

Tencent books record, estimate-busting first-quarter profit, boosted by investment gains

  • Tencent posted record quarterly profit on Wednesday, smashing market expectations, as the social media and gaming giant booked a rise in the value of its investments while fintech and cloud computing make up for declines in games.
  • Revenue came in just shy of analyst estimates at 85.5 billion yuan, with growth at an all-time low of 16%.
  • “FinTech and Business Services”, a category disclosed for the first time and which includes payment and cloud services, generated 21.8 billion yuan in the quarter, up 44 percent.
  • That was more than smartphone gaming revenue, traditionally Tencent’s largest single revenue generator, which fell 2% to 21.2 billion yuan due to fewer new titles.
  • Its online advertising revenue grew 25% versus 55% in the same period a year earlier, with Tencent blaming a “challenging macro environment” and high comparison base.
  • Tencent booked 17% growth in net profit at 27 billion yuan ($3.93 billion), compared with the 19.4 billion yuan average estimate.

Take-Two revenue forecast misses as competition from ‘Fortnite’ intensifies

  • Take-Two Interactive Software reported lower-than-expected quarterly revenue and forecast first-quarter sales below analysts’ expectations, as it faces intense competition from free-to-play “battle royale” games “Fortnite” and “PUBG.”
  • The game publisher’s adjusted revenue, which the company calls net bookings, in the reported quarter stood at $488.4 million, missing the average analyst estimate of $506.5 million.
  • Take-Two’s net income fell to $56.8 million, from $90.9 million a year earlier.
  • Take-Two forecast first-quarter revenue of $310 million to $360 million, and full-year revenue of $2.5 billion to $2.6 billion. Analysts were expecting revenue of $418.3 million for the quarter and $2.78 billion for the year.

Xilinx forecasts fiscal 2020 revenue above Wall Street expectations

  • Xilinx, a chip supplier whose products are used in 5G networking gear, said at an investor conference on Tuesday that it expects between $3.45 billion and $3.6 billion in revenue for its fiscal year 2020.
  • With a midpoint of $3.52 billion, the forecast was slightly above the $3.49 billion that analysts were expecting.
  • The company said that it expects operating expenses for its fiscal 2020 to be between $1.34 billion and $1.37 billion, slightly above analyst estimates of $1.3 billion.
  • Xilinx said it expects gross margins of 67% to 69% in its fiscal 2020, with a midpoint above analyst expectations of 67.3%.

Fears of flying Boeing’s 737 MAX won’t get in way of price conscious ticket shoppers: Reuters/IPSOS poll

  • U.S. fliers still consider ticket prices the most important factor when choosing a flight, according to a Reuters/Ipsos poll, suggesting two fatal crashes of Boeing 737 MAX jets have had little impact on consumer sentiment.
  • In the public opinion poll released May 15, only about half of U.S. adults say they are familiar with the airplane crashes in Indonesia and Ethiopia that together killed 346 people, and only 43% could identify the Boeing 737 MAX as the aircraft involved.
  • Most importantly for Boeing in the wake of the crashes, only 3% said that aircraft maker or model number was most important to them when buying a plane ticket. In contrast, 57% said ticket price was most important.

Microsoft Warns of a Monster Computer Bug, In a Week of Them

  • Microsoft took the unusual step of warning that a computer bug it has now patched could be used by a cyber weapon similar to the WannaCry worm, which spread across the globe two years ago.
  • Microsoft said that it hasn’t seen anyone take advantage of the flaw, which affects older versions of its Windows operating system, but that it believes it is “highly likely” the flaw will wind up being exploited by malicious software, now that it has been publicly disclosed.
  • The flaw affects Windows 7 and Windows Server 2008. It also affects Windows 2003 and Windows XP—older versions of Windows that Microsoft doesn’t typically patch.
  • But, in a sign of the severity of the bug, Microsoft released XP and Windows 2003 patches as well.

Tesla’s solar factory is exporting most of its cells – document

  • The “great majority” of solar cells being produced at Tesla’s factory in upstate New York are being sold overseas instead of being used in the company’s trademark “Solar Roof” as originally intended, according to documents reviewed by Reuters.
  • The exporting underscores the depth of Tesla’s troubles in the U.S. solar business, which the electric car maker entered in 2016 with its controversial $2.6 billion purchase of SolarCity.
  • California state data shows 21 Solar Roof systems were connected by the state’s three investor-owned utilities as of Feb. 28.
  • Only a few others were connected in the northeastern United States, according to a former Tesla employee with knowledge of the matter, who was laid off during staff cuts earlier this year and asked not to be named.

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US ECONOMY & POLITICS

Trump administration to delay auto tariffs by up to six months: Sources

  • The Trump administration plans to delay auto tariffs by up to six months, stopping itself for now from further widening global trade conflicts, four sources told CNBC.
  • The White House faces a May 18 deadline to decide whether to slap duties on car and auto part imports. By law, the administration has another 180 days to come to a decision as long as it is negotiating with its counterparts.
  • The delay comes as the White House tries to strike a potential trade deal with China to end an escalating conflict.

Retail Sales Declined in April

  • Retail sales, a measure of purchases at stores, restaurants and online, declined a seasonally adjusted 0.2% in April from a month earlier, which fell short of the 0.2% increase economists had forecast.
  • Retail sales in April increased 3.1% from a year ago.
  • Data for March was revised slightly up to show retail sales surging 1.7%, the largest increase since September 2017, instead of the previously reported 1.6% jump.
  • Excluding automobiles, gasoline, building materials and food services, retail sales were unchanged in April after an upwardly revised 1.1% acceleration in March.
  • Sales at nonstore retailers, a category that includes internet merchants, were down 0.2% compared with a month earlier.

U.S. Industrial Production Dropped in April

  • So-called industrial production was down 0.5% in April, well below expectations among economists for a flat reading.
  • Manufacturing output, the biggest component of industrial production, fell 0.5% in April from a month earlier.
  • Industrial production was up 0.9% from April of last year.
  • The report showed manufacturing capacity use, a measure of slack, decreased 0.5 percentage point to 75.7% last month.
  • More broadly, industrial capacity utilization declined to 77.9% in April, compared with expectations of 78.7% in April.

Stronger home sales boost builder confidence in May

  • Builder confidence in the newly built, single-family home market rose 3 points to 66 in May, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index.
  • That’s the HMI’s highest reading since October, but lower than last May’s level of 70. Anything above 50 is considered positive.
  • Of the index’s three components, current sales conditions, rose 3 points to 72. Sales expectations in the next six months rose 1 point to 72, and buyer traffic moved up 2 points to 49, the only component still in negative territory.

Trump expected to sign order paving way for U.S. telecoms ban on Huawei

  • President Donald Trump is expected to sign an executive order this week barring U.S. companies from using telecommunications equipment made by firms posing a national security risk, paving the way for a ban on doing business with China’s Huawei, three U.S. officials familiar with the plan told Reuters.
  • The executive order would invoke the International Emergency Economic Powers Act, which gives the president the authority to regulate commerce in response to a national emergency that threatens the United States.
  • The order will direct the Commerce Department, working with other government agencies, to draw up a plan for enforcement.

White House Resistance to Budget Deal Worries Republicans

  • Congressional Republicans are growing increasingly nervous over the Trump administration’s opposition to signing another two-year budget deal to set overall spending levels before the government’s funding expires Oct. 1.
  • Such deals usually combine higher defense spending, a Republican priority, with higher nondefense spending, which Democrats demand in return, adding to the federal budget deficit.
  • In preliminary discussions, senior aides to President Trump have resisted a two-year agreement and argued instead for a one-year extension of current funding, according to lawmakers and aides from both parties in both chambers.
  • The difficulties lawmakers and Mr. Trump are facing in trying to agree on a disaster-aid package, typically one of the least contentious bills, has set off alarm bells that a bitter fiscal fight may be looming this fall, according to lawmakers in both parties.
  • In addition to preventing another partial government shutdown, lawmakers and Mr. Trump need to agree on raising the government’s borrowing limit, known as the debt ceiling, by early fall to avoid running out of money to pay its bills.

U.S. Embassy Staff to Leave Iraq as Iran Tensions Mount

  • The U.S. ordered all its nonemergency diplomatic staff to leave Iraq immediately, as tensions rise with Iran over recent attacks against oil tankers and facilities in the Persian Gulf region.
  • The State Department directive comes amid U.S. warnings of heightened threats in the Middle East from Iran-allied militias, which could target American citizens and soldiers in Iraq.
  • The order comes after the U.S. Embassy in Baghdad on Sunday advised all U.S. citizens to remain vigilant due to heightened tensions in Iraq.

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EUROPE & WORLD

China’s retail sales growth slumps to 16-year low as trade war risks rise

  • China reported surprisingly weaker growth in retail sales and industrial output for April on Wednesday, adding pressure on Beijing to roll out more stimulus as the trade war with the United States escalates.
  • Overall retail sales in April rose 7.2% from a year earlier, the slowest pace since May 2003, data from the National Bureau of Statistics (NBS) showed. That undershot March’s 8.7% and forecasts of 8.6%.
  • Growth in industrial output slowed more than expected to 5.4% in April on-year, pulling back from a 4-1/2-year high of 8.5% in March, which some analysts had suspected was boosted by seasonal and temporary factors.
  • Analysts had forecast output would grow 6.5%.
  • Motor vehicle production dropped nearly 16% as demand weakened, with sedan output slumping 18.8%, the steepest decline since September 2015. Industry data this week showed auto sales fell 14.6% in April, the 10th consecutive month of decline.

Germany’s Economy Rebounds Despite Darkening Trade Outlook

  • Germany’s economy rebounded in the first quarter after narrowly avoiding recession late last year, easing the immediate pressure on policy makers in Europe as the outlook continues to darken for global trade.
  • The German economy expanded by 0.4% in the three months to March from the previous quarter, driven by vibrant private consumption and a booming construction sector, according to a first estimate published by national statistics agency Destatis.
  • With Germany rebounding, economic growth in the 19-nation eurozone rose to 1.6% in the first quarter on an annualized basis, from 0.9% in the final quarter of last year, the EU’s statistics agency said Wednesday.

Tilray, Aurora Cannabis sales jump after Canada legalizes recreational marijuana

  • Cannabis producers Tilray and Aurora Cannabis on Tuesday reported a surge in quarterly revenue, boosted by increased demand following the legalization of recreational cannabis in Canada.
  • Aurora’s gross revenue rose to C$75.2 million ($55.87 million) from C$62 million ($46.07 million) in the second quarter. Analysts on average were expecting C$77.16 million ($57.33 million).
  • Tilray’s revenue nearly tripled to $23 million, beating analysts’ estimates of $20.2 million.

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TODAY in HISTORY

  • The S. Department of Agriculture was created by an act of Congress on this day. (1862)
  • The Standard Oil Company was ordered dissolved by the Supreme Court, under the Sherman Antitrust Act. (1911)

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